South Africa Tourism Report Q1 2009

Tourism Overview After a slowdown in growth in foreign tourist arrivals in 2007, latest data for the period January to August 2008 show weaker growth than that recorded in the corresponding period a year earlier. In the eightmonth period, the number of foreign arrivals was up 6% year-on-year (y-o-y) to around 6.2mn (as against almost 10% y-o-y in the same period in 2007). Moreover, in August, the three key source regions for South African tourism, Africa, Europe and North America (as well as Asia and the Middle East), all recorded sizeable negative growth compared with the same month in 2007. Over the period January to August, growth in tourist arrivals from African countries continued to slow but was still relatively strong at some 6% y-o-y. The number of arrivals from Europe though was up a favourable 5.3% y-o-y, slightly ahead of the 3.6% y-o-y growth in the corresponding period of 2007. Tourist arrivals from the UK (which accounted for over 35% of all European arrivals in 2007) rose a modest 2.6% y-o-y, while visitors from France were up a strong 13.3% y-o-y in the first eight months of 2008. Arrivals from North America, Central and South America, Australasia and the Middle East, also all recorded strong growth rates.

Hospitality The total number of tourist (foreign and domestic) room nights in all accommodation establishments was estimated at 4.95mn nights in Q308. This represents a modest increase of 4.3% compared with the same quarter a year earlier, and comes in the wake of a relatively strong increase of 11.4% y-o-y in Q208 and a buoyant 17% y-o-y increase in Q108. Occupancy rates in all accommodation establishments in Q308 showed only slight improvement, standing at an average of 49.4%, an increase of 2.3% y-o-y.

Forecast Scenario After strong (but weakening) growth in foreign tourist arrivals in 2007, BMI foresees a further slowdown in 2008 although the growth rate is expected to remain relatively favourable at around 5% y-o-y (revised down slightly this quarter). Growth is anticipated to slow once again in 2009 but remain slightly positive.

The outlook for foreign arrivals is set against a background of downward revisions to our global forecasts across the board. In 2010, we expect growth in tourist arrivals and tourism receipts to pick up sharply, as the country hosts the FIFA World Cup and economic recovery takes place in key source markets. A growing threat to the tourism industry though is the rapidly deteriorating political and economic situation in neighbouring Zimbabwe, with the Zimbabwean government recently declaring a belated state of emergency over a cholera outbreak.

2010 FIFA World Cup In October 2008, Finance Minister Trevor Manuel gave a boost to South Africa’s preparations to host the World Cup by announcing the allocation of an additional ZAR1.4bn to cover cost overruns on stadia projects, and ZAR600mn to cover the cost of high-speed internet connections at stadia. At the same time, the treasury stated that despite the escalating World Cup bill, the government remained on course to host a successful World Cup. The treasury also indicated additional allocations to local government totalling ZAR8.8bn. Of these funds, ZAR835mn is proposed to finance an integrated public transport network in large municipalities, including 2010 World Cup cities, while ZAR497mn is allocated for completion of stadia and to help host cities with operational requirements for hosting the World Cup.

Sun International In the first quarter to 30 September 2008, Sun International achieved overall revenue growth of a modest 3% compared with the same period in 2007. Casino and room revenues grew 1% and 13% y-o-y respectively. The average room occupancy rate for the quarter was 76%, down 2% y-o-y. The outlook for the group’s casinos in South Africa in Q2 is expected to remain challenging due to the difficult economic climate, but should be offset to some extent by the stronger growth in hospitality revenue.