The Nexus between the Tourism Industry and Country Risk in South Africa

Thomas Habanabakize, Zandri Dickason-Koekemoer

Abstract

Travel and tourism are major industries that drive the South African economy and create more jobs. However, this industry is not spared from various risks that impede the country’s development. The purpose of this study is to assess the effects of specified country risk components (political, financial, and economic risks) and the total number of tourists visiting South Africa. The study analyzed monthly data spanning from 2013 to 2019 to achieve this objective. The Autoregressive Distributed Lag (ARDL) model was used to investigate the responsiveness of the tourism industry (number of arrivals) towards changes in country risk. The Toda-Yamamoto Granger causality was utilized to determine the causation between variables, and the study applied several diagnostic tools to validate econometric models. Findings revealed the existence of a long-run relationship between the tourism industry and country risk. In other words, shocks in country risk components have a long-run impact on the tourism industry. The short-run results supported the cointegration results indicating that all components of country risk influence the number of tourists coming to South Africa. Since no study has been conducted to determine the impact of country risk on the South African tourism industry, these results are of crucial importance. The study suggests that policymakers and government authorities should introduce and implement strategies and policies that improve the country’s political, economic, and financial stability to increase the number of tourists to South Africa.

 

Keywords: tourism industry, autoregressive distributed lag, country risk.


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