South Africa is currently experiencing a ‘’special period’’ as there is confluence of tragic and unfortunate realities. The economy will possibly enter a recession as economists have predicted that it would grow no more than 0% in 2016.
The South African Reserve Bank’s Annual Report 2015/16 noted that ‘’South Africa’s economy expanded 1.3% in 2015, the slowest rate of increase since the Great Recession’’. The pedestrian growth is too low to grow the economy and create the jobs needed to restore human dignity.
The drought severely affected agricultural production and increased the cost of food. Mining has been experiencing a jobs bloodbath and commodities are in a bull market. The general reality is that when mining sneezes the economy catches a cold, due to the deep forward and backward linkages that mining has in the economy. China’s economic slowdown and cooling off of appetite for our commodities, have impacted negatively on the South African economy.
The biggest challenge in South Africa is the stubborn unemployment that creates poverty and lack. Today there are companies on the Johannesburg Stock Exchange that have record levels of cash sitting idle in bank accounts instead of being invested in the South African economy. With more than R403 billion in bank accounts, it’s clear that the social gap between government and big business is increasing instead of decreasing.
This is a national tragedy which reflects that big business and government are not finding common ground. This has already impacted on the ANC government’s poor election results during the local government elections, as South Africans demanded jobs.
Business confidence is at an all-time low. The Business Confidence Index (BCI) fell to 79,3 in June from 82,5. Until Brexit, the South African Reserve Bank had been battling inflation and raising interest rates.
The immediate aftermath of Brexit was an accrual of the South African Rand against major currencies. The rand has strengthened 4.9% against the dollar since Brexit. This currency accrual has been a blessing as the price of petrol has decreased and the Reserve Bank has not raised interest rates, benefiting households and business.
South Africa has dodged rating agency downgrades to junk status which would spell economic disaster as it would increase the cost of borrowing. The South African Rand depreciated sharply on the news that President Jacob Zuma had recalled Nhlanhla Nene as Minister of Finance, which shocked the markets and the Rand went into nose dive.
This resulted in the re-appointment of Pravin Gordhan as Minister of Finance, a measure that stabilised the markets and appeased big business and investors. Around February this year, it emerged that the Hawks were investigating the conduct of Pravin Gordhan when he was commissioner of the South African Revenue Service. The Hawks have again asked that the Minister of Finance present himself to answer some questions, which he refused to do.
These events have negatively impacted on the South African Rand, leading to its depreciation. The unintended consequence of currency depreciation is that it benefits tourism, making South Africa a more attractive destination for foreign tourists. Currency depreciation dampens outbound tourism, whilst promoting inbound tourism to South Africa.
The Guardian newspaper has reported that South Africa is the second cheapest destination for UK tourists. A further depreciation of the rand will continue to benefit tourism. Tourism will continue to drive the South African economy, as tourism is the new gold.
The National Tourism Sector Strategy (NTSS) creates a vision that South Africa must be in the top 20 tourism destinations by 2020, which is just around the corner. Tourism can only grow and reach an unstoppable growth trajectory if we remove the red tape that dampens the growth of tourism, such as low aviation connectivity, low levels of service excellence, poor safety and security and the requirement for visas, which is an inconvenience for tourists.
The Tourism Red Tape Initiative (TRTI) remains a worthy cause that would change the economic realities of South Africa. September is Tourism Month and this would be a time to reflect if whether as a country we have done all that we could to ensure that we drive economic growth. The huge mining hangover can only be nursed by using tourism consumption to create labour intensive jobs immediately.
Tourism’s ability to diversify the economy is more imperative considering that the Fourth Industrial Revolution is upon us, which means that machines would replace humans, increasing unemployment. Tourism must become a senior ministry such as Home Affairs, Intelligence and Defence. Let the conversation and discourse begin as we celebrate Tourism Month in September.
Unathi Sonwabile Henama teaches tourism at the Tshwane University of Technology and writes in his personal capacity.