The low level of economic growth and the rigid labor market structure in South Africa makes it difficult for the formal economy to absorb the new labor force entering the market. This rapidly increases the level of unemployment. In 1997, unemployment was estimated at 38%. With the South African labor force growing at approximately 2 –2.5 % a year, this means that 300 000 people are coming into the labor market each year (Orkin 1999). According to Pape (1999), employment in South Africa since 1994 has dropped form 40 000 down to approximately 22 000 in the textile industry alone. Unemployment is the principal social and economic challenge facing South Africa so it is apparent that employment creation is very important in South Africa.

The manufacturing industry in South Africa is still restructuring in order to face international competition. It was protected from international competition since the early sixties and became less efficient. Now due to trade liberalization adopted in the past few years, it is unlikely that there would be a rise in its potential to contribute to employment creation. Pape (1999) estimates that within 10 years, manufacturing employment will not be significantly increased in South Africa. A low level of fiscal deficit coupled with the 3% target rule (and the overshooting of this in the past two years) also suggests that the government does not have the capacity or the will to become a major driving force for job creation.

The high cost associated with in particular deep level mining also makes it difficult for this industry to lead employment creation. Visser (1999, 2) confirms that both primary and secondary sectors are no longer reliable in leading employment and economic growth due to “the roller-coaster fluctuation in commodity prices shackling the global economy today. Instead, a more mobile, educated and nature deprived population suggests far stronger guarantees for growth in tourism particularly Eco- and cultural tourism”. Perhaps service industries can provide a strong alternative in driving employment creation.

Despite the promise that the service industry holds, we need to be cautious because the service industry covers a wide variety of jobs. Palma (1999) makes an important distinction between two types of services and their role in employment contribution. One is production related services (i.e. finance, transport, technical education which support production) and these are declining, while freestanding services (i.e. basic education, tourism, government services, personal services) are growing and so also the possibility of their contribution to increasing employment. In South Africa, we can no longer expect manufacturing to be the major driver of job creation. The challenge facing policy makers now is to focus on keeping existing jobs while creating additional employment opportunities.

The 1994 democratic election which heralded the Mandela presidency, brought about a profound change as it ended the apartheid policy system of governance and with that the political unrest and sanction against South Africa. This paved the way for tourism as an alternative form of employment creation. Now tourism could be accepted as one of the key drivers for job growth, wealth creation and economic empowerment. Tourism is internationally accepted as one of the world’s fastest growing industries and South Africa on the other hand has emerged as a highly attractive destination because it has both depth and diversity of tourism products.

Peter Hawthorne (1999) confirms that the dramatic changes of 1990 took South Africa out of political and economic isolation. This succeeded in putting the country on the international travel and tourism map. He points out that in 1994, the number of regional and overseas holiday visitors increased by 50% to more than 5 million a year. Since tourism is the world’s fastest growing industry, the objective of this study is to look at tourism as an alternative for job creation in South Africa.