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Jet Set Follow Kardashian Trail to Cape Town as Slums Erupt

Photographer: Nadine Hutton/Bloomberg

A pedestrian walks along the beach backdropped by the commercial harbour and city centre in Cape Town. Close

A pedestrian walks along the beach backdropped by the commercial harbour and city centre in Cape Town.

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Photographer: Nadine Hutton/Bloomberg

A pedestrian walks along the beach backdropped by the commercial harbour and city centre in Cape Town.

Ex-banker Paul Harris added a 50,000 rand ($4,641) a night villa to his Cape Town hotel as the city Nelson Mandela gazed at from his island prison lures an increasing number of millionaire tourists.

Harris, 64, who quit as chief executive officer of FirstRand Ltd. five years ago, opened the extension with a 7,500-bottle wine cellar and whiskey lounge in November. About 95 percent of his guests are from outside South Africa and have included Kim Kardashian and Oprah Winfrey, he said.

“We had our dark times, we had apartheid,” said Harris, who uses the Ellerman House hotel, once the home of a shipping magnate, to display his art collection. “Tourism could be the best thing going for South Africa.”

Cape Town, where the Atlantic coast mansions of Clifton and Camps Bay contrast with the sprawling shacks of Khayelitsha township, received a boost in January when the New York Times and London’s Guardian newspapers ranked it their top place to visit in 2014.

While strikes shutter South African platinum mines and the poor protest about access to water and housing, the city’s 22 five-star hotels are enjoying their best season since the boom that accompanied the hosting of the 2010 soccer World Cup.

International arrivals to Cape Town, where tourists can ride the cable car up Table Mountain or take a boat to Robben Island where Mandela was imprisoned for 18 years, rose 6.7 percent to almost 160,000 in the peak month of December from a year earlier, official data shows. Arrivals over the whole of 2012 were 667,814, up 5.6 percent on 2010.

Growth Potential

While South Africa’s economic growth rate fell to 1.9 percent last year, the lowest since a 2009 recession, Alan Winde, the Western Cape Province minister of finance, economic development and tourism, said the Cape Town region has the potential to double the size of its tourism industry over the next five years.

“Growth is definitely led by the luxury travel market,” Winde said in a Feb. 12 phone interview. “You speak to anyone in that space, especially a first-time visitor, and they are blown away.”

Winde is a member of the opposition Democratic Alliance, which runs South Africa’s second-largest city. The seven other urban areas, including Johannesburg, are controlled by the ruling African National Congress.

Amazing Quality

Tourism in Cape Town, which was chosen ahead of Bilbao and Dublin as the World Design Capital for 2014, generates more than 15 billion rand a year and employs about 150,000 people, Winde said. The industry accounts for 10 percent of the regional economy, more than agriculture and textiles, he said.

The rand’s 26 percent drop against the pound and 19 percent fall against the dollar last year, the biggest declines among 16 major currencies tracked by Bloomberg, has made luxury accommodation in Cape Town more attractive, said Katie Fewkes, Africa product manager at Audley Travel Group Ltd. The U.K tour operator’s South African business grew 23 percent in 2013 and the first two months of this year have been “really busy,” she said by phone from London.

“The product in Cape Town is amazing and the kind of quality you get for your money, even in the good four-star accommodation, is fantastic compared to other parts of the world,” said Fewkes, who highlights the city’s ability to lure tourists back for return visits. “There are fantastic lodges, luxury hotels and boutique properties.”

Violent City

Cape Town, which offers overseas visitors villas for as much as $13,500 a night, is almost 1,500 kilometers (932 miles) from the platinum mines where more than 70,000 workers have been striking for the past six weeks in a bid to double their monthly wage to 12,500 rand.

While tourists have been largely sheltered from hundreds of shanty-town protests over crime and the provision of services from electricity and housing, last month police used water cannons and stun grenades to disperse 1,000 people staging an illegal march over sanitation in the center of Cape Town. About 22 percent of the city’s 3.74 million people lacked proper shelter, while 12 percent didn’t have flushing toilets, data from the last census in 2011 showed.

The city was ranked the most violent in Africa, according to a study last year by Mexico’s Citizens’ Council for Public Security and Criminal Justice. Cape Town’s homicide rate put it 27th out of 50 cities listed, with Port Elizabeth ranked 38th and Durban 46th. The 26 cities with higher homicide rates were all in the Americas, with San Pedro Sula in Honduras topping the ranking.

Relatively Safe

An analysis of the latest police data by the Pretoria-based Institute for Security Studies found Cape Town residents were 1.8 times more likely to be murdered than their Johannesburg counterparts.

“Tourists are relatively safe,” said Lizette Lancaster, manager of the institute’s crime and justice information unit, adding that violence isn’t evenly distributed across the city. “It is people in poor areas that are not safe in their own homes.”

Still, that hasn’t prevented visitors to the Cape Malay quarter called Bo-Kaap becoming regular victims of muggings, the Cape Times newspaper reported on Feb. 21, citing hotel and guesthouse owners.

Harris, whose Ellerman House competes with Bermuda-based Orient-Express Hotels Ltd. (OEH)’s Mount Nelson, Kerzner International Ltd.’s One&Only and the closely held Cape Grace for affluent visitors, said the country’s political leaders need to set a better example on issues such as corruption, education and providing an enabling environment for business.

Demanding Clients

“It’s not going to be all plain sailing, but we have got good people in South Africa,” said Harris. “We are not about to have a revolution.”

Ellerman House’s room rates start at 8,000 rand a night during the peak southern hemisphere summer season, while the five-bedroom villa rented by Kardashian costs 73,000 rand and has an adjoining spa. Staff outnumber guests by about three-to-one on the Bantry Bay property that is closed to the public.

“Our clients are generally people who have achieved something and so they are demanding,” Harris said in an interview at his hotel. “Exceeding their expectations can get a bit difficult.”

In 1977, Harris co-founded the bank that became FirstRand (FSR) and helped build it into South Africa’s second-biggest financial services company. Now he manages investments from social-networking sites to property and energy in between fortnightly visits to Cape Town from his home in Johannesburg.

“I had enough of banking,” he said. “The hotel is a passion, an indulgence. It’s like having an original painting. I like the concept of sharing it.”

To contact the reporter on this story: Mike Cohen in Cape Town at +27-21-818-0089 or mcohen21@bloomberg.net To contact the editors responsible for this story: Antony Sguazzin at +27-11-286-1934 or asguazzin@bloomberg.net

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