Tuesday, February 17, 2015
Why tourism fails to generate optimal benefits for Tanzanians
By Daniel Semberya
16th February 2015
Elephants unlock the potential of
the tourism industry for Tanzanians.
In Tanzania, for the tourism sector
to make an even greater contribution to successful economic growth, it is
necessary to ensure social inclusion and ecological sustainability.
According to the latest World Bank
Tanzania economic update entitled ‘The Elephant in the Room Unlocking the
potential of the tourism industry for Tanzanians,’ as the tourism sector grows,
it becomes increasingly important to understand why it has not generated
optimal benefits for a greater number of ordinary Tanzanians.
The explanation for this involves
five different factors: First, while tourists spend a lot of money during their
visits to Tanzania, this generates benefits for a relatively small number of
parties in the country.
This is partly the result of the
kind of tourism that a country like Tanzania is attracting, i.e. predominantly
high-value tourists in relatively low volumes.
The average tourist spends
approximately USD290 per day for an average stay of 11 days. However, all
these payment are not all going to local operators and suppliers. Approximately
80 percent of tourists in Tanzania arrive from either Europe or the US, with
about 64 percent subscribing to package tours organised through travel agencies
located abroad.
Therefore, only a portion of the
spending remains in the host country. This is usual in countries like Botswana,
Namibia or Kenya, which rely on a high proportion of foreign tourists.
Second, tourism activities are
highly concentrated in two locations: The Northern circuit, which includes
Serengeti, Ngorongoro, Mount Kilimanjaro and the beaches of Zanzibar.
The national parks of Serengeti and
Kilimanjaro generate 85 percent of the country’s total national park revenues.
Clearly, tourism is underdeveloped
in the rest of the country.
For example, in 2012, only 21,000
tourists visited Ruaha National Park, an under-explored gem in the south.
Most beaches on the mainland, such
as South Beach and Pangani, are also relatively infrequently visited.
Given that large areas of the
country still remain relatively unexplored and underdeveloped for tourism; the
linkages between the sectors activities and the rest of the economy have been
limited at the national level.
Third, the tourism sector has
created some new job opportunities for Tanzanians but not in proportion to the
sector’s growth.
In particular, it is failing to create
additional high value jobs.
Over the past decade, the tourism
sector has grown by a factor of almost 300 percent.
By contrast, the number of jobs
provided directly and indirectly by this sector has only slightly doubled, from
546,000 to 1,200,000 workers over the same period.
While this is still a significant
number of jobs, it also means that during this period, the ratio of labour to
GDP in the tourism industry declined from 55 to 33 percent, in a sector that is
known to be labour intensive.
Furthermore, in Tanzania, the
average annual income per worker in the tourism industry is only USD3,500.
While this figure is considerably
higher than the
general average income of a worker
in Tanzania, it
is lower than the annual income from
tourism, in comparable countries tourism workers earn almost USD5,000 in
Uganda, and USD9,000 in Kenya.
This gap reflects not just the
differences in skills, sets between the different countries, but also the
limited ability of the tourism sector in Tanzania to foster inclusive growth at
scale.
Fourth, tourism in Tanzania has not
yet optimally enhanced economic opportunities for members of local communities
in areas surrounding the major attractions.
It is often argued that tourism can
help stimulate local development.
It is indeed true that if the
industry is well managed, linkages with local communities can be fostered by
involving members of these communities in the development and management of
local attractions and in the delivery of traveler associated goods and services.
This can happen through
co-management arrangements with local communities and through the building of a
supply chain from agricultural produce to hotels; by creating jobs for locals
as employees or guides and by promoting a market for traditional handicrafts,
among other economic activities.
Where such a strategy is in place,
more needs to be done to exploit it by capitalizing on local talents and
resources.
As it is today, local communities
adjacent to major tourism attractions remain among the poorest in the country.
Lastly, the government has failed to
capture all returns from the tourism sector due to an inefficient tax system
and non-transparent redistribution mechanisms.
The multi-sectoral nature of the
tourism industry combined with lack of transparency, fragmented reporting and
the general lack of reliable data is symptomatic of three main problems that
deserve attention.
These include the following:
Fragmentation of the tax system: Tourism operators are subject to more than
taxes and fees, including VAT income tax, municipal service levies, employers’
contributions and safety inspection fees.
The complexity of the system
translates into numerous inspections and visits by tax inspectors and
collectors, which are time consuming and provide opportunities for corruption
and the underreporting of collected revenues.
The unclear and uncertain tax system
also creates barriers to entry for new and small investors, who cannot survive
in the current business environment.
This reduces the opportunity for a
viable tourism sector and decreases its overall level of competitiveness.
High evasion rate: The overall
fiscal revenue generated by the tourism sector is estimated to reach the value
of USD185million per year, equivalent to approximately twelve percent of
tourism GDP.
However, 15 hotels account for about
one quarter of those revenues. This means that other tourism operators are
either paying much less in taxes and fees or the amount collected is not
included in official records.
Either way, it is clear that what is
officially circulated back into the system is disproportionately lower than
expected for an industry that makes such a significant contribution to the
Tanzanian economy.
Non-transparent use of collected
resources: A significant share of revenue is collected by government agencies
that operate outside of the budget.
The complexity of revenue collection
and management systems can be seen from the example of revenue flows in
hunting, a sub-sector of tourism.
Not only is the system complex and
the flow of funds redundant, but also, if the revenue flows are accurately
captured, then the system simply does not work well.
For example, a 2013 NAO performance
audit could not verify whether any of the funds allocated to local government
were indeed distributed or used for the purpose of community-led wildlife
protection efforts as stipulated by the Law.
The combined impact of these three
factors helps to explain why the overall contribution of the tourism sector to
fiscal revenues is equivalent to only a third of what is generated in the
mining sector.
As tourism operators have frequently
stated, the costs imposed by taxes are not as much a problem as the
opportunities created by a complex taxation system for rent-seeking and harassment.
Additionally, the revenue management
systems are characterised by cumbersome processes. As a result, they do not
work well.
There are clear opportunities for
enhancing efficiency and transparency by simplifying the structure of revenue
flows.
Problems of revenue collection and
management also translate into reduced benefits for local communities.
SOURCE: THE GUARDIAN
