Economic Update

22 Jul, 2010

South Africa’s tourism industry enjoyed a bumper year in 2007, with record high arrivals and solid increases in visitors from most of its traditional markets. However, while the figures look good and are set to get better, the industry is aiming to improve its profile as a business tourism destination.

Up to the end of November, overall foreign tourist arrivals to South Africa reached some 9.1m visitors, up by 8.6% on 2006, according to Marthinus van Schalkwyk, the minister of environment and tourism.

Addressing a conference in Sandton on February 26, the minister said there had been strong rises in tourist arrivals from both Kenya and Nigeria, with increases of 15.4% and 14.8% respectively, while growth out of Asia had been driven by a 19.1% increase in the number of Indian visitors coming to South Africa and an 11.8% jump in Chinese arrivals.

However, while last year’s figures were good, van Schalkwyk told delegates the industry needed to do more to promote South Africa as a destination for business tourism, catering to the requirements of the meetings, incentives, conventions and events (MICE) segment, an increasingly important market.

“Business travel is a lucrative sector of the market which ramps up tourism’s contribution to the economy in general,” said van Schalkwyk. “On average, business travellers spend three times more than leisure travellers and up to 40% of them are likely to return.”

There were also many important spin offs from business tourism, with many delegates to events travelling with companions or family and spending time before and after their official work on tours, he said.

“This market is therefore crucial to addressing the more equitable spread of increased tourism spending, geographic spread and seasonality issues,” said van Schalkwyk.

New, proposed or upgraded convention centres in Durban, Cape Town, Port Elizabeth and Bloemfontein have boosted South Africa’s capacity to host major MICE events, though SA Tourism figures show that the country currently attracts just 1% of global business tourism.

Tourism, both in the MICE section and the more traditional recreational variety, is becoming increasingly important for the economy. In 2006, the ministry of tourism said foreign earnings from the sector eclipsed those from gold, the long time economic mainstay, and contributed 8.3% to the country’s GDP.

The ministry said the sector employed just under 1m people as of the end of 2006, an annual increase of more than 9%. As such, the industry is one of the largest sources of employment in the South African economy.

However, the tourism boom does face a few problems. One of these was identified by van Schalkwyk when he said future growth could be inhibited by what he described as “air capacity issues”. In short, there could be a problem in finding enough seats for the growing number of foreigners wanting to make the trip.

South Africa is a long haul for airlines flying out of Europe and the US, and with fuel reaching record prices, the cost of operating routes to the tip of Africa are high. However, rising demand should encourage carriers to schedule more flights.

Another problem, according to the Tourism Business Council of South Africa (TBCSA) is the failure to promote the role played by tourism in the broader economic growth challenges of the country.

Mmatsatsi Marobe, TBCSA’s chief executive officer, said consideration should be given to putting in place special dispensation measures to stimulate the much needed growth and job creation possible in the tourism sector.

The government needed to consider enacting special dispensations such as tax breaks and incentives, which could go a long way to encourage interest by both domestic and external investment, Marobe said in a statement on February 26.

Though South Africa is expecting a tourism surge in 2010 when it hosts the FIFA World Cup, this prestigious event will be a one-off. The country’s tourism industry needs to build for a sustained future, where business and pleasure go hand in hand.