The impact of the Covid-19 outbreak on the R270bn tourism sector has been devastating throughout the industry's value chain, however, there is an opportunity to speed up the recovery of the sector if government can speed up its very slow approval processes and put in place measures to ensure that land reform beneficiaries, especially in the tourism sector, have the much-needed technical and financial support.
These remarks come as the country continues to celebrate tourism month. Amid the gradual easing of lockdown restrictions, which are envisaged to help revive the battered tourism sector which haemorrhaged an estimated 600, 000 jobs and impacted 1.2 million jobs, according to the Tourism Business Council of South Africa (TBCSA).
According to Peter Setou, chief executive of the Vumelana Advisory Fund: "The coronavirus outbreak has impacted negatively on beneficiaries of the land reform programme, and this has resulted in significantly reduced revenue flows in turnover based lease payments to Communal Property Institutions (CPIs). In turn, this has had a ripple effect on their ability to allocate cash to households or to implement community or commercial projects of any scale."
Setou highlighted that : "Now more than ever, it’s critical to ensure that measures are in place to support beneficiaries of the land reform programme, and that funding is channelled towards tourism based projects which have the potential to boost rural and economic development; which will help bridge the adverse poverty gap and make land profitable for the people it seeks to benefit."
Restoring positive economic development
Geoff De Beer, independent transaction advisor on tourism and land reform tourism projects concurs: "The adverse impact of Covid-19 and the lockdown also reduced investment and dampened investor’s risk appetite, which in turn has diminished potential employment across sectors, and other related areas such as maintenance, operations and training."
"Re-establishing the positive development momentum will require the right investment environment to be in place. In addition to having access to high potential land and technical and financial support to assist land reform beneficiary communities to identify and select suitable investors to enter into long term partnerships; government should also speed up regulatory approvals for development rights and environmental approvals. Delays in conferring these rights and regulatory approvals has a direct bearing on the lead-time until a project can commence construction, open doors and create jobs and generate income," says De Beer.
He points out that these interventions are not only the right thing to do, but they are the steps required to make the beneficiary land commercially viable and socio-economically sustainable over the long-term. "If correctly handled, the restitution process can be considered not only as a strategy to address historical dispossession but could also be a key economic development strategy which includes communities that have been historically dispossessed. But for this to materialise, the state, the private sector, non-government organisations (NGOs) and the beneficiary communities will need to bring their resources into the process in an inclusive economic development strategy."
De Beer says currently there is a chasm between the unmet aspirations of the land claimants and the inability of the government to speed up the land reform programme due to a myriad of factors including shortage of funding for purchase of land and the highly politicised restitution process.
"In terms of the development, operation, and marketing of tourism facilities, the private sector has the financial and technical resources to invest, and inherently they are attracted to commercially viable investment opportunities. However, like any other investors, the private investor requires reasonable socio-political and legislative stability and long-term tenure security – be it leasehold or freehold. Tourism investment and operations are typically highly sensitive to real or perceived legal and civil instability and this will have a negative impact on tourism demand trends as well as investment trends."
Covid impact on tourism markets
De Beer adds that it is very difficult to predict the timeframe within which tourism demand levels will recover to the February 2020 levels.
"The precipitous decline in foreign travellers to South Africa – who typically spend about three times as much as South African travellers – has had an extremely negative financial and economic impact on those tourism products that target the foreign tourist."
"In the interim the tourism industry must, and is, adapting. For instance, the local safari industry has had to shift their marketing and pricing strategies to attract the domestic market in order to generate income and sustain economic activity in their facilities. For the domestic and regional market, the travel costs to access the product are far less and the immigration restrictions from Covid-19 may be less of an obstacle. In addition, local and regional tourists are typically less sensitive to real and perceived risks. Where quarantines are to be imposed as part of international travel, they are likely to have a very negative impact," says De Beer.
"Tourism is a niche industry that has a huge potential to generate much-needed jobs and contribute revenue to the fiscus. Part of the interventions process should be to provide transaction advisory support for the communities to help them structure partnerships with potential investors on commercially sound and equitable terms. We are of the view that these interventions will help to stimulate the recovery of the sector and help beneficiary communities of the land reform programme to reap the benefits of their assets," concludes Setou.
