Tourism levy haunting sector

The tourism industry says government should scrap the 15% value-added tax (VAT) on tourism as it has made the Zimbabwean product more expensive.

Zivisai Chagaka recently in Victoria Falls

The cash-strapped government in January last year unilaterally introduced the levy on foreign tourist accommodation in a move seen as a desperate measure to augment the
government’s dwindling revenues. This was despite appeals and protests from stakeholders in the tourism sector who viewed the tax as tantamount to choking them out of business.

Tourist accommodation and related services have been exempted from VAT since its introduction in 2003 to spur growth in the sector.

In a wide-ranging interview, African Travel and Tourism Association chairperson Ross Kennedy told businessdigest that the tax on tourism was “totally unnecessary”. He said this during the relaunch of The Boma — Dinner & Drum Show earlier this week in Victoria Falls.

“Though the 15% tax added last year has been difficult to quantify, it has made our tourism product more expensive. Some of our colleagues reported cancellations after the tax was introduced,” Kennedy said.

Players in the tourism sector are therefore concerned that the few gains that have been achieved by the industry could be reversed. And Kennedy said the tax could have affected 5% of business in general.

“We are still in talks with our minister to have it overturned,” he said. Nonetheless, Kennedy said, the Zimbabwean product remained cheaper than in neighbouring countries although the pricing is driven by supply and demand.

Last year, Finance minister Patrick Chinamasa told parliament that Treasury had collected US$1,6 million in the first four months of its introduction.

Tourism and Hospitality minister Walter Mzembi is one of those who have spoken out strongly against the levy.

In August, he was quoted as having said that the introduction of the tax would neither grow the tourism cake nor guarantee that government will get the desired increase in revenue.

“The sector and myself still believe that it’s early days to impose such a full-blown tax on foreign arrivals that we are still trying to recover,” Mzembi is also quoted as saying.

He said “intelligent taxation would seek to promote the recovery of the sector through an incremental formula that does not kill the goose that lays the golden egg or punish people for visiting”.

“I often hear arguments about Zambia or that other countries are doing it. Why not us, but really, we are coming from different backgrounds given our history of a country under sanctions, at least in the travel market, until 2009,” Mzembi added. “So we need taxation creativity in other areas that do not constitute a barrier to entry and growth of the sector.”

Research conducted by the Zimbabwe Council for Tourism revealed that the country would experience a 75% drop in the number of foreign tourists and lose up to US$124 million per year if the levy is not reviewed downwards.

Available statistics show tourist arrivals to Zimbabwe increased by 9% to 2 056 588 in 2015, compared to 1 880 028 in 2014 with all markets performing positively except for Asia and the Middle East which declined. The growth in arrivals into Zimbabwe was generally backed by growth in the country’s traditional overseas source markets such as the United Kingdom and the United States and compounded by the positive performance of mainland Africa.

The tourism sector achieved 7% growth in receipts from US$827 million in 2014 to US$886 million in 2015 with more of the receipts being driven by the accommodation and restaurant sub-sectors. Tourism receipts have been on a growth path since 2009. The sector could achieve more if the country was not using a much stronger currency, the US dollar, which has made the destination more expensive compared to those in the region.

The average room occupancy level for Harare fell to 57% in 2015 from 59% in 2014. In Bulawayo, the average room occupancy level also fell from 44% in 2014 to 37% in 2015. However for Victoria Falls, room occupancy rose from 49% to 52%, during the period under review.

The national average hotel room occupancy level fell from 48% to 47% while the bed occupancy level also fell by five percentage points from 36% in 2014 to 31% in 2015. Except for Victoria Falls which enjoyed a client mix of 73% foreign to 27% local, utilisation by the domestic business clientele dominated the accommodation sector with 78% of the hotel clientele being locals. Domestic leisure is mostly active during public holidays.

However, Kennedy said 2016 has been “stable” for established destinations in Africa, including Zimbabwe itself as compared to previous years. It was a mixed bag for those in the Victoria Falls, he said, as some realised healthy returns while others struggled. Most of those businesses that rely heavily on domestic tourism are the ones that were hardest hit as a result of a severe liquidity crunch and numerous police roadblocks.

As a result, the domestic market suffered a 50% knock in the second half of December 2016 as the cash crisis deepened. Kennedy said this is the month that usually sees a spike in local arrivals as the festive season begins.

“The state of the economy in general where some corporates are downsizing and effecting other cost-cutting measures such as salary cuts affect travel and leisure as fewer and fewer people have disposable incomes,” he said.

Kennedy said the tourism industry is “poised for growth nonetheless as there were new projects in the pipeline, including multinational fast-food outlets and lodges, looking at the Victoria Falls as a destination that is growing. In Hwange, it was a fairly good year.”

The rains, though they came late, have provided a welcome relief for tourism operators, particularly those in the prime resort of Victoria Falls — “we need water”.

“The Zambezi is now flowing above average and that’s wonderful for tourism … the weather doesn’t impact very much on tourism in Vic Falls,” Kennedy said.

“There is a general good feeling on what the tourism industry is expecting in 2017 and on the balance sheets. The expectation is 7-15% more bookings in 2017. We now have the added advantage of a new and enhanced airport which can handle even the biggest aircraft.

“We are complementing government by talking to airlines to see what can be done to promote and market the new airport. There are big names that have expressed interest in coming here — so we need to promote it so we can realise some benefits out of it as an industry.”

The new Victoria Falls International Airport terminal was commissioned on November 18 last year. This state-of-the-art airport, with a 4km long runway, is capable of accommodating the big, wide bodied aircraft, including the A380. It is expected to handle 1,5 million passengers a year from the current 176 000. The new airport terminal is currently handling five airlines. Arrivals into Victoria Falls by long-haul carriers are, however, expected to increase. Victoria Falls is poised to become a regional hub given its geographical location in relation to other tourism destinations in the region.

Kennedy, who is also CE of the Africa Albida Tourism Group, however said the cash shortages, though problematic to all employees and businesses, “this has had no direct impact on us” as they encourage their guests to use credit cards. He said they also work with travel agents to advise tourists to bring small denominations for small transactions and use credit cards instead for major transactions.

Kennedy welcomed the recent relaunch of a univisa between Zimbabwe and Zambia as “a genuinely user-friendly tourism tool”.

The univisa known as Kaza (Kavango-Zambezi) Transfrontier Conservation Area Visa, means tourists only need to obtain one visa to visit Zimbabwe and Zambia and was relaunched by Home Affairs minister Ignatius Chombo and his Zambian counterpart Stephen Kampyongo on December 21.

The facility had been suspended for a year from December 2015. The two countries had been chosen to pilot the facility following the hosting of the UN World Tourism 20th General Assembly in the resort town of Victoria Falls and Livingstone in 2013, but was suspended because the two countries had run out of stickers and also because the memorandum establishing a univisa between the two countries had expired.

Kennedy said the new visa regime is an early step in exploring and developing Kaza as a tourism zone with Victoria Falls as its hub. He said he hoped other countries in the region will also join in.

Kennedy also praised Mzembi for steering the tourism industry towards growth.

“We have a positive and ambitious Tourism minister (in Mzembi) who wants to get things done. He has worked hard to improve and grow the sector and we must acknowledge that fact,” Kennedy said, adding that the growth of the tourism sector naturally leads to the growth of the economy even from a provincial level to the national economy, hence its growth should be encouraged.

Mzembi is currently vying for the position of secretary-general of United Nations World Tourism Organisation (UNWTO). He is currently the UNWTO Regional Commission for Africa chairperson.

AAT is a Zimbabwean hospitality group with a portfolio of hotels and restaurants in Victoria Falls and in Chobe, Botswana, including the Victoria Falls Safari Lodge, Lokuthula Lodges, Ngoma Safari Lodge and The Boma — Dinner & Drum Show.

Source: Tourism levy haunting sector (27/01/17)