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Tourists are also migrating south
The Western Cape is not only attracting locals
In October last year, I wrote a column about why the Western Cape economy is overtaking Gauteng. In short, two reasons explain the divergence: faster technological innovation and better political institutions. And since October, the trend seems to continue: The Financial Mail, in a cover article on ‘semigration’ last month, reports that people are opting to move to the Cape as an alternative to emigrating: the proportion of house sellers planning to move provinces (rather than say, emigrate) jumped to the highest level in the third quarter of 2022 since measurement started.
But it is not only locals that are voting with their feet. Consider the number of overseas arrivals at South African airports in 2022, by month, compared to 2019. What is clear from the figure is the rapid recovery from lockdown of Cape Town International Airport compared to OR Tambo International Airport (Johannesburg) and King Shaka International Airport (Durban). Whereas Durban received less than half the number of overseas tourists in November compared to before Covid, Cape Town was already above 80%.
Much of this bounce-back can be attributed to new direct flights. United Airlines launched a year-round, nonstop service between Washington, D.C. and Cape Town in 2022, and also expanded their year-round nonstop service between New York and Cape Town. In December, Delta Airlines launched a new triangular route between Cape Town, Johannesburg and Atlanta. Easier access for Americans is reflected in the bounce-back: although German visitors had only recovered 51% of their 2019 numbers (between January and November), Americans were up to 68%.
It is not just the airport that draws in tourists; early last month, Mireille Wenger, Western Cape minister of finance and economic opportunities, noted that she expected 75 ship visits to Cape Town’s Cruise Terminal between November 2022 and April 2023. To put a number on this: just two ships that arrived in early January, the MSC Sinfonia and Norwegian Jade brought around 3500 additional passengers to Cape Town.
But it is not just Cape Town that has benefited from the surge in tourist arrivals. While summer 2022 has certainly been a tremendous success for the Mother City – a CTT survey shows that 85% of tourism industry respondents reported that December's performance was much better than in 2019 – I spoke to the financial manager of one of the best-known Stellenbosch wine farms who noted that ‘this is our best summer yet, even better than before Covid’. Another wine farm manager noted that their tasting room is ‘certainly busier than before’. The same sentiment can be found in the smaller rural towns of the Western Cape that rely even more on the tourism industry.
This rapid increase in Western Cape tourism numbers has consequences. It is not just that tourists visit attractions, like Table Mountain or Robben Island, ensuring that these sights are maintained and managed sustainably, tourists also need places to stay, eat, and shop. While some of these will be international hotel chains (like the Hilton or Airbnb), most often tourist spending directly benefit local entrepreneurs. The rule of thumb is that for every seven tourists, one job is created. That is one additional household with a monthly income, lifting living standards. Although that may be too optimistic – it depends on the spending power of the tourists, the existing stock of tourist infrastructure, competition in the market, technology, etc – it is nevertheless a useful back-of-the-envelope exercise to calculate the likely direct benefits of a boost to tourist arrivals. A Tourism South Africa campaign that draws in 70 000 visitors will, theoretically, create 10 000 new jobs. Whether that campaign should be an almost R1 billion shirt sponsorship of a team that last won the top football league in England in 1961 is another question.
But tourism also brings other benefits. A 2018 paper in the Quarterly Journal of Economics by economists Filipe Campante and David Yanagizawa-Drott shows that new (but direct) air connections ‘increase business links’ and thus ‘fosters the movement of capital’. This is driven, the authors show, ‘by capital flowing from high-income to middle-income countries’. There is no doubt that the new direct links between Cape Town and Washington, D.C., New York, and Atlanta is likely to lead to substantial new foreign direct investment in South Africa. Again, Cape Town is likely to be the main beneficiary.
To some extent, these investment benefits are already visible. Only last week CNN’s Richard Quest was in Cape Town to talk business: he interviewed politicians (though, sadly, not the president), business leaders and entrepreneurs. These were frank interviews, not shying away from the many problems that face the country. But what was quite apparent was the optimism about the future of the Western Cape compared to elsewhere in the country.
As those of us who have been fortunate to travel to many parts of South Africa knowns, this place has much to offer overseas tourists, from the Drakensberg mountains to the Kgalagadi national park, from the Mapungubwe cultural landscape to the Wild Coast, from iSimangaliso Wetland Park to Sun City and the Pilanesberg. But the same factors that are forcing upper-class households to semigrate to the Cape are also driving away tourists from these areas. Poor governance and, as a result, lack of investment, won’t only cause a divergence in incomes in South Africa, but it is likely to push the one industry – tourism – away from those places where it can do the most good.