South African Tourism has lost R300m (€19m) of its international marketing budget over the past three years and about R30m (€1.9m) so far this year because of the depreciation of the rand, says CEO, Thulani Nzima.
“Even though National Treasury assisted us this year by providing us with six months of our marketing budget upfront, by the time we received our money, the rand had declined,” he told Tourism Update at the 45th annual general assembly of the Airlines Association of Southern Africa (AASA) in George at the weekend.
While 75% of its budget was normally spent on marketing, currency losses meant spending was now being reduced in some markets and becoming “lopsided”, he said. SAT was avoiding cutting jobs it could ill-afford to lose and instead was opting to save money through internal belt tightening and putting a stop on discretionary spending, he said.
Nzima confirmed that SAT was not allowed to hedge against currency losses, but had been seeking ways to mitigate its exposure to exchange rate fluctuations for some time. Following currency losses of R48.99m (€3.2m) in the 2011/12 financial year and R26m (€1.7m) during the 2013/14 financial year, it applied to National Treasury to have its annual overseas budget transferred to its offshore bank accounts earlier in the financial year to reduce the foreign exchange risk.
Responding to perceptions that the rand, currently at its lowest point ever, would benefit tourism, Nzima said South Africa could not be positioned as a cheap destination purely because the rand was weak. He said the cost of long-haul tickets must be considered. He said other African countries and Australia were taking advantage of the reported decline in inbound tourism sparked by stringent new visa regulations.
Commenting on the view expressed by Comair CEO, Erik Venter, at the conference that SAT shouldn’t need foreign currency to market itself abroad, but rather should focus on Internet marketing instead, Nzima said SAT’s marketing was very Internet driven and market specific, based on consumer research in each market it served.