Does tourism contribute to local economic development (LED) in the City of Cape Town Municipality? A time series analysis

Abstract

Local economic development (LED) is envisioned to improve local economic challenges. Unfortunate the City of Cape Town local municipality is dominated by poverty, inequality, stagnant economic growth and unemployment. Despite these challenges, researchers contend that tourism is a vehicle to local economic development. Thus, the purpose of the paper was to examine the influence of tourism on LED in the Cape town city municipality from 1994-2018. In achieving this purpose, the study used a Vector Error Correction Model (VECM) time series analysis and the Granger Causality analysis. The results show a positive relationship between exports, number of tourists and local economic development. Contrawise, tourism receipts are negatively related to local economic development. Notable is that local economic development and tourism receipts have a positive relationship in the short-run. The study therefore recommends the enforcement of a tourism policy that specifically benefits the residents more than the business people and entrepreneurs.

Keywords

• tourism
• cape town municipality
• time series
• vector error correction model
• local economic development