South Africa Tourism Report Q4 2009

Tourism Overview

Following strong growth in foreign tourist arrivals in 2006, growth slowed in 2007 and 2008 to 8.5% and5.7% year-on-year (y-o-y), respectively. The most recent official data, for the first five months of 2009,show a continuing weakening trend, with foreign visitor arrivals up by less than 1% y-o-y. In more detail,however, although these latest data show that arrivals from Africa recorded positive growth (up by about5% y-o-y), every other region recorded declined in visitor numbers, compared with the same period in2008. Furthermore, it is worth noting that arrivals from Zimbabwe were up over 16% y-o-y, representingan increase of 77,000, which amounted to about 55% of the total rise in numbers from Africa. Europe andNorth America recorded falls in arrivals of nearly 13% and over 12% y-o-y, respectively.

Hospitality

Latest data confirm a continuing, relatively sharp downturn in the hospitality sector for foreign anddomestic tourism. The most recent data are for Q209 (preliminary data only) and show that the totalnumber of foreign and domestic tourist room nights in all accommodation establishments decreased amarked 9.8% compared with the second quarter of 2008. This follows a similar 9.5% y-o-y fall in touristroom nights in Q109.

Forecast Scenario

According to our new forecasts, BMI expects total foreign tourist arrivals to decline slightly this year, byabout 1.7% y-o-y. The weak outlook for 2009 rests partly on further downward revisions to our economicforecasts in major source markets, particularly the eurozone, and changes to our exchange rate forecasts.Since out last report, we have revised up our short-term forecast for the South African rand against theUS dollar and the euro, putting further pressure on the tourism industry. For 2010, however, we maintainthat growth in tourist arrivals and tourism receipts will pick up sharply, as the country hosts the FIFAWorld Cup and economic recovery takes place in key source markets.

2010 World Cup

The Confederations Cup, which takes place a year before the World Cup and is used as a dress rehearsalfor the main event, took place in South Africa in June. Many of the projects emanating from numerousguarantees given to FIFA to host the World Cup were put to the test during the Confederations Cup,which was broadly regarded as a success. The government acknowledged in August 2009, however, thatthere were some areas that required improvement, particularly in transport and accommodation. Theauthorities also said that despite large-scale strikes by stadium workers in July, they were confident thatthe grounds will still be ready for the World Cup, unless major strikes resume.