Weak rand a tourist’s dreamComment on this story
Cape Town - Clutching shopping bags, quaffing wine, and lounging on pristine beaches: South Africa's weak rand is drawing few complaints from foreign tourists who these days get more bang for their tourist bucks.
The teetering rand, a victim of ongoing emerging market volatility, is tipped to remain on the back foot after hitting a fresh five-year low of around 10.87 against the US dollar.
The plunge comes as tourists flock to Cape Town - named as the world's top place to visit in 2014 by The New York Times Ä for the peak southern hemisphere summer season armed with hard currency.
“From a visitor perspective, it all bodes well for international visitors coming to Cape Town,” said Cape Town Tourism CEO Enver Duminy.
Foreigners spent an estimated $1.2 billion (12.7 billion rand) last year in the city and the industry is already pointing to a rosier season.
Official figures for December are still being tallied but feedback from hotels, tour operators and restaurants is that things look “a lot better” than the previous summer.
“If you look at our key source markets - UK, US, Germany, Netherlands - the exchange rate is in the favour of those travellers,” said Duminy.
“Which is great news for us which means that we become a lot more affordable for a lot more people wanting to leave Europe or the US.”
While recent market darlings, emerging economy currencies like South Africa have been hammered by moves in the US Federal Reserve to ease its stimulus package.
Added to this are domestic challenges such as sizeable twin deficits and spending needs, after a run of turbulent strikes.
“It's largely a global story of which South African characteristics play a part and certainly the depreciating trend is strong,” said Peter Kent, portfolio manager at Investec Asset Management.
“We wouldn't be surprised to see it depreciate some more but on a sort of medium term horizon I would expect some stability, possibly a small rally.”
In the meantime tourists like Norwegian Vidar Woldengen, 47, are getting a welcome surprise.
“When people in Europe find out, I'm sure they will bring their money here as soon as they find out because I was really surprised,” he said while browsing a popular African craft market.
“Now they can afford it.”
Foreign arrivals were up by 14.5 percent year on year in November and hotels are reporting strong occupancy rates.
For the area's famed wine farms, the exchange rate is a boost but long-term impacts are also being eyed.
The rand helped winemakers smash exports records in 2013, with volumes leaving the country up 26 percent.
The country's oldest surviving estate Groot Constantia, hugely popular with tourists, exports 60 percent of its wine and sells a further 20 percent through its tasting room and restaurants.
“The effect of the weak rand now benefits us in the short term in terms of income but in the long term, it's going nail us in terms of input costs,” said Jean Naude, general manager.
Others agree the long term impact of the weak rand is still to be seen.
“It does help with bang for buck but it's a small component of the decision making,” said Rey Franco, manager of the Victoria & Alfred Hotel at the popular Waterfront shopping and restaurant hub.
“The feedback I've heard mostly from guests is 'wow, it's so cheap here', and that goes back to the fact that currency plays a factor in variable spending but it's not the decision maker when it comes to travel.”
But for now tourists like German Daniel Fleig, 31, who in 2011 paid 6.55 rand to the dollar, the situation is “perfect”.
“Now we can spend much more money on our holidays here,” he said.