South Africa: Picking up the pace

After two slow years following the landmark 2010 FIFA World Cup, South Africa’s tourism sector may now be returning to form. The industry is considerably more upbeat than it was one year ago, though downside risks – particularly the uncertain global economy – and domestic weaknesses, such as negative perceptions, are likely to persist through 2013.

In early February the Tourism Business Council of South Africa (TBCSA) announced that its tourism business index was continuing to pick up, with a forecast for a positive score in 2013. The index, calculated from a survey of businesses in the sector, rose to 104.6 in the fourth quarter of 2012, up from 101.1 in the third quarter, and well above the 87.3 recorded in the final three months of 2011. A score of 100 is viewed as “normal” and anything above takes the outlook into positive territory, meaning the forecast of 102.4 for the first quarter of 2013 indicates the sector is reasonably upbeat.

Grant Thornton, the consultancy firm that conducted the survey, said the figures “confirm a return to normal trading levels and an overall positive outlook for the travel and tourism sector in 2013”.

Mavuso Msimang, the chairman of the board of the TBCSA, said that the above-average showing in the index was “a clear indication of the extent to which business is recovering from the recessionary impacts and excess of supply it suffered following the World Cup”.

South Africa’s hosting of the World Cup was a boon for its tourism industry, reportedly bringing more than 300,000 fans to the country. However, maintaining momentum has proved difficult and some of the hotels that were built or expanded before the tournament have found it hard to sustain occupancy rates. Some economists also question to what extent does hosting a tournament boost tourism in the long term, suggesting that visitors who have long planned a trip to South Africa timed their visit to coincide with the World Cup, leading to a spike in arrivals but not necessarily sustained growth.

While the World Cup “legacy” continues to be a subject of debate in South Africa, advocates take the view that the tournament helped raise the country’s profile, stimulated investment in infrastructure that will stand it in good stead over the long term, and proved that it can host big-name sports tournaments.

Sports tourism now accounts for around 10% of South Africa’s visitor arrivals, up from 1% in 2003, and generates approximately R6bn ($671.51m) annually, Gert Oosthuizen, the deputy minister of sport and recreation, said in September 2012. Oosthuizen added that the country would continue to bid for sports tournaments, both for major international events and for niche sports, such as angling. Oosthuizen also said that South Africa was still performing below its potential in sports tourism, and that it should look to position itself as a winter training destination for teams and athletes from the Northern Hemisphere.

The broader industry’s optimism about the future is shared by the World Tourism & Travel Council (WTTC). The WTTC forecasts that the travel and tourism sector will grow by 4.3% annually between 2012 and 2022. While the sector is a relatively small direct contributor to GDP, accounting for just 2.7% in 2011, when calculating the overall impact, including direct, indirect and induced contribution, the sector comprised 8.6% of GDP in 2012, and is expected to rise an average of 4% over the next decade.

However, the tourism industry faces downside risks and structural issues, both in the short and longer term. Another downturn in the global economy could affect both visitor numbers and investment, while inflation is also a concern. A more pertinent issue for the sector, however, is the perception that it is not a particularly safe country. Recent labour unrest – and lethal clashes between protesters and police – reinforce this impression.

“Global economic uncertainty and ongoing recession risk, coupled with the negative profiling of South Africa internationally through labour and community unrest, weighs heavily as a constraint for the sector,” Gillian Saunders, head of advisory services at Grant Thornton, said on the release of the tourism index. “Input cost increases from rates, electricity and fuel costs were also cited as negative factors affecting business performance.”

After a slower two years, there is an air of optimism about the tourism sector’s outlook for 2013. South Africa has a rising international profile and a strengthening brand; the question is whether it can overcome short-term economic issues – and deeper problems of its image and infrastructure – to achieve its potential.

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