How East African states can improve tourism investment

Kigali. Low share of the global tourism investment flowing into eastern Africa has prompted industry stakeholders to call for action to reverse the situation.

Globally, tourism investment was $882 billion in 2017 and Africa received $26.22 billion which is only three per cent of the total amount.

Eastern Africa received $3.11 billion of which 66.4 per cent went to Tanzania, Kenya and Ethiopia.

Experts, policy makers and the industry stakeholders who discussed the ways for improving the tourism financing during the Intergovernmental Committee of Experts proposed various measures to stimulate investment.

Currently, the financing of the sector investment depends on different sources including foreign development financial institutions, equity financing, philanthropic financing while local commercial banks are said to have little understanding of the tourism business.

Some of the factors leading to the low share of investment in the Eastern African region include safety and security issues, inadequate infrastructure, and lack of biodiversity and innovation in tourism products, according to a tourism expert from South Africa, Dr Salifou Siddo, who made a presentation at the conference yesterday.

Other factors include failure to promote the eastern Africa region as a single investment destination and perceived high level of corruption. “Something must be done to address these challenges and ultimately open-up investment opportunities in the sector,” said Dr Siddo.

Improving the ease of doing business and consistency in tax policies are some of the possible ways that may sustain financing of tourism investment in East Africa as the stakeholders see more potentials in the industry.

Suggestions included implementation of effective crisis management in tourism sector as well as member countries to take advantage of the newly signed Single African Air Transport Market.

He said promotion of East Africa as a single region should now consider including all countries in the sub-region for a single tourist visa.

The bloc has more potentials for tourism but investors are said to concentrate in areas with less risks.

“Right now, hotel investment is focused on the already established areas especially the international hotels. However, less of them are seen in the safari business or beach facilities,” said Nura-Lisa Karamagi, Hotel Association of Tanzania chief.

The established areas offer better return on investments but the trend is starving potentials of underdeveloped areas. “There is need for governments to offer effective tax breaks for investors in underdeveloped places,” said Ms Karamagi.

who also presented a paper at the meeting.

According to her, improving the ease of doing business, taxation policy consistency and provision of assets leasing to tour operators are some of the measures that will stimulate tourism investment in the region.

On the other hand, Mr Jonah Orumoi, the chief executive officer of Tourism Finance Corporation of Kenya who spoke on the role of the private sector in tourism financing, said the establishment of strong capital markets and increasing access to affordable credit could help in developing the sector financing.

He said establishing tourism specific funds like the tourism development fund of Kenya could bridge the gap in financing tourism infrastructure development.

“Such funds will cover infrastructure costs like electricity so that a hotel investor doesn’t incur the cost of electricity,” said Mr Orumoi.

However, there was worry among some participants that taxes and levies collected are sometimes prone to misuse due to lack of transparency and accountability in their expenditure.

For Mr Richard Rugimbana, the executive secretary of the Tourism Confederation of Tanzania (TCT), addressing the financing challenge requires three pillars.

These include the establishment of framework for the kind of products to focus on, developing products that will attract tourists and the engagement of the private sector with the public sector on the kind of investment climate needed.

The chief executive officer of the Uganda Tourism Association, Mr Kawere Richard, said government “must mobilise resources to reinvest in our own countries and that is finding our own solution.”

In Tanzania, tourism is the leading foreign exchange earner which brings in over $2 billion per year.