SOUTH AFRICA: Falling Rand Harms South African Tourism

Less buying power due to the weakening rand has probably resulted in a loss of over R300m in international marketing funds for South African Tourism (SAT), CEO Thulani Nzima said.

“The weakening of the rand against foreign currencies – which we need for marketing purposes in those destinations – have reduced our ability to do all the marketing we had originally budgeted and planned for,” explained Nzima at the 45th annual general assembly of the Airlines Association of Southern Africa (Aasa).

“The weakening rand, therefore, affects our ability to deliver on our mandate as we budgeted at a particular – better – exchange rate.”

As for the view that the weaker rand will benefit the industry, Nzima said SAT cannot market the country on the basis of a weaker currency. SAT rather markets the country as a value for money destination. On top of that the fact that SA is a long haul destination must be taken into account.

SAT is also not allowed in terms of regulations to hedge against the currency weakening.

In order to, nevertheless, be proactive and try to mitigate the impact of the currency weakness on its marketing budget, SAT made four proposals to government.

These included asking National Treasury to protect SAT’s originally budgeted exchange rate or to ensure that the original amount in the foreign currency can still be spent. Neither of these proposals was accepted.

What was accepted, however, was to provide some of the funds to SAT already up front so that it could be transferred into the foreign currencies straight away before the rand became even weaker. In this way the impact on SAT’s spend was at least partially mitigated, according to Nzima.

“Treasury and the Portfolio Committee on Tourism understand our challenges and are very supportive of us,” continued Nzima.

“At SAT we have also taken some steps the past two years, like using internal funding – by sacrificing some other discretionary spending – to enable us to get closer to our marketing target spend.”

He emphasised, however, that he is aiming to avoid cutting any jobs at SAT in the process.