/ 16 March 2024

Locals drown in digital nomad wave

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Christina Leitner works in a bar and has been living as a digital nomad for eleven years. At the time this photo was taken, she was staying in Cape Town. (Photo by Kristin Palitza/picture alliance via Getty Images)

“That the native does not like the tourist is not hard to explain,” Antiguan-American author Jamaica Kincaid wrote in her 1988 essay, A Small Place.

“For every native of every place is a potential tourist and every tourist is a native of somewhere … But some natives — most natives in the world — cannot go anywhere … They are too poor to escape the reality of their lives; and they are too poor to live properly in the place they live, which is the very place you, the tourist, want to go.”

This sometimes-strained relationship between locals and tourists has been thrown into stark relief recently, as the two groups come to grips with the reality of a relatively new phenomenon: digital nomads.

In February 2022, when President Cyril Ramaphosa first announced that his administration was looking into creating a remote working visa, the idea was that making it easier for so-called digital nomads to temporarily relocate to South Africa would boost economic growth.

Other countries wanting to capitalise on the Covid-induced rise in remote workers had already explored this option after the pandemic dealt a blow to tourism worldwide.

Two years later, in February 2024, South Africa’s department of home affairs published draft amendments to the country’s immigration regulations finally introducing the remote working visa. 

But the years since the pandemic have shown that — while creating new opportunities for the tourism industry — the rise of digital nomads is a double-edged sword, having the effect of pricing locals out of their home economies.

South Africa’s digital nomad visa was the result of extensive lobbying, not least from the Western Cape government, which already benefits significantly from an influx of foreign tourists to the province.

According to data from Statistics South Africa, during almost every month last year — save for June — Cape Town International Airport welcomed a larger proportion of foreign travellers to total tourists compared with Johannesburg’s OR  Tambo Airport.

Governments around the world have had to adapt to the rise of digital nomads, said Doris Viljoen, the director of the Institute for Futures Research at Stellenbosch Business School.

“They were sort of pushed to react, because the nomads themselves made the push. The nomads found spaces and places they thought would be interesting to stay and to work from. By their mere presence … governments sort of had to react,” Viljoen said.

An analysis by the United Nations World Tourism Organisation (UNWTO) noted that the number of countries offering digital nomad visas has risen significantly since 2020. The UNWTO surveyed 54 destinations last year and found that 45% offered these visas for up to one year, while 39% exempted digital nomads from tax payments.

The 2023 report recommended that host countries carefully evaluate the costs and benefits of implementing digital nomad visa programmes, noting that their effect on tourism is still difficult to measure.

Rosemary Anderson, the national chairperson of the Federated Hospitality Association of Southern Africa (Fedhasa), described the economic case for such a visa as robust, noting that digital nomads represent a largely untapped market.

“Unlike typical tourists, digital nomads tend to stay for longer periods, which translates into more sustained income for local businesses and increased occupancy rates for the hospitality sector,”Anderson said.

“Moreover, these individuals often possess disposable income and a propensity to explore local attractions, dine out and participate in cultural activities, further stimulating the economy.”

David Frost, the chief executive of the Southern Africa Tourism Services Association (Satsa), agreed, adding that the country cannot afford to fall behind on visa reform. “It is time that policymakers grasp that tourism is a key economic driver,” he said.

But there are certain pitfalls that come with attracting digital nomads to the country. “Like with anything,” Viljoen said, “all of these positives come with some negatives.”

Digital nomads have already been blamed for driving gentrification and creating housing crises in other destinations for remote workers, including Lisbon and Mexico City. Both Portugal and Mexico offer digital nomad visas.

Last year, thousands of protesters reportedly took to the streets of Lisbon complaining that the cost of living in the city had become untenable. According to the World Economic Forum, rental prices in the Portuguese capital have risen 30% in the past five years.

In 2022, Mexico City saw similar protests over the reported affordability crisis created by the rise in Airbnb listings.

According to data from Inside Airbnb, an activist-driven website that provides city-level data on the short-term property rental marketplace, Mexico City has 26  760 listings — almost 4  000 more than there are in Cape Town, which itself rivals several other digital nomad hotspots, including Lisbon. 

Cape Town has grappled with a housing crisis that long predates the digital nomad phenomenon. The city’s digital nomad-driven affordability problems have yet to reach a boiling point, but the subject has driven debate among social media users complaining that their rands simply cannot compete with dollars and euros. “Please go away. Please,” one social media user urged.

Viljoen noted: “The market reacts how the market reacts. So there is a demand for accommodation that includes everything that a digital nomad could require.

“So people want to stay there and that drives up prices, because spaces that would otherwise be available for long-term rentals to locals are now being used to cater to a new market.

“We’ve seen that in many cities. I think that we are seeing some elements of this in Cape Town as well.”

Viljoen noted that many other cities have seen strong pushback against digital nomads, adding: “I think South Africa must be cognisant that it could develop that way.”

Graphic Biz Nomads Website 1000px

The rise of digital nomads also stands to drive foreign investment in the local property market, where properties are purchased by foreigners to offer as spaces that digital nomads can rent for the duration of their stay. In many cases, very little of that shorter-term rental revenue enters our country’s tax system, Viljoen added.

She expects South Africa’s tax authorities will start to find ways to keep these digital nomad-induced revenue dilemmas in check.

The country’s proposed remote working visa will exempt digital nomads from registering with the South African Revenue Service (Sars), as long as it is issued for a period of less than six months within a 12-month period.

“I suspect that some people will still come in on a tourist visa and just dip under the radar — stay here for a maximum of three months, earn money from foreign employers, and go away again. Those digital nomads don’t become part of the tax system,” Viljoen said.

Sian Gaffney, a senior associate at Bowmans, said there is nothing preventing digital nomads from using a long-stay visa to avoid registering with Sars. She also wasn’t aware of any evidence that remote work visas create greater tax compliance among these types of tourists. 

That said, Gaffney added that the visa has the potential to encourage foreign employers to send their workers to explore the South African market for investment opportunities.

While Satsa’s Frost acknowledged the affordability concerns created by digital nomads, he said the benefits of welcoming them far outweigh the potential downsides. 

“By proactively addressing concerns and implementing strategies to ensure the influx of nomads positively impacts all residents, South Africa can become a model for sustainable and inclusive economic development in the era of remote work,” he said, adding that their presence has the potential to reduce the effect of seasonal fluctuations. 

Fedhasa’s Anderson cited 2023 data showing that South Africa’s tourism recovery is sitting at 79% of pre-pandemic levels. 

“We have seen many discussions surrounding the impact of digital nomads on locals and we cannot ignore the fact that the presence of digital nomads can influence local economies, potentially affecting the cost of living,” she said.

“However, this challenge is not insurmountable and can be managed through careful policy planning and community engagement. Ensuring a balance between welcoming digital nomads and protecting local interests is crucial.”