Economic Implications of Second Home Development in South Africa

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Economic Implications of Second Home Development in South Africa Economic implications of second home development in South Africa Case Study on Franschhoek Sanne van Laar 3453057 Master’s Thesis 2011 International Development Studies Utrecht University Supervisor: Dr. Prof. Annelies Zoomers Economic implications of second home development in South Africa Case Study on Franschhoek Graduation Master’s Thesis by Sanne van Laar International Development Studies University Utrecht Department Geography MSc International Development Studies Supervisor: Dr. Prof Annelies Zoomers Host organisation: Stellenbosch University Supervisors: Prof R. Donaldson and Prof. S. Fereirra I hereby declare that this thesis is entirely the work of Sanne van Laar. Any other contributors or sources have either been references in the prescribed manner or are listed in the acknowledgements together with the nature and scope of their contribution Twello, August 2011 ACKNOWLEDGEMENTS This report is the result of six months of research and analysing. It is written as my final graduation thesis in order to finalise my master in International Development Studies, University of Utrecht, The Netherlands. The subject of this paper regards the economic implications of second home development in South Africa, focusing on the small and lovely town Franschhoek. Conducting the research and writing this thesis was a learning experience, a life experience but most important a great experience. Interesting but also challenging and at times frustrating, with mainly high ups, and sometimes a deep down. This period has contributed to a better understanding, more knowledge, and new perspectives, but above all it has enriched me as a person. A great lesson learned during the 4 months of field work has been that between theory and practice there is a world of difference, and often things do not go according to the book. It challenged me to think outside the box by means of exploring new ways to come where I wanted to be. Coming to the end of this process, I can say that I am glad that I took on the challenge and that I am satisfied with my accomplishments. Although a thesis is considered an individual work, it would not have been realised without the support of several people. First of all, I would like express my gratitude to my supervisor Dr. Prof. Annelies Zoomers for her time and effort to advise me, guide me and answer questions when needed, but on the other hand allowing me to follow my own path. Secondly, I would like to thank my supervisors in South Africa, Professor Sanette Ferierra and Professor Ronnie Donaldson who have enhanced my research with their professional knowledge and advice, and guided me through the process of collecting data. The weekly Friday meetings have been of great importance, and I highly appreciated the time devoted. In addition I would like to thank the respondents who have contributed to my research, without them I would have not been able to finish this thesis. I am very grateful that many have taken the time to answer my questions, filled in the questionnaires, and sit down for in-depth interviews. Furthermore, I would like to thank friends and family who have been supporting me unconditionally, offering me a listening ear when needed, and encouraged me to do the things i had to do. It has been heartening to experience this while being far away. Last but definitely not least I would like to thank the great group of people I had the opportunity to spend time with while being in South Africa. I was amazed by so much involvement, friendliness and warmth. Their presence has been comforting and reassuring, and made this experience a GREAT experience. Baie Dankie Sanne van Laar Twello, August 2011 EXECUTIVE SUMMARY South Africa is facing increasing second home ownership. Numerous villages and towns along the South African coastline, and increasingly in its rural interior, have grown and been converted significantly as result of amenity migration. Franschhoek is one of many examples. Nevertheless, until now, with some exceptions, second home development as a topic of research, has been almost invisible to the South African academics. Contrasting to the remained silence regarding second homes is the intensive interest and media attention for the topic; “foreign land and home ownership in the South African context”. Questions are raised whether foreign ownership is justifiable, as the majority of the South Africans is unable to afford own land or property, let alone a second home. Striking in this debate is, that until now there is hardly been given any attention to domestic second home ownership and questions regarding the sustained elitist nature of second homes in South Africa. Next to the international investors, the wealthy local urbanites are obtaining second homes in rural towns and villages. However, as the South African Geographical, Tourism as well as Town and Planning research discourses remain rather mute on the topic of second home development, the question “what are the implications of foreigners and South Africans owning a second home?”, remains unanswered. As it is a place and context specific topic, the purpose of this research presented in this thesis is to find out what the effect of second home development is for the village Franschhoek, specifically. Therefore the aim of the research was identified as: “To gain a deeper understanding of the economic implications of second homes in Franschhoek, by means of analysing and comparing spending behaviour of South African’s (domestic) second home owners and foreign second home owners in the local economy, in an attempt to investigate difference between the two groups in their contribution to the local economy” This objective is threefold, therefore three sub-objectives are identified and examined. The conclusions are discussed hereafter. (1) ’To identify the characteristics of the Franschhoek second homes and second home owners, to investigate whether there are differences between the characteristics of foreign and domestic second home ownership’. This objective is examined in chapter 5 of thesis. Franschhoek is an ideal second home node. Approximately 37%, indicating total number of properties, are regarded converted or purpose build second homes, placing Franschhoek between the second and the third phase of the second home development cycle. The second home owners are economically active and they can be categorised as upper –level income earners, indicating a high purchasing power. Differences between foreign and domestic second home owners mainly are based on their age and position in the family life cycle as well as the function of their second home in Franschhoek. Due to the presence and influence of foreign second home owners, this research on Franschhoek is different from previous case studies conducted in the South African context. Previous researches were mainly focused on the domestic character of second home development at a certain destination. In Franschhoek, the active presence of foreign second home owners, in combination with the absence of many domestic second home owners due to having their second home only for investment purpose, makes that it is a case on its own, with only limited interfaces with second home development in South African context, discussed in academic literature until now. (2) ‘To identify the spending behaviour (economic pattern) of foreign and domestic second home owners in the local economy and analyse the differences between the two groups, and by this means investigating the contribution of foreign and domestic second home owners to the local economy and its development’. This objective is examined in chapter 6 of this thesis. Second homes influence a variety of different components in Franschhoek local economy, ranging from direct and indirect employees’ wages to higher income for the local municipality in terms of rates and taxes. In addition Franschhoek local economy experiences second home spending patterns which are continuously year round, such as the need for maintenance and memberships fees. There are many differences noticeable between foreign and domestic second home owners’ contribution to Franschhoek local economy, and on the related implications on Franschhoek local economy. In general the foreigners spend higher amounts more frequent and in different businesses, contributing to a higher economic differentiation on the one hand, and an increase in foreign currency in the local economy on the other hand. In many occasions the difference between domestic and foreign second home owners was limited. Furthermore it became clear, that dependency and seasonality were negative side effects of especially the foreign segment of second home owners in Franschhoek. The potential influence that second home development can have on Franschhoek local economy and its development should not be underestimated. (3) ‘ To investigate the perceptions of local community, local business owners and second home owners on (economic) implications of second home development’. This objective is examined in chapter 7 of this thesis. The majority of the permanent residents like local business owner’s respondents groups, do not perceive second home development affecting Franschhoek negatively. They are positive about the second home owner’s interaction and involvement, arguing that there are several positive economic implications induced by second home development, such as job creation and diversification of the economic base, which are of high importance. Interesting in this respect is, that both the positive and negative
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