Wednesday, May 22, 2024

New tax on tourists will bring bigger cake to Botswana

A week ago The Telegraph, a UK newspaper, ran a story with the headline “One of Africa’s most expensive countries just got costlier: Botswana introduces $30 tourist tax.”

This story is of interest especially because the UK is one of Botswana’s key originating markets of international tourists that visit the country.

In 2013 the Department of Tourism found that 3 percent of arrivals at accommodation facilities were of tourists from the UK whereas those from the USA and Germany were 6 percent and 4 percent respectively.

Only those three international countries were specified under the tourist arrivals into Botswana. The others were SADC countries such as South Africa (14 percent), Zimbabwe (2 percent) and Zambia (1 percent).

To put the impact of the article into context information on the tourism value chain is used to demonstrate how a change in the perception of Botswana as a destination of choice to UK residents could affect the number of their arrivals.

The tourist tax was introduced according to Botswana Tourism Organisation (BTO) for the benefit of the local tourism sector to avail money for its growth, which by extension means also improving the livelihoods of Batswana.

Upon entry into Botswana at either border posts or airports tourists will pay this $30 tax which will remain valid for 30 days during which time it can be used for multiple entries.

Accepted payments are cash, debit and credit card. From the face of this new tax the rationale given for its introduction resonates with the widely accepted consensus that the contribution of tourism to the country’s economy needs to increase. At present the tourism sector makes up 3.9 percent of Botswana’s total economic output and given its social benefit to communities it goes without saying that creating additional revenue streams from it is a rational decision.

Although beneficial such a decision, on the other hand, comes at the backdrop of the widely reported unsettling revenue generation by the country from its tourism activities. The status quo is significant revenue leakages which Botswana is yet to reverse.

The money trickling path within the tourism sector is succinctly illustrated by the World Travel & Tourism Council in its 2017 Travel & Tourism Economic Impact report released last month and based on the picture an explanation could be derived regarding the millions of Pula that Botswana loses from its tourism activities. This explanation contributes to the existing concern that the country’s tourism sector is not tapping on the immense potential that it has to spur future growth and development post the diamond era. This concern emanates from the finding that out of the total money made from Botswana’s tourism sector she only keeps 10 percent of it with the remaining 90 percent never reaching the economy.

The illustration shows that travellers pay directly to airlines, hotels, travel agents, restaurants, shopping malls, convention centres, entertainment, rental cars and recreation to mention but a few.

These services are supplied by outside goods and services such as marketing and PR, cleaning and maintenance, energy providers, catering and food production, design and print. The reason the money does not reach Botswana’s economy is said to be because often holiday packages are sold through travel agents and operators based in the home country of the tourists which means that they keep a significant part of the tourist payment to direct services such airlines, hotels, internal flights and land transfers.

Tour operators combine the different direct services (transport, accommodation, food, recreation, entertainment) and sell as a single product to tourists through travel agencies.

A study by Dirk Willem Te Velde and Massimiliano Cal├¼ titled “Assessment of Botswana’s Services Sector” gives specific insight on the reason Botswana makes very little from her tourism sector.

“Most sales of tourism packages occur via several intermediaries, including tour operators and wholesalers overseas and in South Africa (which acts as sales hub for southern African

region). Therefore, a substantial share of value-added accruing to actors along the tourism value chain accrues to companies outside Botswana,” says the study. It explains that the use of South Africa as a hub is that it has a more efficient and reliable communications network compared to Botswana; greater availability of skilled personnel, especially as far as marketing and reservation competences are concerned and easier access to foreign tour operators given that most have a branch in Johannesburg.

The study further says that the revenue leakages owing to bookings and reservations done by companies outside Botswana are a corporate issue than they are a regulatory issue “in that companies in Botswana are able to capture a greater share of the value chain when they are sufficiently competitive and skilled.”

The new tourist tax is one way to increase revenue in Botswana’s tourism sector but there are other ways as indicated in the study particularly in view of the current revenue leakages.

For example, the study says that if bookings and reservations operations were to be set up in Botswana instead of making South Africa the hub sales would come directly here.


Read this week's paper