Fahari ya Serengeti

Tuesday, February 17, 2015

WAKULIMA ZA TUMBAKU
















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
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