Falling rand harms South African Tourism

Source: Carin Smith , Fin24, 11/10/2015

George – 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 told Fin24.

"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.