ZIMBABWE: Export Incentive To Tourism

The export incentive was introduced last year under a $200 million facility guaranteed by the African Export-Import Bank under the bond notes regime.

Qualifying exporters get an extra 5% in bond notes.

In his monetary policy statement RBZ governor, John Mangudya said the bank was extending the export incentive scheme to the tourism industry, as a reward for its contribution to foreign currency generation.

He said the depreciation of the South African rand and other regional currencies affected the price competitiveness of the country’s tourism industry, considering that the bulk of tourists come from Africa, particularly South Africa.

In view of this, Zimbabwe becomes more expensive as a tourist destination as the US dollar strengthens against the regional currencies.

The export incentive scheme is, therefore, expected to provide some cushion to allow the tourism sector to adjust prices to remain competitive, Mangudya said.

Tourism and Hospitality Industry minister Walter Mzembi applauded Mangudya for listening to sectoral representation and “reflecting and aligning to global tourism trends, which now capture tourism, as the third global export earner”.

He needs to be applauded because the behaviour of currencies single-handedly after safety and security is a key determinant of growth in the tourism sector, as weaker currencies and devaluations tend to attract traffic from stronger currency source markets.

A case in point is how the United Kingdom has benefited from Brexit with its attendant weakening of the pound sterling that has seen tourism spending surge to a 7% year-on-year increase,he said.

Mzembi said dollarisation has severe competitiveness unintended consequences, and any measure that mitigates that, is welcome.

There is no incentive for a rand source market to holiday in Zimbabwe, and measures to incentivise rand acceptance as transactional currency in the tourism sector are most welcome, he said.

Mzembi said there was also need to attend to US dollar denominated cost drivers — labour, power, water and other cost of sales, which can only be tamed by a “holistic internal devaluation exercise and the benefits passed to tourism to achieve effective and competitiveness in rand pricing in near parity with South Africa itself”.

Zimbabwe Council of Tourism president, Tich Hwingwiri said: The decision to extend the incentive is a welcome development, as government continues to recognise industry as a quick win, especially during these times of the scarcity of the foreign currency.

The industry is looking forward to execution of ease to do business recommendations in order to invite more visitors to our country thus resulting in more foreign currency inflows.

Tourism is considered a the best income earner, and provides the quickest turnaround ahead of other sectors such as mining and agriculture.

Zimbabwe Tour Operators’ Association former chairperson, Wengayi Nhau said he also welcomed the move, but added the central bank needed to make special considerations to tour operators, who needed to import for their business.

We will do our best because we are an exportable service. There are fundamentals though that still need to be addressed. Our sector being as it is by its nature most of our services and goods that we then need as inputs come from outside, he said.

Zimbabwe Tourism Authority (ZTA) chief executive Karikoga Kaseke said that while some businesses closed down in recent years due to economic challenges, there has been a notable rise in new investments into the tourism sector.

The Tourism sector registered 28 new restaurants, 17 new guesthouses and 28 incentive travel organisers. This goes to show that the sector can actually be the catalyst for the economic turnaround of Zimbabwe given all the necessary support and enabling operating environment, Kaseke said.

Industry officials say Harare requires about 1,000 more rooms by 2018 and at least another 1,000 by 2020. Victoria Falls requires at least 500 more rooms by 2018 and a 1,000 more rooms by 2020.

He said tourism thrives well in an economy that was stable, but the ongoing economic challenges have resulted in low disposable income for the country’s citizens, who are the nation’s potential domestic tourists.

Consequently, Kaseke said the domestic tourism suffers, as there was low propensity for the locals to engage in tourism activities.

The liquidity cash crisis in the country has resulted in limited business both at local and international level impairing the growth of the tourism industry as both domestic and foreign tourists cannot access cash, Kaseke said.

Cash shortages have also resulted in damage to the country’s image. This is especially so as some countries including the UK issued travel advisories warning their citizens on the cash shortages, a move which deters potential tourists to the country.

Furthermore, this scenario reduces tourism expenditure denying the sector the opportunity to generate the much needed foreign currency, he said.

Kaseke said tourists do not have the cash to buy curios, arts and crafts further reducing the downstream impact of tourism.

The ZTA boss said the tourism industry was affected by many taxes and licences and this was compounding in making the country’s tourism product more expensive and uncompetitive within the region.

Tourists now prefer to stay in neighbouring countries crossing over into Zimbabwe for fewer days because of the higher costs of the destination, he said.