Clutching shopping bags, quaffing wine, and lounging on pristine beaches, foreign tourists visiting South Africa are getting more bang for their buck from the country’s weak rand.
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 — 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 bn (12.7 bn rand) in 2013 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.”
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.”
Foreign arrivals were up by 14.5% 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%. (AFP)