The relationship between tourism and trade in South Africa

Thesis (M.Com. (Economics))--North-West University, Potchefstroom Campus, 2009.Tourism and trade are growing at an unprecedented rate. The United Nations World Tourism Organisation (UNWTO) barometer (2007) finds that foreign arrivals for January 2007 to August 2007 showed a 5.6 percent increase compared with the previous year. Furthermore, the World Trade Organization (2007) finds that merchandise trade grew by 8 percent worldwide. A number of studies have been conducted internationally on the relationship between tourism and trade and empirical evidence for these studies support that, in many cases, a relationship does indeed exist. The main objective of this study is to examine the relationship between tourist arrivals and trade in South Africa. In order to do this, the empirical investigation is divided into two analyses. The first analysis involved a panel set data which includes tourism and trade data of 40 countries with South Africa for the period 1992 - 2007. In the second analysis, South Africa's nine main tourism and trade partners namely: Argentina, Australia, Botswana, France, Germany, Japan, Mozambique, the Netherlands, the U.K. and the U.S. were identified and investigated on their own. Using cointegration tests, Granger causality and Block exogeneity tests, the long-term relationship between tourist arrivals and trade in South Africa was investigated, as well as which series leads the other series, thus assisting in predicting that series. The results for the first, panel data analysis indicate that, for South Africa as a whole, there is indeed a long-term relationship between tourist arrivals and trade, that trade predicts tourist arrivals and tourist arrivals influence trade. The second analysis involved analysing the relationship between tourist arrivals and trade between South Africa and South Africa's main tourism and trading partners. The results show that certain control variables, namely climate, travel costs, price competitiveness and exchange rates, were added to reveal the effect that it might have on the relationship between tourist arrivals and trade. These results indicate that a causal relationship between tourism and trade still exists for Argentina, Australia, Germany and the Netherlands. For Argentina, Germany and the Netherlands, trade leads to tourism and a two-way causality exists between tourism and trade for Australia. However, when examining France, the United Kingdom, Japan, Mozambique and the United States, no direct relationship can be determined between tourism and trade. In these cases, the link between tourism and trade is explained by one or more of the control variables. The tourist arrivals of Mozambique and the United States were the exception, as these arrivals could not be explained by trade or any of the other control variables. This study therefore concludes that there is indeed a long-term relationship between tourist arrivals and trade in South Africa, and that trade predicts tourist arrivals, and tourist arrivals influence trade.Master