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June 2010

Tourism Outlook: South Africa

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Introduction

1 UNWTO World Tourism Barometer, April 2010 Interim Update

Tourism is a vital component to economic growth at the local, national and global levels. For developing nations such as South Africa, tourism is a key industry and significant contributor to revenues, job creation and stimulation of infrastructure development. Even in a challenging economic environment, tourism remains important to a nation’s gross domestic product and to its visibility on the global stage among potential visitors, investors and influencers.

This year brings many reasons for optimism for the tourism industry and specifically for the South African tourism economy. After projecting modest three to four percent growth for the industry, the United Nations World Tourism Organization (UNWTO), has already seen a seven percent increase in international tourism in the first two months of 2010. This follows the upturn already registered in the last quarter of 2009 when arrivals grew by two percent after 14 consecutive months of negative results1.

This is the second Tourism Outlook: South Africa, a publication that details spending on Visa cards by international visitors to South Africa for the previous two years. This report uses actual Visa card spend data to aggregate information about visitors – where they are coming from, how much they spend and what they are buying.

Visa is committed to providing South Africa’s global tourism industries with current and accurate information that can help sharpen tourism marketing efforts and grow related revenues. As the use of electronic payments continues to increase, Visa will work with our partners in the tourism industry as well as our financial institutions and merchant clients to ensure that both residents and visitors to South Africa enjoy the benefits of electronic payments.

Gerald Hawkins, Group Country Manager, Visa Inc.

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In the first quarter of 2010, Visa cardholder spending by international visitors to South Africa increased 34 percent to $566 million compared with $423 million in 2009. While total 2009 Visa cardholder spending by international visitors in South Africa declined 2.7 percent amidst economic headwinds (from $1.84 billion in 2008 to $1.79 billion), rising South Africa tourism arrivals based on increased international visibility around the 2010 FIFA World Cup™ indicate significant opportunity for growth this year. In 2009, South Africa saw 9.9 million foreign arrivals, up 3.6 percent from 9.6 million in 2008. This modest growth contrasts with the 4 percent decline seen across the globe2. Moreover, the South Africa government anticipates more than 10 million foreign arrivals in 2010, with hundreds of thousands of visitors around the 2010 FIFA World Cup™3.

As a partner to the FIFA World Cup™ and the tourism industry, Visa supports tourism growth in South Africa during 2010 and beyond. Visa brings a deep understanding of infrastructure developments around the tournament and the associated opportunity for host markets. And as the world’s largest retail electronic payments network, Visa has the unique opportunity to provide businesses and governments with information and insights on international tourism spending. Turning Visa transaction data into actionable information is one of the ways Visa delivers value to businesses and countries that rely on tourism revenues. This data enables businesses to improve their product offerings and marketing strategies to ensure that they have the right tools and business models to attract a sustainable flow of visitors.

Anticipating the 2010 FIFA World Cup™

9 Cities10 Stadiums64 Games

2 UNWTO January 2010 World Tourism Barometer • 3 South Africa Tourism

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South Africa Inbound Tourism Spending

While Visa cardholder spending

by international visitors to South

Africa decreased (2.7 percent), from

$1.84 billion in 2008 to $1.79 billion

in 2009, South Africa weathered the

economic headwinds which impacted

international tourism during 2009

better than most countries around

the world, which saw up to double-

digit percentage drops in inbound

tourism spending.

Early 2010 Visa cardholder spending also showed reason for optimism. During the first quarter of 2010, Visa cardholder spending increased 34 percent from $423 million during the first quarter of 2009 to nearly $566 million during the first quarter of 2010.

There was significant year-on-year growth in Visa cardholder spending during the first quarter of 2010 compared to the same period in 2009, particularly among the top ten contributors to South Africa inbound tourism spending. The United Kingdom (37 percent), United States (19 percent), Germany (38 percent) and France (27 percent) all saw significant gains in early 2010 over the first quarter of 2009. This is particularly significant

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2009

Top 2009 Inbound Source Countries Percent Growth (+/-)

2008

U.S. -8%$269.7M$295M

Mozambique +118%$89M$40.7M

Germany -23%$78.1M$102M

France -8%$67.5M$73M

Botswana 18%$62.7M$53M

Nambia -15%$55.5M$65.4M

Canada -15%$52.9M$61.8M

Switzerland 2%$41.2M $40.4M

U.K. -11%$461M$517.5M

Australia -9%$59.5M$65.5M

travelers to South Africa during 2009. Mozambique in particular saw significant year-on-year growth due its developing payments infrastructure and increased preference for payment cards.

While travelers from Western Europe were the strongest contributors to South African tourism, 2009 saw the significant year-on-year growth in spending on Visa cards by tourists from all over the world, with emerging markets including: Malawi (168 percent), Mozambique (118 percent), Angola (115 percent), China (28 percent) and Botswana (18 percent).

given that tourism spending by visitors from these four nations declined in 2009 compared to 2008 levels.

Despite a challenging climate in 2009, South Africa continued to be a popular tourism destination. Last year, visitors from the United Kingdom, United States, Mozambique, Germany and France made the largest contributions to South Africa tourism, as measured by Visa cardholder spending. Four of the top ten contributors to South African inbound tourism spending came from nations in Western Europe, accounting for over half (54 percent) of spending by international

Switzerland 36%

Top First Quarter 2010Inbound Source Countries Percent Growth (+/-)

2010 2009

U.K. 37%

U.S. 19%

Germany 38%

Mozambique 5%

0 50 100 150 200

France 27%

Canada 35%

Botswana 58%

Australia 43%

Namibia 35%

$159.7M$116.8M

$73.4M$61.5M

$29.7M$21.5M

$21.5M$20.5M

$21.5M$16.9M

$18.7M$13.8M

$18.6M$11.8M

$17.4M$12.2M

$16.3M$12.0M

$14.7M $10.8M

Source: VisaVue Travel Data, 2009 – 2010Source: VisaVue Travel Data, 2008 – 2009

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In June 2010, South Africa will be

welcoming more than 370,0001

international visitors to their country

as the 2010 FIFA World Cup™

kicks off on June 11, 2010. The

tournament will provide South Africa

with a significant opportunity to

showcase its country to the world

and provide a lasting impression to

attract visitors and tourism revenues

for years to come.

The month-long 2010 FIFA World Cup™ is expected to add 93 billion rand to the South Africa economy, translating to a 0.54 percent boost to gross domestic product, a significant contribution given that the total South Africa GDP growth in 2010 is estimated at 2.0

4, 5, 6, 7 Grant Thornton Strategic Solutions, “Updated economic impact of the 2010 FIFA World Cup,” April 2010

2010 FIFA World Cup™ South Africa

to 2.5 percent . This influx of international tourism revenue helps to support continued infrastructure developments and economic growth within the country.

International sporting events such as the FIFA World Cup™ also provide host countries with significant job growth opportunities. Within South Africa, the number of annual jobs sustained due to the 2010 FIFA World Cup™

will be 650,000 jobs .

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According to VisaVue data, South Africa has already seen a year-on-year increase in spending during the first quarter of 2010 as compared to 2009, a strong sign leading up to the FIFA World Cup™. During the first quarter of 2010, Visa cardholder spending by international visitors to South Africa was nearly $566 million, an increase of over 34 percent from the $423 million spent during the first quarter of 2009.

Travel-related merchant segments saw significant growth during this period,

with a 41 percent increase in lodging spending, airlines saw a 19 percent increase, 28 percent increase in auto rental spending and a 22 percent increase in travel agency spending amongst international travelers on their Visa card. These numbers should continue to increase during the FIFA World Cup™ as visitors are expected to spend on average 30,200 rand ($USD 4,077) and stay on average 18.7 days in the country during the month long tournament7.

Visa’s Partnership with Tourism IndustryVisa International Travel and Tourism Summit

In February 2010, Visa convened a diverse group of leaders in tourism and government to review the challenges and opportunities for international travel in 2010. Participants included the United Nations World Tourism Organization, U.S. Department of Commerce, Moody’s Analytics, Travelport, and tourism ministers and representatives from Malaysia, Brazil, the United Kingdom, Canada and more.

The Summit featured presentations on current behaviors and attitudes of international travelers, economic data describing 2009 outcomes and the environment in 2010 and beyond, as well as case studies in the tourism industry’s resiliency following crises and natural disasters. In addition, representatives from the UNWTO and Visit Britain described the opportunity for tourism associated with major sporting events such as the Olympic Games and FIFA World Cup™.

While each speaker and participant articulated a distinct point of view on how to support continued growth in the global tourism industry, all shared the belief that greater collaboration is key to ensuring the industry is well-positioned for growth.

As a partner to tourism operators and governments worldwide, Visa is committed to partnering with the tourism industry by developing electronic payment systems and partnerships that attract international visitors and enable spending. Visa believes that digital currency continues to be a vital component for the growth of global tourism, as well as creating a more connected and powerful global economy.

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2009 and Q1 2010 Inbound Tourist Spending by Market Segments

Retail Purchases Top South Africa Inbound Tourism Spending

Consistent with tourism spending

trends over the past three years,

retail purchases continued to account

for the largest share of tourism

spent on Visa cards in South Africa,

followed by travel-related purchases

such as lodging, airlines

and travel agencies.

General retail purchases, such as clothing and food, represented 53 percent of Visa transactions by international travelers within South Africa in 2009, totaling more than $949 million. Despite showing a decline from the previous year’s total, lodging continues to be a major expenditure for international travelers, representing 13 percent of Visa

transaction volume in 2009 and totaling more than $224 million.

Discount retail continued to see the biggest year-on-year gains, with a 101 percent increase in expenditures over 2008, suggesting that the economic conditions of 2009 led international travelers to seek bargains while traveling abroad.

Consistent with 2009, during the first quarter of 2010 the largest merchant segments for South Africa inbound tourism spending, based on transaction volume, were general retail related purchases, such as clothing and food related transactions. During the first quarter of 2010, several key merchant segments showed significant growth over 2009 levels: Visa cardholder spending in the restaurant segment increased 48 percent, lodging increased 41 percent, general retail purchases increased 32 percent and airlines saw a 19 percent increase.

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2008 and 2009Transaction Volumein Top Categories Percent Growth (+/-)

2009 2008

General Retail 6%

Lodging -5%

Airlines -17%

Restaurants —

0 200 400 600 800 1000

Supermarkets 9%

$948.8M$892.3M

$224.2M$235.1M

$103.5M$124.9M

$59.1M$54.5M

$71.9M$72.2M

0 50 100 150 200 250 300

First Quarter 2009 and 2010Transaction Volumein Top Categories Percent Growth (+/-)

2010 2009

General Retail 32%

$291.8M$221.5M

Lodging 41%

$77.9M$55.3M

Airlines 19%

$28.2M$23.7M

Auto Rental 29%

$19.1M$14.8M

Restaurants 48%

$27.8M$18.9M

Opportunities AheadTourism Outlook: South Africa indicates that significant opportunities exist for South Africa tourism in 2010, particularly with the imminent 2010 FIFA World Cup™. With infrastructure developments around the 2010 FIFA World Cup™, South Africa is well positioned for continued growth in tourism arrivals and revenues in 2010 and beyond.

Visa is committed to working with the tourism industry, and specifically with South Africa government, tourism organizations and businesses to support continued growth, by providing not only the currency for cross-border transactions but also a reliable and secure global payments network that includes millions of cardholders around the world.

For more information regarding Tourism Outlook: South Africa and Visa’s tourism initiatives, please contact globalmedia@visa.com.

Source: VisaVue Travel Data, 2009 – 2010Source: VisaVue Travel Data, 2008 – 2009

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Appendix

ToP 2009 INBoUND SoURCE CoUNTRIES ISSUER CoUNTRy 2008 2009

01 United Kingdom $517.5M $461M

02 United States $294.7M $269.7M

03 Mozambique $40.7M $88.5M

04 Germany $102M $78.1M

05 France $73M $67.5M

06 Botswana $53M $62.7M

07 Australia $65.5M $59.5M

08 Namibia $65.4M $55.5M

09 Canada $61.8M $52.9M

10 Switzerland $40.4M $41.2M

Source: VisaVue Travel Data, 2008 – 2009

South Africa Inbound Transaction Data

ToP FIRST QUARTER 2010 INBoUND SoURCE CoUNTRIES ISSUER CoUNTRy Q1 2009 Q1 2010

01 United Kingdom $116.8M $159.7M

02 United States $61.5M $73.4M

03 Germany $21.5M $29.7M

04 Mozambique $20.5M $21.5M

05 France $16.9M $21.5M

06 Canada $13.8M $18.7M

07 Botswana $11.8M $18.6M

08 Australia $12.2M $17.4M

09 Namibia $12.0M $16.3M

10 Switzerland $10.8M $14.7M

Source: VisaVue Travel Data, 2009 – 2010

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ToP FIRST QUARTER 2010 MARKET SEGMENTS MARKET SEGMENT Q1 2009 Q1 2010

01 General Retail $221.5M $291.8M

02 Lodging $55.3M $77.9M

03 Airlines $23.7M $28.2M

04 Restaurants $18.9M $27.8M

05 Auto Rental $14.8M $19.1M

06 Supermarkets $11.9M $18.7M

07 other Travel & Entertainment $11.6M $16.9M

08 Travel Agencies $12.1M $14.8M

09 Health Care $8.2M $11.8M

10 Department Stores $10.6M $11.8M

Source: VisaVue Travel Data, 2009 – 2010

ToP 2009 MARKET SEGMENTS MARKET SEGMENT 2008 2009

01 General Retail $892.3M $948.8M

02 Lodging $235.1M $224.2M

03 Airlines $124.9M $103.5M

04 Restaurants $72.2M $71.9M

05 Supermarkets $54.5M $59.1M

06 Travel Agencies $77.9M $54.5M

07 Auto Rental $56.7M $53.1M

08 other Travel & Entertainment $50.2M $52.6M

09 Department Stores $48.5M $41.1M

10 Health Care $32.2M $35.1M

Source: VisaVue Travel Data, 2008 – 2009

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Tourism Outlook: South Africa