Why tourism is the quick fix SA needs

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Tlotliso Phakisi, Investment Analyst at Cannon Asset Managers

The urgent amendment of South Africa’s stifling visa regime could be the quick fix needed to drag the country out of the economic doldrums, especially now that “tourism terminator” Malusi Gigaba has resigned as the Minister of Home Affairs and a Member of Parliament, says Cannon Asset Managers Investment Analyst Tlotliso Phakisi.

Introduced under Gigaba’s leadership, the tourism industry has been hamstrung for a number of years by unfriendly visa requirements that have negatively impacted the number of tourists entering the country. In particular, the controversial requirement that visitors travelling with children under the age of 18 years provide their unabridged birth certificates (UBC) upon entering or exiting has proven especially damaging to tourism numbers.

According to the Tourism Business Council of South Africa (TBCSA), over 13,246 travellers were prevented from entering the country between June 2015 and June 2016 after failing to meet the UBC requirements, losing the country many millions in potential revenue.

“Despite this, however, tourism has been one of the few sectors in the country to consistently show promise and resilience in terms of both job creation and economic growth over the past few years, demonstrating its potential as the lever needed for turning things around in the short term,” says Phakisi.

Recent figures from Statistics South Africa show, for example, that of the 15.8 million workers employed formally and informally in South Africa in 2016, 4.4% (or one in every 23 people) were directly employed in the tourism sector. This compares to 3.8% just ten years prior.

Furthermore, the 690,000 people employed in the sector in 2016 outnumbered those in both mining (444,000) and utilities (118,000). That same year, the tourism sector directly contributed to 2.9% of South Africa of South Africa’s gross domestic product (GDP), making the sector larger than agriculture, although still smaller than construction and mining.

“These figures help to underscore the extent to which tourism has outperformed other key industries in job creation. And when compared to other countries’ tourism receipts, it becomes clear that tourism should be an easy win for South Africa, especially given our rich natural and cultural heritage.”

Source: Howmuch.net (2018)

Pointing to the above graphic, for instance, he observes that New Zealand was able to attract $10 billion in tourist receipts in 2017, while Singapore, a country that is 0.006% the size of South Africa in terms of land area, was able to bring in $20 billion – more than twice that of South Africa.

“This highlights that to unlock the potential of tourism to stimulate our economy, all we have to do is take our thumb off the administrative pipeline that chokes the industry.”

“And perhaps of even greater importance is that the cost of this tourism sector stimulus is zero or even negative, meaning that it will free up resources as we reduce administrative and regulatory requirements.”

Promisingly, back in September Ramaphosa announced government’s intention to introduce immediate reforms to the country’s visa regime, including regulations for travelling with minors that would make it easier for tourists, business people and academics to come to South Africa as part of his stimulus package.

However, these changes have still not materialised, while a bungled response from the Department of Home Affairs only created more policy uncertainty and confusion, notes Phakisi.

“Ultimately, however, Ramaphosa’s stimulus plan and particularly visa reforms should be welcomed as the quick fix needed to ignite economic growth and turn the tide on unemployment. With this mind, all eyes must remain on government to deliver on its promises to liberate the tourism sector by implementing a more reasonable set of proposals.”

“We hope that Acting Minister of Home Affairs Blade Nzimande will address visa reforms with great urgency as he steps into his temporary role at the helm of the department.”