Thursday, October 22, 2020

Minister misleads parliament on tourism leakages

When he had to tackle a question in parliament recently about how the Botswana government benefits from hotel reservations made outside the country, the Minister of Lands and Housing, Prince Maele (who was standing in for his colleague at the Ministry of Environment, Wildlife and Tourism) provided information that will be contested by another Motswana in another part of Africa.

“In instances where a holiday is booked through foreign operators or agents, about 30 to 40 per cent of revenue remains in the source countries as fees for wholesalers/tour operators/travel agents/travel insurance and long haul flights, whereas the remaining 60 to 70 per cent of revenue is remitted to this country, in this case Botswana. This loss of revenue is referred to as structural leakage due to the very nature of the tourism sector itself,” Maele said in response to a question by Okavango MP, Bagalatia Arone.

However, according to the African Natural Resources Centre, the figure is much higher than that. In a report it has published, the Centre, whose current director is Sheila Khama, the former Chief Executive Officer of De Beers Botswana, says that leakages of foreign revenues from tourism amount to over 70 percent. That confirms the findings of a Botswana Institute of Development Policy Analysis (BIDPA) study on tourism leakages. BIDPA said that while foreign earnings from tourism were “substantial”, the leakages were also very high.

Khama supervised the editorial team that put the report together and the former CEO of the Botswana Tourism Organisation, Myra Sekgororoane, was one of the three peer reviewers. A non-lending entity of the African Development Bank (AfDB), the ANRC was established in November 2013 to bring additional expertise and services to the Bank and its regional member countries – like Botswana.

According to Maele, these leakages occur because Botswana’s tourism industry is not fully developed to capture all the revenue in the value chain.

“Therefore, purchases are generally made through intermediaries in the tourist’s country of origin, hence the leakage,” he said.

The ANRC says nothing about Botswana’s tourism industry not being fully developed; instead, it says it is foreign-dominated. It refers to a collaborative research work paper that was conducted by AfDB, the OECD Development Centre and UNDP which indicates that the leakages occur partly because the bulk of Botswana’s tourist bookings are handled in South Africa.

“At the same time, Botswana’s tourism sector supply chain is foreign-dominated, which is said to be contributing to the loss of revenue,” says the ANRC report which is titled “Maximising Benefits from Water for Tourism in Africa”.

The “foreign-dominated” aspect doesn’t come out clearly in the minister’s response because he sought to portray the leakages problem as being pervasive and not peculiar to Botswana.

“When you go to Cape Town right now using South African Airways, South African Airways is based in South Africa but you are going to pay in Botswana. There is revenue which will remain Botswana and that which will go to South Africa,” said Maele who later added in response to a supplementary question: “It is a trend of tourism internationally, and it is very difficult to avoid. There are these leakages everywhere that are called economic and structural leakages of the tourism sector.”

The difference though is that in other countries (like Cape Town, South Africa in his example), the tourism sector is not dominated by foreigners and the leakages are not as high as those in Botswana.

In order to ensure that operators in Botswana remit and declare revenue, Maele said that the Ministry of Environment, Wildlife and Tourism is “working on a comprehensive study on leakages to advise government on how to derive maximum benefit from the tourism industry.” On the other hand, the ANRC proposes that the problem can be solved by giving citizens a larger stake in the industry.

“The issue of leakage can be addressed over time by empowering more locally-owned businesses to operate, including the development of Botswana’s tour operators and booking agents. Fiscal measures can also be taken to encourage re-investment rather than repatriation of profits,” the Centre says.

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