23 September 2020 – The move to ‘level 1’ of the lockdown is a welcome step from a broader macroeconomic perspective, as this ensures that economic activity in the country continues to normalize gradually across more sectors of the economy. Within agriculture, the only segment that will likely benefit the most from this move is agritourism, which has been hard hit by the pandemic due to restrictions in international and local travel, along with the wider tourism industry.
The agritourism industry comprises, amongst others, hunting tourism, rural tourism, wine tourism, nature-based tourism, cultural heritage tourism, and adventure tourism. These activities provide additional income to farming businesses and create jobs in rural areas.
One of the most common forms of tourism in South Africa has mainly been wine tourism and hunting tourism. The former has been hard hit not only by the temporary ban on interprovincial and international travel during various stages of the lockdown but by the temporary prohibition on alcohol sales which has recently been lifted. Wine producers and farmers, specifically small farms, rely to a certain extent, on agritourism to diversify income and to boost the sales of their produce. Hence, the impact of the temporary ban on sales and limited movement of people was quite pronounced despite exports having been permitted for the greater part of the lockdown.
Rural Limpopo also stands to benefit from the increased wider opening of the economy through hunting and wildlife tourism (game-farms and game-lodges). While there is no clear measurement of the value of agritourism in South Africa, studies from the Western Cape Department of Agriculture suggest that accommodation, wine cellars, tours and tastings, restaurant, hiking, conferences and functions, weddings, picnics and fishing are amongst the key offerings in that province. Accommodation, hiking and hunting are likely to be some of the common offerings in other provinces in the country.
Although international tourists, who generally have a higher average spend when compared to local tourists, might remain limited, even with the move to level 1 of the lockdown, we suspect that there might be an uptick of locals exploring the country. This is partly because consumers’ confidence and appetite are likely to slowly return as the spread of the pandemic continues to slow. With respect to international tourists, studies from the Western Cape’s Department of Agriculture show that 29.8% of the international market’s average spend on wine tourism was between R501 to R1000 per day in 2017. The local tourists will most likely spend less than that, especially during the current tough economic times.
Nevertheless, we are already starting to observe anecdotal evidence on social media and other platforms such as various establishments offering special prices and local tourists showing updates of such offerings. While local tourists might not boost the rural economy to vibrant levels as before the pandemic, there will nonetheless be an improvement from weeks of limited business activity. The key challenge is that local tourists will likely be cautious about spending given the poor domestic economic outlook, which means that various businesses that generally derived great value from agritourism will remain under pressure, to a certain extent, over the near-to-medium term. We also suspect that establishments with hiking and hunting facilities will most likely gain from local tourists as individuals may prefer nature which offers social distancing.
Aside from the agritourism, the broader agricultural sector has been open from the onset was classified as essential and did not close during the strict lockdown period. As we have repeatedly pointed out, the wine, tobacco and floriculture are amongst the products whose sales were temporarily banned and therefore hard hit by the lockdown relative to other products and broader subsectors of agriculture. The vibrancy of the sector is evident from the recent GDP data which showed that agriculture’s gross value-added expanded by 15.1% q/q on a seasonally adjusted and annualised basis following an expansion of 27.8% q/q in the first quarter.
In a nutshell, the shift to level 1 of the lockdown will have limited impact on a sector that was already largely open – agriculture. But related industries such as agritourism and small farms that depend on agritourism stands to benefit. This will largely be in provinces such as the Western Cape, Limpopo and other provinces that have various rural offerings that we have listed above, which is accommodation, wine cellars, hunting, restaurants, wedding venues, fishing, and camping, amongst others. Source (WandileSihlobo.com)