#Brexit: How will the crashing pound affect SA travellers?

2016-06-24 12:57 - Selene Brophy
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Cape Town - The world woke up to the news that Britain has divorced Europe so to speak as the UK voted to leave the European Union (EU) and global economies suffered the worst Friday financial headache in a long time.

And while experts indicate the withdrawal process is expected to be complex and contentious, as South Africans we’re wondering how this affects us in the short, medium and long term.

Short term – impact of currency fluctuations?

Immediate effects have seen UK Prime Minister David Cameron tender his resignation. Fin24 reports that the rand fell more on Friday than on the day President Jacob Zuma fired former finance minister Nhlanhla Nene. It dropped over 7.8% against the dollar from R14.33 to R15.45, according to Adam Phillips of Umkhulu Consulting, compared to the 5% decline with the Zuma –Nene announcement.  Follow Fin24's full coverage here.

At Midday on Friday Fin24 also reported the pound collapsed to a 31-year low and currency, equity and oil markets went into freefall as the Union Sterling crashed more than nine percent to $1.3305, its weakest level since 1985.

Medium term – effects on tourism revenue streams and air access?

For South Africans travelling abroad, the questions around visas, the Schengen border-free zone, any impacts on roaming charges and low cost flights will all need to be answered, but for now it is expected to largely remain unchanged.  

Financial experts estimate that the Brexit vote is expected to shave about 0.1% off SA’s GDP, added to this imported goods will increase in price, causing the supply chain to affect local pricing, including those within the tourism revenue stream.

While some experts forecast that the pound could drop to below the euro, others remain optimistic about the effects of the currency fluctuations.

'SA a highly favourable for international visitors'

Cape Town Tourism CEO Enver Duminy says the exchange rate “still makes SA a highly favourable prospect for international visitors as it means affordable luxury".

It is hoped that the 'shock' will be short lived as the process to exit will take about two years, with Duminy saying “in the medium term, tourists and tourism businesses will need to prepare themselves for a series of changes”.

“We would caution against tourism businesses raising their prices to gain from international visitors only to price locals out of the market, especially since locals may opt to travel domestically within SA as a result of unsteady exchange rates,” Duminy says.

“Those international visitors who have booked well in advance will be able to enjoy their visit to the Mother City, and we will continue to showcase all that the city has to offer as a world-class travel destination,” says Duminy.

'Costs of exploring and experiencing the attractions are reasonable'

Added to this Duminy says the reaction from international visitors after their visit is that a stay in the city is far more affordable than they’d perceived prior to visiting, saying “once in the city, the costs of exploring and experiencing the attractions are reasonable”.

Conversely, as the pound plummets it could become more affordable for South Africans to visit Britain - but this remains to be seen. Currently the pound hovers well above R20.85/£1.

According to Vanya Lessing, CEO of Sure Travel and President of the Association of Southern African Travel Agents (Asata), South Africans wanting to travel abroad will not have too much to be concerned about as yet.

Lessing says "Countries will not want to make it more difficult or expensive for a traveller. In fact, there will be a lot of competition not to lose tourism, but rather to make gains to contribute to GDP."

Air access and excluded destinations?

Manoeuvrability around Europe from Britain, could become more restricted if UK-European flights are affected.  Low-cost airlines in Europe and the UK have thrived due to treaties which ensure a single aviation area across Europe. According to SkyNews, EasyJet also claims that the UK being part of the EU has allowed for their routes across Europe to almost double, and fares to fall by 40%.

A post-Brexit reality now means access to the aviation market could change, with Britain becoming a more sovereign and excluded destination and that low-cost airlines may choose to switch bases, putting a peg in cheap travel across the continent.

In order to mitigate this, the UK would no need to ensure entry to the European Common Aviation Area.  According to Willie Walsh, boss of British Airways’ owner International Airlines Group (IAG), airlines that have a more global focus wouldn’t see a material impact due to Brexit.  

On the back of all this Asata’s Lessing says, “ Travel is a very resilient industry. People will continue with their business and leisure plans.  In today's global world, travel has become a necessary function of business and life.”

Long term effects – the vote is still out?

Any long-term, future impact of the Brexit decision remains to be seen, with the UK needing to take stock of all the far-reaching consequences.

Many believe those most-likely affected will be the younger generations across Britain and Europe, as this NY Times reporter Nicole Perlroth's tweet sums up rather poignantly. 


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