**Abstract**

South Africa is facing three main developmental problems, including high levels of poverty, unemployment, and inequality. The tourism sector allows for a relatively easy entry into the local market for small businesses and entrepreneurs and has the potential to create jobs and subsequently, income. Tourism development could be utilised as a driver for economic growth and development. The main objective of this research was to assess the impact of the tourism sector on economic growth and development in South Africa, focusing on the Gauteng Province which, is the economic hub of the country and even Africa. The methodology utilised was based on a quantitative design, using secondary time series pooled panel data approach including, all the municipal entities in the region. Annual data from 2000 to 2019 were used to analyse the impact of tourism on economic growth and development. Tourism variables include measurements such as tourism spending and international tourism trips. Results confirm the tourism-growth nexus and the sector allows ease of market entry for small businesses, resulting in employment creation and income for the poor in developing regions if promoted via effective policy implementation, even in regions where tourism is not the leading sector.

**Keywords:** economic development, economic impact, Gauteng region, South Africa, tourism

### **1. Introduction**

Tourism is an important economic sector and contributes 10.4% of global GDP; one in ten jobs are provided via tourism; and 1.4 billion international trips are completed per annum [1]. Globally nearly 60 percent of the population lives in poverty [2], and this number is expected to increase as a result of COVID-19. South Africa has some of the highest levels of poverty, unemployment, and even income inequality. These factors are often obstacles to sustainable economic growth. Within the context of this study, tourism could be defined as all types of travel activities and affects local communities through the environment, employment, and social systems [3]. People living in poverty have limited choices due to a lack of knowledge, opportunities, and skills and find it difficult to exit the poverty trap [4].

Within this context of growing unemployment and poverty, tourism as an economic sector is widely accepted as a sector that could help marginalised and disadvantaged regions achieve higher growth levels with more employment opportunities [5]. As an economic sector, tourism is one of the leading sectors and a fastgrowing sector [6]. However, COVID-19 has had a massive impact on tourism on a global scale. As an industry, tourism acts as an export industry, attracting foreign income into the receiving region and is, therefore, the main source of income for many poor developing regions [7]. Traditional economic sectors such as mining and manufacturing have in recent decades struggled to contribute significantly to poverty reduction and employment, and tourism has proven to be able to play that role in developing regions [8]. Samini, Sadeghi, and Sadeghi [9] go as far as to state that tourism could act as a driver or engine of growth as the sector creates employment opportunities, which could lead to more disposable income and increases in government tax revenues [9, 10]. Growth in the sector will result in the diversification of regional and local economies, which is especially important for regions that have focused economies dominated by single resource sectors. These economies are vulnerable to economic and other shocks [11]. The diversification of such economies could minimise the impact of shocks. According to Pedrana [11], the tourism sector could drive investment, allow for employment opportunities, facilitate the inflow of money, and contribute to infrastructure development.

Despite acknowledging the importance of tourism for economic growth and development, the section is still ignored as an important economic sector due to lack of data and reporting [12, 13]. Phiri [14] states that due to limited data and subsequent limited quantitative academic research, the exact impact of tourism as an economic sector on economic growth and development, especially in developing regions and nations, are limited. In the South African context, it is needed to determine the impact of tourism activities on growth and development [15]. For this reason, the focus of this study is on the economic hub of South Africa and even Africa, the Gauteng province, which is situated in central South Africa and includes cities such as Johannesburg, Pretoria, and Soweto. The region is the only major metropolitan region in the world not located next to an ocean or major river system. This study's contribution is found in the qualitative and quantitative analysis of the dynamic impact of tourism on regional economies using panel data in a developing region.

#### **2. Literature review**

This section of the study consists of three parts: an explanation of concepts and definitions, a theoretical foundation, and results from other empirical studies. In terms of concepts and definitions, tourism is defined as people travelling from one region or place to another for more than one night for reasons including holiday, recreational and sports, cultural, medical, and business activities [11]. According to [1] tourism is a multidimensional concept and linked to many economic activities and consists of individuals, communities, businesses, and organisations as well as places that collaborate to provide a tourist experience. Tourism could facilitate employment opportunities for all and even for people with lower levels of education [5].

As this study investigates the links between the tourism sector and regional economic development, the concept of regional economic development is also defined. Stimson, Stough, and Roberts [16] provide comprehensive definitions of regional economic development supported by other researchers. They state that regional economic development is a similar concept if compared to economic development, but on a regional scale. They list the following components of the concepts: regional economic development is a process where regional stakeholders including business,

**105**

*An Assessment of the Impact of the Tourism Sector on Regional Economic Development…*

communities, and local government attempt to stimulate economic opportunities through the involvement of all economic sectors, employment and quality of life. According to Stimson et al. [16] the regional economic development process includes policy formulation, planning, analysis, strategy development, and resource application; while regional economic development product includes employment, wealth creation, investment, infrastructure development, and quality of life.

This section contains empirical results on the relationship between the tourism sector and regional economic development. Rosentraub and Joo [17], over three decades, assessed several metropolitan regions across the world where investments have been made to attract larger numbers of tourists and human capital. Key results from this research indicate that sports and amusement-related tourism activities allow for most gains and benefits for regional development. Some authors [18] analysed the linkages between the tourism industry and economic development processes. The study focused on regional economic development, investigating the importance of tourism geography's economics and the increasing significance of networks and new information and communication technologies. Tourism complexity and economic development's role is essential, and the importance of the

From a European perspective, authors such as [19] assessed tourism's contribution to regional economic resilience in Europe. The results confirmed the significance of tourism as a factor of regional economic resilience. Furthermore [20] assessed domestic and international tourism's impact on the regional economic growth for 179 European regions from 1999 to 2009 using GDP per capita as the dependent variables with other variables such as human capital, technological capital, institutional and social features of the regions. The final results established both domestic and international tourism do positively affect economic growth. Dana, Gurau, and Lasch [21] analysed the potential of two regions regarding tourism in rural areas as a source of entrepreneurship opportunities supporting regional economic development in rural, regional France. According to Alberti and Giusti [22], tourism plays a major role in regions' economic development and competitiveness. This paper assesses the clustering of tourism and cultural heritage activities that could lead to regional competitiveness in the Motor Valley cluster in Italy from 1999 to 2011. This region is globally known for its motorsport industry, with firms involved in this industry since 1800 in facilities, institutions, cultural heritage, museums. All role players collaborate, leading to competitiveness in regional tourism. The study results confirmed the importance of establishing clusters focused on tourism interlinked with a cultural heritage for regional competitiveness. Cortes-Jimenez [23] analysed the role of tourism on regional economic growth in regions of Spain and Italy using panel data econometric methods. The results indicate that tourism through both domestic and international tourism contribute positively to regional economic growth. However, it should be noted that the impacts and pat-

terns of impacts on regional development differ from region to region.

Vieira and Santos [24] examined the role of tourism for regional economic development in Portugal in terms of spatial interrelations between municipal regions. Results indicate significant spatial interrelations between and across the various municipalities and that spatial tourism clustering occurs in coastal locations. Besides, tourism was confirmed via an econometric analysis as a significant driver of regional economic development. Petrevska and Manasieva Gerasimova [25] analysed the impact of tourism on regional economic development in the south-western section of Macedonia, focusing on tourism flows, the capacity of tourism accommodation, and tourism spending from 2003 to 2010. Findings from the analysis are that this region is a leading region in Macedonia but still needs to achieve its potential. This situation exists due to limited policy formulation and implementation. Surugiu

*DOI: http://dx.doi.org/10.5772/intechopen.95810*

term 'glocal' in tourism development processes.

#### *An Assessment of the Impact of the Tourism Sector on Regional Economic Development… DOI: http://dx.doi.org/10.5772/intechopen.95810*

communities, and local government attempt to stimulate economic opportunities through the involvement of all economic sectors, employment and quality of life. According to Stimson et al. [16] the regional economic development process includes policy formulation, planning, analysis, strategy development, and resource application; while regional economic development product includes employment, wealth creation, investment, infrastructure development, and quality of life.

This section contains empirical results on the relationship between the tourism sector and regional economic development. Rosentraub and Joo [17], over three decades, assessed several metropolitan regions across the world where investments have been made to attract larger numbers of tourists and human capital. Key results from this research indicate that sports and amusement-related tourism activities allow for most gains and benefits for regional development. Some authors [18] analysed the linkages between the tourism industry and economic development processes. The study focused on regional economic development, investigating the importance of tourism geography's economics and the increasing significance of networks and new information and communication technologies. Tourism complexity and economic development's role is essential, and the importance of the term 'glocal' in tourism development processes.

From a European perspective, authors such as [19] assessed tourism's contribution to regional economic resilience in Europe. The results confirmed the significance of tourism as a factor of regional economic resilience. Furthermore [20] assessed domestic and international tourism's impact on the regional economic growth for 179 European regions from 1999 to 2009 using GDP per capita as the dependent variables with other variables such as human capital, technological capital, institutional and social features of the regions. The final results established both domestic and international tourism do positively affect economic growth. Dana, Gurau, and Lasch [21] analysed the potential of two regions regarding tourism in rural areas as a source of entrepreneurship opportunities supporting regional economic development in rural, regional France. According to Alberti and Giusti [22], tourism plays a major role in regions' economic development and competitiveness. This paper assesses the clustering of tourism and cultural heritage activities that could lead to regional competitiveness in the Motor Valley cluster in Italy from 1999 to 2011. This region is globally known for its motorsport industry, with firms involved in this industry since 1800 in facilities, institutions, cultural heritage, museums. All role players collaborate, leading to competitiveness in regional tourism. The study results confirmed the importance of establishing clusters focused on tourism interlinked with a cultural heritage for regional competitiveness. Cortes-Jimenez [23] analysed the role of tourism on regional economic growth in regions of Spain and Italy using panel data econometric methods. The results indicate that tourism through both domestic and international tourism contribute positively to regional economic growth. However, it should be noted that the impacts and patterns of impacts on regional development differ from region to region.

Vieira and Santos [24] examined the role of tourism for regional economic development in Portugal in terms of spatial interrelations between municipal regions. Results indicate significant spatial interrelations between and across the various municipalities and that spatial tourism clustering occurs in coastal locations. Besides, tourism was confirmed via an econometric analysis as a significant driver of regional economic development. Petrevska and Manasieva Gerasimova [25] analysed the impact of tourism on regional economic development in the south-western section of Macedonia, focusing on tourism flows, the capacity of tourism accommodation, and tourism spending from 2003 to 2010. Findings from the analysis are that this region is a leading region in Macedonia but still needs to achieve its potential. This situation exists due to limited policy formulation and implementation. Surugiu

*Peripheral Territories, Tourism, and Regional Development*

Within this context of growing unemployment and poverty, tourism as an economic sector is widely accepted as a sector that could help marginalised and disadvantaged regions achieve higher growth levels with more employment opportunities [5]. As an economic sector, tourism is one of the leading sectors and a fastgrowing sector [6]. However, COVID-19 has had a massive impact on tourism on a global scale. As an industry, tourism acts as an export industry, attracting foreign income into the receiving region and is, therefore, the main source of income for many poor developing regions [7]. Traditional economic sectors such as mining and manufacturing have in recent decades struggled to contribute significantly to poverty reduction and employment, and tourism has proven to be able to play that role in developing regions [8]. Samini, Sadeghi, and Sadeghi [9] go as far as to state that tourism could act as a driver or engine of growth as the sector creates employment opportunities, which could lead to more disposable income and increases in government tax revenues [9, 10]. Growth in the sector will result in the diversification of regional and local economies, which is especially important for regions that have focused economies dominated by single resource sectors. These economies are vulnerable to economic and other shocks [11]. The diversification of such economies could minimise the impact of shocks. According to Pedrana [11], the tourism sector could drive investment, allow for employment opportunities, facilitate the

inflow of money, and contribute to infrastructure development.

Despite acknowledging the importance of tourism for economic growth and development, the section is still ignored as an important economic sector due to lack of data and reporting [12, 13]. Phiri [14] states that due to limited data and subsequent limited quantitative academic research, the exact impact of tourism as an economic sector on economic growth and development, especially in developing regions and nations, are limited. In the South African context, it is needed to determine the impact of tourism activities on growth and development [15]. For this reason, the focus of this study is on the economic hub of South Africa and even Africa, the Gauteng province, which is situated in central South Africa and includes cities such as Johannesburg, Pretoria, and Soweto. The region is the only major metropolitan region in the world not located next to an ocean or major river system. This study's contribution is found in the qualitative and quantitative analysis of the dynamic impact of tourism on regional economies using panel data in a developing region.

This section of the study consists of three parts: an explanation of concepts and definitions, a theoretical foundation, and results from other empirical studies. In terms of concepts and definitions, tourism is defined as people travelling from one region or place to another for more than one night for reasons including holiday, recreational and sports, cultural, medical, and business activities [11]. According to [1] tourism is a multidimensional concept and linked to many economic activities and consists of individuals, communities, businesses, and organisations as well as places that collaborate to provide a tourist experience. Tourism could facilitate employment

As this study investigates the links between the tourism sector and regional economic development, the concept of regional economic development is also defined. Stimson, Stough, and Roberts [16] provide comprehensive definitions of regional economic development supported by other researchers. They state that regional economic development is a similar concept if compared to economic development, but on a regional scale. They list the following components of the concepts: regional economic development is a process where regional stakeholders including business,

opportunities for all and even for people with lower levels of education [5].

**104**

**2. Literature review**

and Surugiu [26] studied the relationship between the tourism sector and economic growth in Romania from 1988 to 2009 using econometric cointegration Granger causality methods, vector error correction model (VECM), and impulse response functions. The findings show that tourism expansion does granger cause economic growth. Results from this study place a focus on the requirement for effective tourism development strategies. Fundeanu [27] analysed the role of tourism clusters in the south-west Oltenia region, looking at tourism potential, tourism diversity, strengths, and weaknesses of the region. The study found that tourism clusters are catalysts for regional development, and the competitive advantages of such clusters should be the focus of public policies and strategies.

Gunderson and Ng [28] studied the impact of tourism on regional development in the rural USA. Tourist spending could result in increased demand for regional goods and services, eventually leading to employment creation and an increase in disposable income. The results indicate that public policy effectiveness, sustainable natural resource management, and community development could allow for tourism development and regional development. Tourism positively affects regional economic performance. Klytchnikova and Dorosh [29] analysed the role of tourism on regional economic development in Panama's poor regions using a social accounting matrix model. The paper used the impact of tourism spending on growth and poverty at the regional level. The results indicate that tourism has a large impact on the regional economy and is also an important multiplier in the local economy. The sector also allows for important benefits to the poor. Mishra, Rout and Mohapatra [30] considered tourism an important sector to promote regional economic growth and analysed the import of India's sector from 1978 to 2009 using econometric methods. Time-series econometric models were used for the analysis from 1978 to 2009. The results indicate the existence of unidirectional causality running from tourism activities to economic growth.

Wen-li [31] analysed the impact of tourism on economic growth in regional China since the 1990s. The study results indicate a significant impact of tourism on regional economic growth and allow for diversified and balanced development. He and Zheng [32] analysed the Sichuan region from 1990 to 2009 in China and the tourism sector's impact with abundant resources on the regional economy. Over the last decade, the contribution of tourism to the provincial GDP has been increasing annually. Results indicated that a bi-directional relationship exists between tourism development and economic growth. Yang, Fik, and Altschuler [33] analysed tourism-related economic multipliers from regional input–output tables for 30 Chinese provinces looking at tourism variables, including income, employment, and employment multipliers. Interesting findings reveal that the output and employment multipliers of tourism are positively associated with regional economic development.

Rogerson [34] states that uneven development is a reality of South Africa's spatial economy's structure with leading and lagging regions. Tourism has been identified as a vital economic sector for regional development. This paper assesses the 23 distressed regions in dire need of economic development. These regions rely mostly on domestic tourism, and local natural assets should be maximised with effective policy implementation. Meyer and Meyer [8] conducted a study using regional tourism statistical data from 2001 to 2013 for two geographical areas in a developing region in South Africa. The results indicate that tourism in these regions has a significant impact on economic growth as the sector does include low skilled workers in a labour-intensive industry and allows for a range of benefits for regions that include employment and income.

Lastly, the tourism sector could also have negative impacts, especially on the environment and sustainable development. Effective policies should be in place to allow for strategies to prevent the environment's deterioration [35]. Pedrana [11] believes that tourists could negatively affect local cultures. These negative impacts could be

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**Figure 1.**

*An Assessment of the Impact of the Tourism Sector on Regional Economic Development…*

minimised with local community involvement and if local partnerships and cooperation exist between the private and public sectors. The tourism industry could play an important role in protecting the social and cultural integrity of a community [36].

The research methodology is based on a quantitative analysis using both descriptive and econometric methods to achieve the primary objective. In this study, the tourism sector's impact on a developing region is analysed using secondary data from Global Insight [37]. Annual data from 1996 to 2019 were used and analysed firstly utilising trends and correlation analysis and secondly by using a pooled econometric panel approach including the five municipal areas (see **Figure 1** for details) in the Gauteng province in South Africa. Gauteng province comprises of

*DOI: http://dx.doi.org/10.5772/intechopen.95810*

**3. Methodology**

the following municipal regions:

• The city of Johannesburg, Metropolitan region (COJ)

• City of Tshwane, Metropolitan region (COT)

• Ekurhuleni, Metropolitan region (EKR)

• Sedibeng district municipal region (SDM)

• West Rand district municipal region (WRDM)

*Gauteng municipal regions. Source: https://en.wikipedia.org/wiki/List\_of\_municipalities\_in\_Gauteng*

*An Assessment of the Impact of the Tourism Sector on Regional Economic Development… DOI: http://dx.doi.org/10.5772/intechopen.95810*

minimised with local community involvement and if local partnerships and cooperation exist between the private and public sectors. The tourism industry could play an important role in protecting the social and cultural integrity of a community [36].
