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.

ZIMBABWE: Tourism Negatively Affected By Government Policies

Tourism players have appealed to government to revisit some of its policies that are negatively affecting the industry which is currently grappling with subdued tourist arrivals.

There is unanimity among industry actors that tourism is a key growth driver and Treasury estimates that the sector is set to grow by more than 4,7 percent this year and maintain moderate growth of above four percent.

Finance Minister Patrick Chinamasa has highlighted that government supports interventions meant to enhance tourism, which include marketing, relaxing the visa regime, investment in tourism and related infrastructure and promotion of the "Open skies policy."

However, industry players said they were suffering from the dire effects of some government policies whose existence directly affects operations and tourist arrivals.

Two years ago, government introduced a 15 percent Value Added Tax (VAT) on accommodation and recently came up with Statutory Instrument 64 of 2016 which restricts the importation of a range of goods into the country without a licence or import permit.

Tourism players who include hoteliers and tour operators held an urgent meeting last week under the auspices of the Zimbabwe Tourism Authority (ZTA) where they implored the ZTA board, led by Chipo Mutasa, to immediately engage government over the issues.

Zimbabwe Council for Tourism (ZCT) representative, Barbra Murasiranwa, told the meeting that the sector was saddled with a number of challenges that needed urgent attention.

Murasiranwa said even the 15 percent VAT introduced by government two years ago needs re-visiting as it was directly affecting tourism.

"Something still needs to be done about VAT. It's making our destination expensive. We want to bring business to the country through luring tourists, but we can't do that when our products are this expensive. We can attract more tourists if VAT is removed," said Murasiranwa.

She said some countries such as Kenya and Tanzania had scrapped VAT to attract more tourists into their countries. ZCT has also appealed for a one-stop-shop where all licence fees and permits could be applied for and obtained under one roof.

Murasiranwa called for decentralisation of licence offices to respective towns where tour operators could, for instance, apply for permits in Victoria Falls or any other town they are domiciled in rather than having to travel to Harare.

"We also need a one-stop-shop where operators can apply for permits and licences and do away with multiple licences. There are as many as 20 licences needed to run helicopter and boats (services) and all these are obtained from Harare and Bulawayo. Fees should be reasonable as well," she said.

Murasiranwa said the industry still needed assistance regarding the prolonged rates impasse between hotels and the Victoria Falls Municipality.

African Sun Hotel group and the local authority recently clashed over a US$400 000 bill in unpaid rates, which had skyrocketed following a disputed 500 percent tariff increase.

"The rates issue between (Victoria Falls) hotels and the council is still pending. The council introduced a 500 percent increase in rates resulting in a number of meetings after we complained about the issue. The rates were then reduced by 20 percent, but hotels are still appealing for a relook into this because the figure is still high," said Murasiranwa.

Mutasa said they would return to the resort town with a response within a month.

ZIMBABWE: Zim Collects $1,65m Tourism VAT

Willard Manungo, Finance ministry’s permanent secretary

Hard–hit Zimbabwe government collected a total of $1,65 million from value added tax (VAT) on non-resident tourist accommodation in the four months to April this year, a top official has revealed.

Willard Manungo, Finance ministry’s permanent secretary, on Monday told Parliament that government was aware of implications surrounding the VAT introduction and this was consistent with developments within the southern African regional countries.

“From a fiscal point of view, we continuously monitor the environment to try and ensure that we don’t undermine the recovery of the tourism sector,” he said adding that the VAT was only introduced based on submissions from tourism stakeholders.

The permanent secretary noted that government from 2009 introduced rebates on capital goods and suspension of duty on vehicles imported under tourism sector as way of supporting the tourism industry in expansion initiatives and refurbishment of hotel facilities.

“In 2014 alone, the concessions that we gave with regards to tourism industry, we have foregone over $2 million in terms of duty that should have been paid by the sector again as a way of trying to improve the sector’s competitiveness,” he said.

He added that 33 tourism operators had so far benefitted from the rebate on capital goods related to the tourism sector while the suspension of duty on motor vehicles imported by the sector had benefitted about 22 tourism operators.

“All in all, 55 operators have actually been able to benefit by way of concessions on both capital goods as well as on motor vehicles,” said Manungo.

This comes as the Zimbabwe Tourism Authority (ZTA) has already pleaded with tourism operators to maintain last year’s rates despite the introduction of levy on foreign accommodation as a way of boosting tourism.

“This year we have agreed that industry will pay and they are already paying the 15 percent but they can’t change their rates,” ZTA chief executive Karikoga Kaseke recently said.

“It means the tax is eroding into their revenues and profitability. I don’t know what will happen when we let them increase rates next year. It will be bad,” Kaseke said.

The tourism boss noted that his organisation was not ruling out the possibility of a reversal of the decision to impose the tax.

“The 15 percent VAT has been lumped on industry whilst efforts to try and persuade fiscal authorities are underway and the minister (Walter Mzembi) is very much pushing for reversal of that decision,” said Kaseke.

In January this year, Zimbabwe unilaterally imposed a 15 percent tax on foreign tourists’ accommodation to enhance its depleting coffers.

The southern African country has not been charging VAT on foreigners’ accommodation payments and tourism-related services for the past decade.

When the Vat system was introduced in 2003, the travel and tourism sector was recognised as an exporter and was exempt from VAT on foreign visitors’ payments.

Tourism is one of Zimbabwe’s major foreign currency earners, generating $827 million in 2014, down from $856 million in 2013.