South African Travel Agencies: A perfect payment storm
Agents are facing a perfect storm of payment problems, which could see as many as one-third of BSPZA-accredited agents giving up their Iata licences, says Asata.
Ceo of Asata, Otto de Vries, told Travel News that the withdrawal of DIP insurance from the market (DIP gave six months’ notice for the withdrawal of its cover, which will be discontinued in September), meant that approximately a third of South African travel agents were searching for an alternative guarantee method, which would enable them to continue to issue cash tickets through the BSP.
At the time that DIP announced its withdrawal from the market many agents initially reported that they planned to move across to Iata’s Global Default Insurance (GDI). This is a similar product to DIP, offered by Euler Hermes, and provides agents with a collateral-free form of financial security for their accreditation. Otto says the reality of the situation is that agents around the world are reporting that Euler Hermes is declining their individual applications for GDI, citing that the risk is too high at present. A number of agents who were previously insured by GDI have also reported that their cover was withdrawn by the insurer with immediate effect, says Otto.
“That leaves agents with a choice, to opt for an Iata bank guarantee or to move across to GoLite which incorporates EasyPay, Iata’s voluntary pay-as-you-go e-wallet solution. A close inspection of EasyPay shows that many of the airlines operating in South Africa are not accepting this method of payment for tickets yet, which renders this option largely ineffective at present. An Iata bank guarantee is also not a viable option for many agents at present. Guarantees for weekly remittances start from R160 000, while 14-day remittances start from R250 000, which is a substantial amount for an agent to set aside at a time when the industry is in the midst of a cash-flow crisis. These amounts, which work on the assumption that agents are delivering cash sales of R160 000 per week, are also disproportionate to the value of actual cash flows currently taking place,” explains Otto.
He adds that agents are also adjusting to the new BSP remittance periods. BSP sun-setted its BSPZA monthly remittance option at the end of July, which means that agents only have the option of weekly or fortnightly BSP remittance payments. This adjustment puts further pressure on travel agents’ cash flow, as many corporates settle their travel accounts with their TMC on a monthly basis.
At the same time, many South African agents are due to submit their annual financials for the renewal of their Iata licences, at the peak of the industry’s lockdown crisis.
Otto says Asata, together with the BSPZA Agency Programme Joint Council (APJC), is trying to assist agents to overcome these obstacles. Earlier this month Travel News reported that an APJC proposal would be put forward for a PaConf vote in September, requesting temporary local financial criteria that are fit-for-purpose under current trading circumstances. The World Travel Agents Association Alliance and the European Travel Association also put forward a request last week to suspend all Iata financial renewals until the end of September, allowing APJCs to put forward proposals for temporary LFCs.
While the industry awaits the outcome of these proposals, Otto says many agents, over and above the agencies affected by DIP’s withdrawal from the market, are considering giving up their individual Iata licences.
“This is due to the cumbersome, one-sided nature of the agency programme, which does not protect the agents from potential airline failure and ADM abuse. This is likely to result in further consolidation within the market with many agents choosing to outsource their ticketing function to their consortiums,” says Otto.
