Three-quarters (74%) of small business owners in South Africa’s tourism sector are feeling optimistic as they head into the first unrestricted holiday season in two years, according to new research from small business platform Xero.

Despite their optimism, small businesses – which make up the bulk of the South African tourism industry – have a large gap to fill with over three-quarters (77%) reporting revenue declines of at least 21% in the past two years . Additionally, a third (34%) said a lack of financial skills was their number one challenge, with 35% calling for more government investment to help them with digital skills and innovation.

Colin Timmis, country manager for South Africa at Xero, says: “There is a lot going on this tourist season. The sector is a huge contributor to GDP and a third of those we surveyed are looking to hire over the next 12 months. businesses will not be able to grow without increased support in key areas such as digitalisation, financial management, load shedding and late payment reduction from large companies.”

Over a quarter (27%) of small business owners wanted to see a bigger effort from the government to attract more tourists to South Africa during the peak season, so it’s good to see flight and visitor numbers on the rise.

Councilor James Vos, a member of the Cape Town City Mayor’s Committee on Economic Growth, highlighted the promising increase in tourist numbers: “Between November and December, we anticipate 184 international flights per week. This will increase to 191 weekly flights between January and March next year, or about 1.5 million round-trip seats between next month and March, generating a huge tourism expenditure of R7.9 billion. This demonstrates the potential for our city’s small business community this summer.”

Barriers holding back small businesses

The majority of small business owners (96%) said the disruption due to load shedding in recent months had a negative impact on them. And businesses continue to breach agreed payment terms, with 35% of tourism businesses experiencing late payments month after month.

Digital adoption is key to driving growth

Just under half (44%) of businesses plan to invest in digital skills and training within the next 12 months, but many are lagging behind when it comes to adopting digital tools. More than a third (38%) of tourism businesses still manage their finances on spreadsheets.

And with 32% citing poor tax compliance as a top financial challenge, many could improve their prospects by using digital tools that help automate tax filing and give them more control over their cash flow.

Timmis continues, “It’s concerning to see so many businesses still using spreadsheets or even paper to manage their finances. These businesses are at risk of being left behind and will struggle to do simple things like apply for finance in the future if they don’t fit. The Our country is in dire need of investing and promoting the benefits of technology.”

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