5 February 2019

Lesotho: Govt Losing Millions to Tourism Contractors

... ... contractors not paying taxes and rentals for using state properties

Herbert Moyo

THE Ministry of Tourism, Environment and Culture is reviewing its contracts with private operators who are leasing its accommodation and tourism facilities after realising that some private operators have not been paying any dividends, rent and taxes to the government for several years.

The principal secretary in the Ministry of Tourism, Monaphathi Maraka, this week told the Lesotho Times that a consultancy had been engaged to advise the ministry on the standardisation of current and future contracts with private operators to plug loopholes that were exploited by the latter to avoid paying taxes and dividends.

He cited Victoria Hotel in Maseru and Mohale Lodge (about 90 kilometres from Maseru) as some of the establishments that had failed to pay rent and taxes to the government for many years.

Mr Maraka said the private operators took advantage of the constant changes of governments, which ushered in new ministers and principal secretaries who had no knowledge of the contracts, to evade paying rent and dividends.

"My message to the management of the Victoria Hotel is that they are not paying their dues to government," Mr Maraka said.

"I think they are happy with their wrongs because they know that for the government to get them to pay up, this would entail lengthy legal wrangles which they have time for. We as a ministry are also taking a very long time to act and one of the reasons is the constant changes in government.

"My predecessor, Motena Tšolo worked on a report about Victoria Hotel like our pre-predecessors also worked on reports about Victoria Hotel. They are capitalising on knowing that every time there is a change of minister and principal secretary, they can get away without paying because of the memory loss on the part of government.

"It is not only Victoria Hotel. Mohale is another case in point. The management of Mohale have entered into a legal wrangle with government because they are behaving the same way as the management of Victoria who are using delaying tactics and yet they are poorly operating the businesses.

"They know that the memory loss on the part of government as a result of frequent changes of regimes has caused poor follow up of issues like that. We could take them to court. We could do everything the legal way to get the properties back but they know that the memory loss that happens here when we change principal secretaries and ministers means that when a new minister comes in, the process starts afresh.

"That is where they are capitalising. So, I would say that the ministry has a responsibility to go out and map these facilities that are not making profits and paying their dues and sort out these issues. Currently we have a transaction and advisory team at work in the ministry.

"They are giving us advice on how to structure the contracts that we enter into with operators of hotels like Victoria and Mohale so that we can arrive at some level of standardisation in contracting these companies to deliver services. Tourism is dying. It is not picking up because the operators of the facilities are not up to scratch in terms of what they should be doing," Mr Maraka said.

Victoria Hotel has been at loggerheads with the government for a long time over its failure to pay rent and taxes. Last year, the then Tourism minister, Motlohi Maliehe, raised similar concerns in an interview with this publication.

"We have analysed and discussed the (Victoria Hotel) matter at ministerial level and we are now in discussions with the ministry of finance with regards to the agreement they had with the private operator. The crux of the matter is that, for years, the government has not received anything from that investment, including rent. Although it has taken this long to realise, we all agree that something has to be done," Mr Maliehe said.

The 56-room Victoria Hotel, which employs 58 employees was leased to the current operator, Thabiso Tlelai, almost a decade ago in 2009. Mr Tlelai told this publication that the rent is M60 000 per month. Theoretically, Mr Tlelai only needs two days of full occupancy to pay his monthly rent and still have lots of change left over. A room costs M710 per person during the week and M870 per couple.

On weekends, the cost is M625 per person and M750 per couple. Assuming the hotel is always fully booked by single people the operator would make M880 000 per month in rentals alone. This excludes the rentals for the conference facilities at the hotel.

Mr Maliehe said leasing facilities without getting any returns does not make sense for the government as establishments are expected to generate revenue for use to further improve the tourism sector.

He said the ministry was looking at leasing all its facilities, some of which had become white elephants to local and foreign investors who would pay decent amounts in rentals.

"We are not saying we will be unreasonable and we want to milk the investors, but we have to work out agreements that ensure that the government also gets something."

Yesterday, the Victoria Hotel operator, Mr Thabiso Tlelai refuted Mr Maraka's claims that he had not been paying rent, saying his lease agreement with the government stipulated that the rent would be deducted from the millions he claims he injected into improving the facility upon leasing it. Although he did not say how much he invested, he has previously told this publication that he injected M20 million to refurbish the hotel.

He challenged Mr Maraka and the government to take legal action against him if indeed he had violated his agreement with the government over rentals and dividends.

He said Mr Maraka and former minister Mr Maliehe all spoke from an uninformed point of view with regards to the issue.

"The truth of the matter is that I got sign-offs on the huge capital I injected into the facility and the government is getting rent out of that capital injection," Mr Tlelai said, adding that the lease agreement will continue until 2025.

He has previously told this publication that he will need to inject another M30 million to further improve the facility to international standards.

He said at the time he took over Victoria Hotel, the then government had approached some big names in the hospitality sector in the Southern Africa region and none of them were interested in the facility.

"The hotel was in shambles when I took over, vandalised and all. All the rooms, kitchen and dining area were a disaster. So, the agreement with government was that I should refurbish the hotel and fix all the structural defects. The costs would be amortised so that I get back my money. I spent millions which would be deducted in lieu of my rent until that amount that I spent fixing the hotel is paid.

"Some of the money that I used was borrowed from banks and I have to repay it. It is irresponsible for government officials to make pronouncements on issues that they don't understand. Similar statements have been made by the previous minister (Mr Maliehe) and I don't know why they keep making these statements but I don't want to get into boxing matches with government ministers and officials."

Mr Maraka said if at all the Victoria Hotel had been refurbished, this had not been in done in a way that made the facility more attractive and enticed more customers.

"Victoria Hotel is not getting customers because they cannot market themselves. This also because they have not even refurbished the facility in a way that makes it any more attractive.

"They had better get their act together and turn that facility into a profitable facility for the people of Lesotho and stop ignoring that it is in fact a public asset. They are not making profits even for themselves and how can they make profits for the people of Lesotho," Mr Maraka asked rhetorically.

He also called on tourism operators to market their business and come up with innovative ideas that will generate profits instead of waiting for the revenue that came from government bookings for programmes involving public servants.

"They (tourism players and the hospitality sector) are over dependent on the government. They rely on government orders to purchase services for public servants to stay at their facilities. But it takes long for the government to process the orders and pay them, so this is not good for the businesses' cash flow. And so, they should be looking for people who will pay cash. They should invite the public to stay during the weekends like some of the bigger hotels do," Mr Ma

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