18 April 2019

Zimbabwe: Currency Crisis Blights Tourism Sector

interview

The tourism sector has been recovering after years of being hard hit by negative perception, caused by government's toxic policies and confrontation with Western countries. However, the hospitality sector faces a number of challenges in its recovery process. Zimbabwe Independent business reporter Kudzai Kuwaza (KK), spoke to Tourism Business Council of Zimbabwe chief executive Paul Matamisa (PM, pictured) on the state of the sector, the high prices of tourism products and the sector's promotion drive. Below are excerpts:

KK: What necessitated the change of the name from the Zimbabwe Council of Tourism to the Tourism Business Council of Zimbabwe?

PM: The name was changed due to various reasons. We had attained 30 years from the time we started and, if you look at that time, one would have matured and in the process also your views and objectives change. Resulting from that, a name becomes an albatross to do what you want to achieve.

The industry leadership saw the need for it to change and we had had over time, people querying whether we were a government institution or not because anything with the word council is automatically assumed as government related. Therefore, we decided to put the word business so that people know that we are a business entity and that we stand for the interests of the private sector.

KK: What progress has been made towards promotion of the country as a tourist destination?

PM: As an organisation we have an interest in that is being marketed is our destination were we have operated and have businesses, hence we have a keen interest in that even though the mandate to market Zimbabwe lies with the Zimbabwe Tourism Authority.

We look and compare ourselves with what our colleagues in the region are doing and you see that Zimbabwe is poorly resourced in terms of cash, these other countries are into millions in terms of budgeting for marketing but in Zimbabwe we have never been allocated more than one million for budget except this year when we were allocated $2 million which has since depreciated in value. Therefore, they need a strong budget to carry out the mandate of marketing effectively to the outside world.

KK: How have the disturbances we experienced in January affected the tourism sector?

PM: Tourism thrives where peace prevails and if there are disturbances of any nature or negative statements have an impact on the arrivals of tourists therefore peace is of paramount importance if we are to achieve the goals we are targeting.

KK: How has currency volatility affected the sector?

PM: The changes that have happened have caused upheavals in the market; the currency is supposed to be 1:1 with the greenback but now it is not this has a strong impact on business. The other thing is the availability of forex for businesses to operate therefore the cost of obtaining that for is now very high due to its scarcity.

On the issue of taxes, we started with 2% transactional tax. The intention was good because it was trying to give everyone a taxation responsibility however, what they failed to realise is that in the business sector those who were already paying taxes were also asked to pay this additional tax. This then brought the additional cost on the already existing taxpayer.

For years, we have been talking about tax for the export for tourism products as a sector we say that we can get more if these taxes were removed because it will help reduce the cost to the destination. We also have to look at the situation of the currencies and the currency that we have is incomparable with other currencies in the region, you are dealing with the US dollar as your main currency against the rand, pula and metical, you realise that you are not going to be accurate in your calculations and the way you do business.

Then besides the taxes we have, we believe that as an economy we have not done well because when we move from one currency to another we have not interrogated the systems to see that they are working well; so we end up with problems which seem to be insurmountable few months down the line.

Beginning of this year, people were saying that by April the US dollar and RTGS rate would have come down, but here now we are in April yet nothing has happened, the value chain that we operate in is such that it makes your product in the end not easy or cheap. We are looking at a situation where prices are pegged at 3,5 to four times more so when your suppliers are giving you products at that rate what chance have you got to reduce the price? If you want to remain in business it the becomes an issue of passing on the costs you are receiving so that you remain viable.

KK: Given the prevailing circumstances, what hope is there for domestic tourism?

PM: There is hope for domestic tourism because they are operating in the same market that businesses are operating in. The hardships that businesses are facing are being received by the domestic market. I also hope that special programmes are put in place so that people are able to visit their favourite destinations, so it can be done, but it requires effort from all of us. It is within the economy that solutions must be found for everyone to survive not for individuals only.

KK: What is the current state of domestic tourism now?

PM: The component of our domestic tourists that is local is mainly for business. At the final analysis, you want to promote the leisure aspect of our domestic tourism. We need some kind of special programmes that have to be put on the market that will promote the movement of people from one destination to another, it is not easy, but it has to be done.

KK: What is the state of investments in the tourism sector?

PM: A lot of investment is taking palce in Victoria Falls in particular which is pleasing and that some of the investments are being pioneered by local businesses which is good.

We also have foreign investments coming through but what I would like to say is that more can be done to get investments in other regions of tourism. Concentration seems to be on Victoria Falls. However, we should look at other destinations like Kariba, Eastern Highlands and new destinations like the Zambezi Valley.

KK: Have you made any headway towards the presentations you have been making to government about removing the 15% tax on foreign visitors?

PM: When you are working with government, some things are prolonged, but you have to keep at it. You do not have to shy away. We believe that the 15% tax on the tourists coming here should be removed which would do well to the destination in terms of promoting it as far as the cost of doing business is concerned. Things, which are sold outside the country, are not charged tax so why should we charge tourists tax? It is an export as well.

KK: How helpful has the tourism fund set up by Reserve Bank of Zimbabwe?

PM: I suppose there are people who are benefiting from it, but from what I understand the uptake was not that great as was anticipated initially. Those facilities you are getting it in RTGS dollar when you invest you are serious. It is $15 million only that is not enough. Think of it one hotel will gobble up the entire $15 million, so in my view that fund should be used to help small operators and small-to-medium enterprises.

How far have you gone with the tourism fund you intend to set up as an industry?

The tourism reserve fund has to start from the level of US$300 million. The fund will look to entice outside institutions to also invest in Zimbabwe. They bring in their money and they get a small incremental interest so that their money will make more money for them in the long run, but at the same time it is a developmental fund that is helping to develop tourism in this contry.

Therefore, it is a fund we would want to be established and run under a trustee programme and we are optimistic it will encourage investments from locals in a big way. We would also like to attract the big banks out there so that they can lend money for investments.

KK: What has been the response of the government towards this fund?

PM: We introduced this topic in 2016 and it was well received we were working then on the ease of doing business and the issue of the revolving fund was one of the issues on the table. The only thing we faulted on was the action.

KK: What is your outlook for the sector in 2019?

PM: We are looking for great things in 2019 despite the setbacks we might have had economically, from the outside world we are getting many accolades our Minister (Prisca Mupfumira) has been named Minister of the Year for Tourism in Africa and we received the Sustainable Tourism Destination in Africa award.

We have won other accolades as well where Zimbabwe is in the top ten must visit destinations so that should show you that there is interest out there so this should give us hope.

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