Page 130 - Risk Report 2024

1. Functional State 2. Politics

Poor governance and service delivery failures directly impact Generally, geopolitics poses no immediate threat to the sector,
the sector through reduced revenue, increased cost, and eroding although international travellers are impacted. SA’s approach
margins. Resilience requires of sector entities to maintain own to international relations pose a greater risk to the harmonious
operations and infrastructure to provide quality services to relationships with countries that house major SA tourism
customers. The sector collaborates with Government for better markets. Instability and poor relations affect the predictable
outcomes (e.g. investment in private sector-led initiatives and environment that the sector requires to thrive. Sector entities
community-based tourism). As SA increasingly becomes a advocate for supportive policies, while diversifying source
degraded State that is less and less attractive to international markets and investment sources in specific tourism regions.
and local tourists, the sector lobbies locally and nationally Political unrest, riots, strikes, disruptive events, and increased
for focused attention whilst operators are caught in a spiral regulations affecting inbound tourism (e.g. visa requirements)
of investing in privatised services to supplement the State’s create uncertainty, increase cost to do business, and reduce
shortfalls. For smaller establishments, the cost of compliance the attractiveness of SA as an international tourist destination.
and grading standards are comparatively high, which excludes How SA deals with the 2024 election results will determine how
them from growth opportunities and the ability to create long the sector will be subject to consumers’ ‘wait and see’
employment. approach.

3. Economy 4. Social Security
The sector experiences significant headwinds during economic Declining social security, poverty, unemployment, and social
downturns as travel is mostly a discretionary expense. uprisings impact the average citizen, reduce consumer
Prolonged economic instability causes reduced consumer confidence and discretionary spend, and increase crime. Loss of
spending, revenue generation, and profitability for entities tourism is instantaneous after such events in key tourist areas,
that rely on local tourism. The weak Rand makes SA an impacting the sector through increased cost, reduced revenue
attractive tourist destination for foreigners, but crime is a and profitability, and ultimately increased unemployment.
deterring factor. Focusing on cost optimisation, diversifying Private security, business interruption insurance covers, and
target markets, offering competitive pricing, and promoting business continuity and emergency procedures mitigate the risk
value-added experiences to attract visitors during economic to a limited extent (but often excessively expensive for smaller
downturns will alleviate some of the impacts. Other African players). Apart from sound financial management and diversified
countries are becoming more attractive travel and trade routes source markets, the sector contributes to social development
and key access points into the African market. Businesses delay through job creation, enterprise and supplier development,
decisions on key investment projects, consumers alter travel and skills development. Well thought-through CSI investment
patterns, corporates embrace virtual meetings, and businesses creates social leveraging opportunities to develop communities
reduce travel costs to mitigate economic pressures. Continued and improve social security. Random and poorly integrated or
emphasis placed on tourism indabas and marketing and unstructured CSI-funded projects, however, may disrupt social
branding initiatives remain important. development and security. By investing responsibly in local
communities and promoting responsible tourism, the sector
addresses social challenges whilst enhancing its resilience.

5. Rule of Law 6. Water
Crime results in increased cost, reputational damage, safety Water unavailability due to failing infrastructure or droughts
concerns, and declined attractiveness, which deter tourists significantly affects the sector, which is heavily water reliant.
and new development investment. Poor public infrastructure In addition pollution due to failing waste water management
(roads and access to remote destinations) is vulnerable to illicit at key tourism destinations affects the attractiveness of
activity and opportunistic crime, while internal fraud and theft establishments at these locations. SA’s failure to plan
increase due to social-economic hardship. The sector prioritises and ensure access to clean water may lead to business
staff training, security technologies, and collaboration with law interruptions and increased costs to procure water tankers.
enforcement agencies. Transparency, ethical business practices, Sector players are forced to invest in water recycling (e.g.
and CSI mitigate the risk. In small towns, smaller establishments reverse osmosis plants, and grey water irrigation), alternative
are compelled to integrate business development initiatives water sources (e.g. boreholes, and rainwater harvesting), and
beyond hospitality to create social cohesion, conducive tourism water-saving measures (e.g. low flow taps, water saving shower
environments, and sustainable communities. heads, and water wise plants in landscaping), where possible.
Further innovative ways are needed to conserve water, and to
collaborate with local communities and authorities to address
water management challenges. These innovative programs
increase the cost of doing business which cannot always be
passed on to the consumer.