- Tanzania Tourism is recovering on the back of sound fiscal policies, vaccine drives
- Business environment supports sector investment
- Case for the need to increase domestic tourism
Thanks to sound government fiscal policies, Tanzania’s tourism sector is steadily recovering. While the need for increased domestic tourism still persists, this development spells new hope for millions employed in the sector that is the country’s largest foreign exchange earner.
At the height of the global pandemic, lockdowns and travel restrictions severely hurt the tourism industry. In 2020, gold sales beat returns from tourism making the former the number one foreign exchange earner above tourism.
In that year, a report by the Bank of Tanzania (BoT) placed gold exports at an all-time high value of US$2.5 billion, up 46.8 percent. However, in that same period tourism earnings slowed from US$2.5 billion to US$2.3 billion dragging tourism to second place in terms of foreign exchange earnings.
This slump was a major blow to the country, for one, as of 2019, the tourism sector employed 1,550,100 people equivalent to 11.1% of the country’s total employment.
To give you a clearer picture of the devastation, the World Bank attests that; “Economic activity in the sector contracted sharply in 2020, resulting in job losses and business shutdowns which has had negative knock-on effects for inter-related sectors.”
In its 16th Tanzania Economic Update titled Transforming Tourism: Toward a Sustainable, Resilient, and Inclusive Sector, the World Bank warns that; “While partial recovery is underway, business revenues and derived taxes for the government still remain below pre-pandemic levels.”
“The latest news point to the fact that we are not out of the wood yet, as the third wave of COVID-19 with a more deadly variant seems to be spreading,” warns Albert Zeufack, World Bank Africa Chief Economist.
EAC Regional Tourism Integration
Similarly, as the country took internal measures to help the sector recover, the entire region, under the East African Community (EAC) moved to do the same. The EAC’s Sectoral Council on Tourism and Wildlife Management recently approved what it termed, the EAC Regional COVID-19 Tourism Recovery Plan.
Under this recovery plan, the EAC looks to work collectively towards the recovery of tourism in the region by supporting measures already adopted by individual countries in the bloc. A key agreement here was harmonization of guidelines to restore tourism and hospitality.
The Council approved the draft regional guidelines which are meant to build coherence in the measures that individual countries take to revive tourism. The Council insisted that if they work under the same guidelines then they will be able to earn trust and confidence of international tourists.
Other than the recovery guidelines, the Council approved a draft Regional Tourism Marketing Strategy. The marketing strategy is designed to sell the EAC region as the best tourism destination in Africa.
A big takeaway from the meeting was the agreement to establish an annual EAC Regional Tourism Expo (EARTE) that will serve to market the region as a single tourist destination.
“The COVID-19 pandemic has taught all of some really important lessons. For instance, domestic and regional tourism markets are really key and they can help in making the tourism sector resilient in case of future disasters and pandemics. The pandemic has revealed that we can use technology to connect with each other and have meetings such as this. It is therefore really important that we invest heavily invest in infrastructure and connectivity,” commented Kenya’s Tourism Cabinet Secretary, Hon. Najib Balala during the Council’s virtual meeting.
His counterpart, EAC Secretary General Hon. (Dr.) Peter Mathuki seconded the point but also noted that the sector’s multiplier effect and linkages with other sectors are instrumental to the much sought-after integration.
“Based on statistics reported by the Partner States, as a region, we lost close to 70% of international tourist arrivals in 2020 coupled with massive losses in tourism earnings and tourism-related jobs. The signs this year are still bleak given the recurrent waves of the pandemic that result in the imposition of unpredictable measures and restrictions by Governments around the world from time to time,” lamented the Secretary-General.
While the Partner States have undertaken individual tourism recovery efforts, the Secretary-General urged for the region to come together to implement joint actions including the formation of intra-regional tourism initiatives.
Lessons from Zambia: Fiscal policy to recover tourism
In 2020, while most other African nations were still wondering what they would do to stave off the negative effects of the pandemic, Zambia quickly moved to cut Corporate Income Tax (CIT) greatly bringing relief to businesses in the tourism and hospitality industry.
It worked, and in the 2021 Budget, it was no wonder the government again reduced the CIT rate. This time, the government cut CIT to 15% from 35% a break given to income earned by hotels and lodges on accommodation and food coaches.
This year, the government of Zambia has gone ahead and extended the CIT reduction to give the industry a chance to recover. Zambia has done more than cut down its CIT, a move that allows the industry to save on tax expenses.
Zambia has also taken several relief measures for the industry including cutting down visa fees of all categories by half (50%), instituting a stay of registration fees for hotel managers, suspension of license renewal fees for hotels and lodges, suspension of 15% customs duty that was previously imposed on tourist buses and coaches and other safari game viewing vehicles.
That is not it, along with reducing expenses that would otherwise be incurred by the industry as described above, the government of Zambia has gone ahead and outlined plans to improve infrastructure in other parts of the country to allow easier access by tourists and for investors of the sector.
As for improving the investment atmosphere, the government has announced that it will ease the regulatory framework to make it easier for the private sector to build hotels, lodges, and other tourism facilities.
It is obvious that the government of Zambia is losing lots of money by cutting down their taxes and other fees, and maybe it is for this reason that other African countries have not taken this bold step. However, when you look on the flip side of things, you find that failure to take these measures is much more expensive to any one country.
The government of Zambia has also said it will to the relief measures introduced, it will also reduce the number of licenses required to operate in the sector to reduce the cost of doing business in the sector and to promote investment.
Zambia estimates losses in excess of USD 400 million to be incurred due to the slowdown of the sector and its related value chain.
That is not to include both the monetary cost of employment losses and the resulting devastating impact it would have on the social welfare of the country.