Veteran visitors to South Africa are always full of good ideas for things to do for those who are about to go for the first time.
Newcomers to Cape Town generally hear the same list of essentials: go and see the penguins at Simonstown; go and see the whales at Hermanus; go and taste the fine wines in Stellenbosch.
There is also a common refrain about one of Cape Town’s trendiest areas – the beach area of Camps Bay: “You simply must go to this fabulous restaurant in Camps Bay. The food is wonderful, the wine is amazing, and try as you might, you can’t spend more than £15 ($26) a head.”
Tasty profits Most of this advice is well founded. With seemingly unlimited supplies of superb local crayfish, plump oysters from Namibia and huge prawns from Mozambique, the restaurants do offer fabulous food, at least for seafood fans. But £15 a head? It’s so cheap that it sounds too good to be true. And it is.
Even one year ago, conversion rates for the South African rand were extremely favourable for the foreign traveller, at roughly R17 to the British pound. Now, however, a pound will buy you only about R10.5 to R11.
On top of that, local hoteliers and guesthouse owners, who made piles of cash when the weak rand attracted thousands of tourists in 2002, were hoping to capitalize on their good fortune again this season and increased their rates dramatically – often by 50%.
Restaurants and even airlines have done the same thing. Enterprising shops along the beachfronts have started charging R350 for towels. A year ago, visitors to local vineyards were unable to find many wines for over R25. Now it is difficult to find anything under R50.
As Deutsche Bank pointed out in a report in December 2003, the currency dominates the economic landscape in South Africa. The bank says that the rand rallied by a full 8% on a trade-weighted index basis from September to December 2003, and it labels the rand as “probably the world’s most volatile ‘investable’ currency”.
The firm also highlights excess dollar supply in the South African economy, which could be a result of locals taking advantage of cheap short-term foreign loans. Naturally, hedge funds have also taken advantage of the rand’s boom, generating an explosion in currency swap trading, which produced an average daily trading increase of $1.7 billion in the year to September 2003.
This new prosperity does bring benefits to some. Barclaycard has been running proud radio adverts saying that it is relaunching in South Africa, having given up on its operations there 10 years ago.
But the impact on holidaymakers is significant. Tourist organizations are calling for the Reserve Bank of South Africa to stabilize the currency. They say that currency volatility is bad for the industry, whereas a stable rand at any reasonable level will help to keep the visitors coming.
Clearly the currency appreciation cannot continue for ever, and Deutsche Bank predicts a correction soon.
Staying away At the end of November last year, which is usually the time of year when the tourists start arriving in large numbers, many of Cape Town’s guesthouses were struggling for business. “This time last year, we were so busy that we were turning people away,” explained one British expat guesthouse manager to his only two guests over breakfast. “We had to go and stay in a flat down the road so that people could stay in our bedroom. It was crazy.”
He knew that the echoing silence of his guesthouse in 2003 was largely his own fault – he had almost doubled his room rate year on year. But he was also quick to blame the strong rand and higher air fares for his misfortune.
Perhaps we should not feel too sorry for him. Immediately after this short chat, he wafted past his pool, out of his sizeable garden and into his Range Rover to go to play golf in the sunshine for the day. Again.
By early December, local taxi drivers doing the airport run were reporting that the tourists had finally started to arrive.
But that did not stop the expat guesthouse manager from looking elsewhere for new opportunities. Having decided that life is simply too tough on the sunny Cape, he has resolved to move himself, his wife and his business to Dubai – a city that welcomes 14,000 tourists every day.
