Much is riding on the fifth South Africa Investment Conference (Saic) this week but along with many in the tourism sector, I wonder if enough attention is being paid to an industry where revenue potential is enormous, but progress is often patchy and there is reticence and uncertainty about financial commitment.
There is no question tourism can be a super sector. It is a future driver of our economic growth. What mining was for the South African economy in the 70s and 80s, tourism can be for our stressed economy.
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Planned and managed properly, the flow of money spread right across the entire supply and value chain will make the sector an employment enabler at every level of the industry.
According to the World Travel & Tourism Council, the direct contribution of travel and tourism to South Africa’s GDP is just shy of R140 billion a year, accounting for 4.8% of the country’s GDP.
Before the Covid-19 pandemic the industry supported around 600 000 jobs, equating to around 4% of total employment in the country.
Healthy financial returns
With the right infrastructure and policies in place, South Africa has the potential to significantly increase its tourism industry and the jobs and revenue it generates. But it needs a serious financial kick-start.
Right now, banks are not keen on the sector, citing high risk and uncertainty. Inevitably, when there is money to lend, it ends up in the hands of bigger, more established players. The strategy is understandable, but unfortunate and we need a new approach.
In recent weeks, I have been in discussion with several industry players about the viability of an independently managed private investment fund that would identify and support viable projects in the sector, as well as provide a healthy return to investors.
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South Africa has a strong regulatory framework and a mostly effective operational infrastructure that investors would find attractive.
It’s my belief that to be a relevant and attractive option, such a fund would need starting capital of around R10 billion.
Key to its success would be an indication of commitment from local tourism stakeholders of a pipeline of viable projects that will add value and growth to the sector.
Crossroads
As an entrepreneur who is actively playing in this field, it’s my experience that if you show an operational and execution blueprint, capital and support will follow.
Such a fund will help to create jobs, increase foreign and domestic investment, and ultimately help to revitalise the country’s tourism sector.
Foreign investment is essential to the growth of the tourism sector, as it helps to create a larger market for goods and services.
There is no reason why large institutional investors, sovereign wealth funds and sovereign linked companies would not want to be part of such a fund. And locally, such a fund would help support small businesses and other companies that are focused on the tourism industry.
South Africa is at a tourism crossroads. Government needs to decide if it wants to take a growth high road like Singapore and Dubai, or flounder in an environment of uncertainty and mixed messaging.
Timeline-driven success
In Singapore’s case, its success is predicated on offering a clean, safe, family friendly destination with excellent public transport and a strategy of promoting the destination as a premier events entertainment hub.
Dubai has positioned itself as an easy to reach global shopping destination with high end luxury hotels. Both approaches are actively supported by their respective governments who see the value of the tourism sector.
Crucial to the fund’s success would be its independence. But it must be wholeheartedly endorsed and supported by government as well as SA Tourism, the body tasked with promoting the country as a viable, safe, and sustainable destination.
The South African government has two choices if we’re to get this right. We need less talk and more timeline-driven action on crises like power generation and rampant crime, and then a decision on whether it has the political will to turn tourism into a proper super sector.
Read:
Gauteng, KZN and the Northern Cape attract the most pledges at investment conference [March 2022]
R69bn of the R364bn pledged at investment summit has ‘flowed into the economy’ [March 2021]
SA tourism industry’s decade of dashed hopes [July 2020]
If government makes the right decision, capital will follow.
Time is fast running out. President Cyril Ramaphosa needs to give a clear and unequivocal indication at his investment conference that tourism is vital to the future of the country, and that limitless opportunities are abound for investors and tourists. Prevarication or avoidance is a massive opportunity lost.
Hamza Farooqui is the CEO of Millat Investments, which owns four hotels operated by the Hyatt Hotels brand.
Listen to Farooqui speaking on The Property Pod (or read the transcript):
