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Rand has tourism industry confused
March 14, 2004
By Vernon Wessels
Soon the strong rand will also be blamed for causing erectile dysfunction.
And why not? It's being accused of everything else: killing the manufacturing sector, ripping the soul out of our mines, chopping our farmers off at the knees, sucking the lifeblood out of the export sector ...
The tourism industry is so confused by the actions of the rand it cannot decide if it is being slaughtered by the currency or not.
At R6.7610 to the dollar, the rand is now trading at more than half of the R13.84 record worst it hit at the end of 2001.
Will such an appreciation dent the competitiveness of an industry exposed offshore? Hell yes!
But we quickly forget that R13 or even R10 per dollar was an abnormal level to slide to and, with the benefit of hindsight, we know that such a value was unsustainable.
There is some merit in the argument that the appreciation in the rand is causing short-term problems in certain sectors (while benefiting others). But someone has to throw a custard pie at the next chief executive who bleats about the strong rand.
The rand has appreciated for two consecutive years - that's 24 months or eight consecutive reporting periods (including the interim results).
Enough already.
An economy cannot be built on a weak rand alone.
Lower interest rates and lower inflation is much better for the economy than having a weak rand that benefits only those exposed to the export sector for a short period.
A business owner, director or foreign company would rather invest in a country where costs will increase predictably rather than worry that prices will suddenly surge more than 10 percent and wages (the biggest cost of most firms) will also need to rise to compensate for this.
A (very small) daily financial newspaper this week proclaimed it had solved the raging debate about the strong rand's impact on the tourism sector. The strong rand is keeping foreign tourists away, said the paper - renowned for changing its mind on issues.
Another financial daily paper (Business Report) had two conflicting articles on the effect of the rand on tourism on the same day - only four pages apart.
One article declared South Africa remained a magnet for tourists while the other cited a slight decline in hotel occupancy rates and foreign arrivals as another indication of the havoc being wreaked on the economy by the strong rand.
It is not as cheap to visit South Africa as it was two year ago. But it is still cheap: €1 buys you more than R8.20 and £1 will give you more than a dozen rands.
A drive around our country will reveal that a number of new hotels have been built. The rand is not responsible for hotel rooms, lobsters, or trips to game reserves being sold at rip-off prices.
That is greed. If the tourism sector goes limp it will only have itself to blame for not seeing any action.
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