UGANDA: Uganda Hotels And Lodges Operate At Rarely 10%, Mandatory VAT Partly Responsible

Just a few weeks ago did Ms. Jean Byamugisha, Executive Director of the Uganda Hotel Owners Association, during an exchange of emails lament the fact that low occupancies, especially in upcountry hotels and safari lodges in and around the various national parks, was alarmingly low. She attributed this to the sudden introduction of an 18 percent Value Added Tax, one which tourists unlike in other countries cannot claim back and which subsequently made accommodation as part of their safari more expensive by nearly 20 percent.

'This is why we are fiercely lobbying for VAT on upcountry hotels to be zero rated with the hope that this should bring down the cost of doing business and the cost of the room rate' did she say in early March during which time average occupancies had sunk as low as 30 percent with some locations down even further to between 13 and 17 percent.

Now has the struggle to survive reached critical levels and hotel operators have taken their fight to the government. Ahead of the annual budget reading have key stakeholders once again impressed upon government that their dire warnings of last year, ahead of the introduction of the 18 percent VAT, were not just empty threats as some members of parliament had alleged at the time, but 12 months later have shown serious consequences vis a vis hotel and lodge occupancies.

The hot pre- and post election period did not help either so far, as tour operators from abroad had quietly diverted traffic to for instance Rwanda for gorilla tracking, even though there was in retrospect no cause for alarm at all as the government of Uganda had made good of the promise to keep the country safe from riotous protests.

However, the more recent and hastingly passed amendment to the finance bill currently in place, exempting members of parliament from paying taxes, amounts to giving themselves a 47 billion Uganda Shillings present shortly before the term of the current parliament expires, money which in fact should have been invested in tourism marketing and for lowering taxes and the cost of doing business for Ugandan hotels.

While city hotels' occupancies are said to be within the financial viability ranges is it mostly the safari lodges which have taken a beating.

Other contributing factors named by the organisation were the excessive Visa fees, almost stealthily passed a year ago and again were warnings of the impact of such measures ignored or pushed aside. At 100 US Dollars a person is the entry fee into Uganda now at the same level as the common East African Tourist Visa, which at the same cost allows visits to Kenya and Rwanda in addition to Uganda, but where according to many reports immigration officials made it difficult to get such Visa on arrival, at times demanding - illegal - proof that visitors would indeed go to see the neighbouring countries.

Funding for tourism marketing too has been describes as too low, though, were the funds sharply raised questions were promptly asked by stakeholders to what extend the Uganda Tourism Board would be able to absorb added money and turn it into marketing value addition to actually generate more arrivals through consistent trade fair and sales show attendances than splashing the money away in one off activities, or 'activism' as one regular contributor phrased it.

The three areas combined could end up in a perfect storm for the industry should government once more ignore private sector warnings and a reversal of fortunes for the sector could lead to job losses and sharply lower foreign exchange earnings, besides turning investors for new lodges or resorts on some of the spectacular islands on Lake Victoria away.

Outgoing Tourism Minister Dr. Maria Mutagamba - she did not stand for re-election in her Rakai constituency as she is preparing for retirement from active politics - has carried the message of the private sector into cabinet and promised that the Prime Minister's office will deal with the grievances, however, it will be the finance bill tabled soon during the annual budget reading when the industry will learn if indeed the substantive changes they asked for will be incorporated or, if VAT and Visa fees are maintained, they need to look into a doubtful future.