Southern Sun says it is losing up to R15m a month due to violence in Mozambique with protests against the election result.
On Thursday, the R12bn hotel group said the weeks of violent protests after the October 9 presidential election led to low occupancy levels as travellers stayed away due to concern about safety.
SA closed its border with Mozambique shortly after reopening it due to escalating post-election violence, advising its citizens to delay nonessential visits to the neighbouring country and disrupting trade for companies such as Southern Sun.
“The [Maputo] hotel went virtually empty because everybody left town after the elections, and the borders have been closed and all that natural trade and travel doesn’t flow.” CEO Marcel Nikolaus von Aulock said.
“The impact to us is probably between R10m and R15m a month in lost profits. That’s the difference between what we said we’d make and what we’re going to make if they carry on.”
Before the violence erupted, Southern Sun was reporting a surge in business tourism at its Maputo facilities amid a deterioration of the CBD and port challenges besieging Durban.
The group’s results for the six months to end-September show that total revenue for the offshore division of hotels fell from R213m to R207m.
Security
That was mostly because of issues at its two Mozambique hotels, which had a poor first half because of a lack of business and security worries about the country’s national election.
The offshore division generated earnings before interest, taxes, depreciation, amortisation, and restructuring or rent costs (ebitdar) of R39m, a 4.8% slip from the R41m recorded in the previous comparative period. Noting that the business could not operate profitably in an environment of prolonged violence, Von Aulock expressed optimism that a settlement would be reached in Mozambique soon.
He said that the group believed that the city still had a lot of potential.
“We’re paying staff even though we’re running on 5% occupancy,” said the CEO. “We’re not going to stop paying the staff because there’s a three-week trauma.
“If it’s a six-month trauma, it’s a different discussion around how that hotel structures and what it does,” Von Aulock said. The hotels group said that total revenue was 6% higher at R2.966bn, and profit rose to R331m from R254m a year ago.
The group said the results reflected the effects of the decisions taken amid and during its recovery from the pandemic.
The complete cost restructuring undertaken meant that the group was able to deliver 10% ebitdar growth from 6% income growth.
The announcements by the department of home affairs simplifying requirements for port of entry visas and visa regulations for China and India indicated the government’s commitment to promoting tourism in SA, which would benefit the group’s portfolio in all regions, it said.
Negative
Highlighting that infrastructure and safety issues had affected Durban’s desirability as a tourist destination, Von Aulock said there were positive steps towards correcting negative perceptions as talks with city officials signalled that Durban was targeting Blue Flag status, which would help to bolster SA’s third-largest city and its International Convention Centre’s (ICC) attractiveness as a conference destination.
Regarded as one of the world’s most prestigious awards, the international Blue Flag designation is given to beaches, marinas and eco-friendly cruise ships that meet requirements for environmental quality, safety and accessibility, which helps to drive tourists and business.
“If they get the basic infrastructure fixed, which they’re working on, it’s not a hard fix for Durban,” he said. “The ICC in Durban should be doing a hell of a lot better, and it’s not,” he said, pointing out that the Sandton and Cape Town ICCs boasted dozens of bookings for 2025.
“Hopefully, that can turn because that ICC is a great facility that should be driving the business tourism into Durban on top of just your leisure and your beachfront sort of holiday maker stuff,” he said.
Conversely, it said Umhlanga continued to perform well, and was a key growth node in the group.
Traditionally, the group generated the majority of its profits in the second six months of the financial year.
It hopes to capitalise on several events being hosted in SA, including the G20 summit, the Mining Indaba and the African Energy Indaba, it said.
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