#1TOURISM COUNCIL OF ZAMBIA (TCZ) A PRESENTATION TO THE BUSINESS REGULATORY REVIEW AGENCY Fostering Increased Private Sector Consultation for Better Regulation in the Business Environment Southern Sun Ridgeway Hotel Thursday 2nd February, 2017#2This presentation: - Explains why tourism is important to any economy - Illustrate how Zambia matches up with its competing neighbours, namely Zimbabwe & Botswana - Outline the challenges tourism is facing in Zambia, almost all a consequence of poor regulation - Suggest solutions that can improve Zambia's performance and relevance in the tourism sector#3WHY IS TOURISM IMPORTANT, IN ZAMBIA OR ANYWHERE? Sector Impact Effect Transportation Production Entertainment Jobs Recreation Direct Visitor Spending Indirect Retail Induced Wages Food & Beverage Taxes Accommodations#4Tourism has also been proven to be the most important, if not the only, source of legal employment and economic activity in Zambia's most remote, impoverished areas - especially where there is attractive habitat and viable populations of wildlife. Surely a better option than illegal activities such as charcoal burning and poaching!#5The Local Economic Impact of South Luangwa National Park, Zambia In 2015, tourism to South Luangwa National Park generated $26,677,218 in direct spending, $14,990,000 in local added value, and $3,670,000 in personal income to local Zambians in the Mfuwe area Employment 1,097 jobs for local Zambians provided by lodges and souvenir shops 5,356 dependents supported as a result of these jobs 61.6% of local jobs are in tourism 12.2 jobs in tourism for every 100 households 376 additional jobs created as a result of local spending of wages Charitable Contributions $1,500,000 in tourism related contributions to local NGOs or directly to development work, supporting the education of thousands of students, providing access to water for hundreds of households, and creating 110 additional jobs Local Businesses Tourism enterprises purchased $955,000 in goods from local businesses of which $99,677 was paid to local producers. A further $1,779,000 in sales resulted from spending of wages. Overall, tourism was responsible for 57% of sales in the local business economy. gef GLOBAL ENVIRONMENT FACILITY A preliminary analysis of work undertaken for the Global Environment Facility in 2015 & 2016. Send questions to UF FLORIDA Alex Chidakel ([email protected]). Photo credit: Thiago Beraldo UNIVERSITY of#6Summary: HOW DOES ZAMBIA'S TOURISM MATCH UP WITH ITS NEIGHBOURS BOTSWANA & ZIMBABWE? COUNTRY ZAMBIA ZIMBABWE BOTSWANA PROTECTED AREA SQ KM 286,000 105,000 186,000 TOURISTS FOREIGN 800,000 2,000,000 2,600,000 FOREIGN REVENUES $280 MILLION $500 MILLION $1,5 BILLION JOBS 83,000 426,000 87,000 Source: http://www.wttc.org/#7HOW DOES ZAMBIA'S TOURISM MATCH UP WITH ITS NEIGHBOURS BOTSWANA & ZIMBABWE? The results upon analysis are disappointing – although Zimbabwe has less than half, and Botswana less than 2/3, of land area under protection compared to Zambia:#8HOW DOES ZAMBIA'S TOURISM MATCH UP WITH ITS NEIGHBOURS BOTSWANA & ZIMBABWE? The results upon analysis are disappointing – although Zimbabwe has less than half, and Botswana less than 2/3, of land area under protection compared to Zambia: - Zimbabwe with fewer natural resources and despite its dire economic/political challenges, has more than double the tourist numbers and tourist revenues compared to Zambia.#9HOW DOES ZAMBIA'S TOURISM MATCH UP WITH ITS NEIGHBOURS BOTSWANA & ZIMBABWE? The results upon analysis are disappointing – although Zimbabwe has less than half, and Botswana less than 2/3, of land area under protection compared to Zambia: - Zimbabwe with fewer natural resources and despite its dire economic/political challenges, has more than double the tourist numbers and tourist revenues compared to Zambia. - Botswana with even fewer natural resources & no Victoria Falls enjoys 5X the revenues and 3X the tourists compared to Zambia.#10HOW DOES ZAMBIA'S TOURISM MATCH UP WITH ITS NEIGHBOURS BOTSWANA & ZIMBABWE? The results upon analysis are disappointing – although Zimbabwe has less than half, and Botswana less than 2/3, of land area under protection compared to Zambia: - Zimbabwe with fewer natural resources and despite its dire economic/political challenges, has more than double the tourist numbers and tourist revenues compared to Zambia. - Botswana with even fewer natural resources & no Victoria Falls enjoys 5X the revenues and 3X the tourists compared to Zambia. Despite being one of the safest countries on earth to visit, despite being blessed by ample wildlife resources, the Victoria Falls, rivers, lakes, towns and friendly people it is evident that Zambia is not achieving its full tourism potential - but why?#11HOW DOES ZAMBIA'S TOURISM MATCH UP WITH ITS NEIGHBOURS BOTSWANA & ZIMBABWE? The results upon analysis are disappointing – although Zimbabwe has less than half, and Botswana less than 2/3, of land area under protection compared to Zambia: - Zimbabwe with fewer natural resources and despite its dire economic/political challenges, has more than double the tourist numbers and tourist revenues compared to Zambia. - Botswana with even fewer natural resources & no Victoria Falls enjoys 5X the revenues and 3X the tourists compared to Zambia. Despite being one of the safest countries on earth to visit, despite being blessed by ample wildlife resources, the Victoria Falls, rivers, lakes, towns and friendly people it is evident that Zambia is not achieving its full tourism potential but why? - WHY is it that Botswana is more expensive to visit than Zambia, has fewer resources and yet is 3x-5x more successful than Zambia in the tourism industry?#12HOW DOES ZAMBIA'S TOURISM MATCH UP WITH ITS NEIGHBOURS BOTSWANA & ZIMBABWE? The results upon analysis are disappointing – although Zimbabwe has less than half, and Botswana less than 2/3, of land area under protection compared to Zambia: - Zimbabwe with fewer natural resources and despite its dire economic/political challenges, has more than double the tourist numbers and tourist revenues compared to Zambia. - Botswana with even fewer natural resources & no Victoria Falls enjoys 5X the revenues and 3X the tourists compared to Zambia. Despite being one of the safest countries on earth to visit, despite being blessed by ample wildlife resources, the Victoria Falls, rivers, lakes, towns and friendly people it is evident that Zambia is not achieving its full tourism potential but why? - WHY is it that Botswana is more expensive to visit than Zambia, has fewer resources and yet is 3x-5x more successful than Zambia in the tourism industry? WHY is it that hotel occupancies in Zambia have fallen to 50% over the past 3 years, from an average of 70% for the preceding 20+ years?#13HOW DOES ZAMBIA'S TOURISM MATCH UP WITH ITS NEIGHBOURS BOTSWANA & ZIMBABWE? The results upon analysis are disappointing – although Zimbabwe has less than half, and Botswana less than 2/3, of land area under protection compared to Zambia: - Zimbabwe with fewer natural resources and despite its dire economic/political challenges, has more than double the tourist numbers and tourist revenues compared to Zambia. - Botswana with even fewer natural resources & no Victoria Falls enjoys 5X the revenues and 3X the tourists compared to Zambia. Despite being one of the safest countries on earth to visit, despite being blessed by ample wildlife resources, the Victoria Falls, rivers, lakes, towns and friendly people it is evident that Zambia is not achieving its full tourism potential but why? - WHY is it that Botswana is more expensive to visit than Zambia, has fewer resources and yet is 3x-5x more successful than Zambia in the tourism industry? WHY is it that hotel occupancies in Zambia have fallen to 50% over the past 3 years, from an average of 70% for the preceding 20+ years? WHY is it that major, successful safari tourism brands (Wilderness Safaris and Abercrombie & Kent / Sanctuary Lodges) that thrive in South Africa, Zimbabwe, Botswana, Namibia, Tanzania, Kenya, Uganda and Rwanda are struggling and divesting in Zambia?#14A survey was carried out across all sectors of the industry including aviation, hotels, rest houses, car hire, travel agency, safari hunting and game viewing lodges to identify the key challenges private sector is facing as hindrances to the industry.#15A survey was carried out across all sectors of the industry including aviation, hotels, rest houses, car hire, travel agency, safari hunting and game viewing lodges to identify the key challenges private sector is facing as hindrances to the industry. The bad news is that the challenges reported are all self inflicted ones.#16A survey was carried out across all sectors of the industry including aviation, hotels, rest houses, car hire, travel agency, safari hunting and game viewing lodges to identify the key challenges private sector is facing as hindrances to the industry. The bad news is that the challenges reported are all self inflicted ones. The good news is that these can be easily remedied by just stopping what we are doing wrong.#17GENERAL CHALLENGES FACING TOURISM IN ZAMBIA AND THE LOWER ZAMBEZI Poor marketing of Zambia as a tourist destination Underfunded, poorly strategized national marketing meaning few tourists know about Zambia and those that do mistakenly think Zambia is a rustic destination only for the adventure traveller. Consider that the annual national tourism marketing budgets of South Africa is US$150 million, Kenya $50 million, Botswana US$8 million, even Zimbabwe can afford $13 million - Zambia - less than $1 million! Furthermore although 80% of tourists cite video/film as crucial to their choice in a destination Zambia discourages the making of videos in its wildlife areas by charging high filming fees and requiring formal permission which is difficult and time consuming to obtain. Being featured on programs such as Animal Planet and National Geographic is priceless yet free advertising for the country's resources and whilst Zambia is asleep in this regard our competing countries are getting all the attention through maximizing use of this opportunity.#18TAXES R - - GENERAL CHALLENGES FACING TOURISM IN ZAMBIA AND THE LOWER ZAMBEZI High burden of taxation on the tourism industry Zambian tourism destinations are accused by Government of being too expensive but the high cost of doing business through taxes, red tape and investor-unfriendly legislation whilst private sector subsidises GRZ's obligations to community, infrastructure and wildlife, that renders Zambia non competitive with Zimbabwe and other neighbours are created by Government. Aside from the multitude in stealth taxes levied upon the industry via various authorities and councils. Tourism cannot provide the growth, employment and development whilst burdened like this: 16% VAT on all tourism products whereas in Zimbabwe 14.5% VAT is levied only on accommodation, food & beverage, making tourism activities in Zambia 16% more expensive than in Zimbabwe, and F/B/A 2% more expensive. 10% service charge mandatorily and arbitrarily (no other country imposes this) charged on accommodation, food and beverages making such services 10% more expensive than they should be. 1.5% tourism levy effective January 01 2017. This is for tourism marketing and training however there is already a new skills/training levy per 2017 budget so the tourism industry is being taxed twice for the same. - High customs/excise taxation on inputs plus VAT impinging on cash flow and discouraging investment and renewals on tourism enterprises. These all contribute to making Zambia a very expensive tourist destination. For example, a typical safari lodge in Zambia with $1 million annual tourism revenue receipts in 2017, an indicative 50.4% of its revenues are paid directly to GRZ. In other words for every US$ a tourist spends in Zambia more than 50% of this goes to GRZ before a tourism company can service a tourist! TAXES#19Gross Turnover 1,160,000 TAXES 2016 To Government 1,160,000 1,000,000 160,000 2017 To Government Net Turnover 1,000,000 160,000 VAT Cost of Sales 112,037 112,037 Payroll 374,630 59,576 PAYE 374,630 26,431 NAPSA 63,181 Increase top tier to 37.5% 26,431 Licencing 4,482 4,482 4,482 4,482 Diesel 26,480 26,845 Petrol 26,400 Marketing 61,692 2,913 No Reclaim VAT 80% of cost 21,592 WHT 27,128 365 No Reclaim VAT 10% of cost 3,641 No Reclaim VAT 100% of cost 61,692 21,592 Communications 9,330 Rent 24,000 1,287 No Reclaim VAT 100% of cost 2,400 WHT 9,330 1,287 24,000 2,400 Park Fees 168,189 168,189 168,189 168,189 Customs Duty 10,000 10,000 10,000 10,000 Vehicle Spares 18,130 21,031 2,901 Other Expenses 78,020 78,020 Toursim Levy N/A in 2016 15,000 15,000 NEW in 2017 Training Levy N/A in 2016 1,873 1,873 NEW in 2017 Taxable Profit 86,610 30,314 65,743 23,010 Total to Government % of Net Turnover 487,184 48.7% 504,352 50.4%#20masterfile masterfile.com/619-08588899 GENERAL CHALLENGES FACING TOURISM IN ZAMBIA AND THE LOWER ZAMBEZI High burden of bureaucracy on the tourism industry masterfile masterfile.com/619-08588899 Burdensome bureaucracy such as prescribed by the Zambia Tourism Agency for 2017. Many tourism enterprises require a minimum of 22 licenses, and some as many as 49 different licenses and permits from 7 different authorities although the document is vague and subject to (mis) interpretation. For 2017 Tourism Enterprises require the approval and signature of 7 different authorities, a physical and practical impracticality/impossibility. Furthermore new guest registers require copious and personal information from tourists, threatening them with imprisonment for mistakes and/or their refusal or their inability to provide the correct information regarding their visit to Zambia or refusing to comply.; In fact in terms of the new Hotel Act threatens proprietors with imprisonment 11 times, and tourists 3 times respectively, all very discouraging for tourist and investor alike. Further Car Rental vehicles require at least 4 license discs crowding the windscreen and creating a hazard.#21AND THE LOWER ZAMBEZI Poor protection and management of protected areas Poorly managed protected areas and poor planning means POACHING & ENCROACHMENT i.e. reduction of wildlife and degradation of habitat in game viewing and hunting areas plus conflicting visitor use, which discourages tourism and investment whilst degrading the resource. Over crowding the small prime game viewing areas whilst abandoning much of Zambia's protected areas, thus discouraging the high and mid- range tourists who require an unspoiled wilderness experience and who cite “wildlife viewing” as the prime reason for visiting Zambia, comprising 55% of the tourists generating 85% of wildlife tourism revenues (NB this figure does not include revenues for safari hunting which are so far unavailable) in South Luangwa NP; Allowing game viewing and safari hunting close to and even within the same areas as each other thus exposing Zambia to the "Cecil effect" i.e. the luring from NP's using baits and hunting of well known tourist-habituated lions which are worth many multiples of revenue and jobs alive than dead; Allowing encroachment and deforestation of protected areas; Allowing commercial fishing in tourism areas; eg the Lower Zambezi was Zambia's prime tourist area for sport fishing - there is no fishing ban, the river has been netted out and even the NP is over-fished - the stretch of water between Kariba dam and Luangwa Boma is Zambia's least protected stretch of river. Allowing mining in tourism and conservation areas; Opaque and inconsistent licensing practices at DNPW, and not allowing relevant communities to benefit meaningfully from tourism activity.#22GENERAL CHALLENGES FACING TOURISM IN ZAMBIA AND THE LOWER ZAMBEZI Lack of long haul air carriers into Zambia and lack of competition in the aviation sector Cost of air traveling to and within Zambia is prohibitive and the aviation regulator is discouraging investors through high costs, unnecessary fines, "safety" taxes and imposing vague legislation that is difficult to comply with. A much-needed direct flight between Lusaka and UK/Europe, and further there is a need to improve the domestic airline industry.#23GENERAL CHALLENGES FACING TOURISM IN ZAMBIA AND THE LOWER ZAMBEZI Litter and unbecoming behaviour. For instance when tourists are at the Victoria Falls bridge border crossing, on the Zambian side they see litter everywhere, dust and stones, trucks and loiterers. As they cross into Zimbabwe the change is immediately apparent - no litter or loiterers, green manicured lawns in public places where antelopes and warthogs wander freely, orderly shops where it seems the people of Victoria Falls in Zimbabwe seem to take pride and care in their city despite such dire economic circumstances, creating a visually very much more attractive environment for tourist and investor alike. There should be no reason why at least the tourist areas and border crossings can't be well maintained and well policed to be attractive to tourists and investors like Zambia's counterparts 500m away.#24GENERAL CHALLENGES FACING TOURISM IN ZAMBIA AND THE LOWER ZAMBEZI Lack of adequate vocational training for the tourism industry Lack of water on the Zambian bank of Zambia's prime tourist attraction, the Victoria Falls, during the dry season when water is diverted from the Falls to a power station. ZIMBABWE ZAMBIA#25SOLUTIONS: In order for the tourism industry to have a chance of developing and reaching its full potential whilst sustaining the resource LZTA is requesting of Government the following key interventions: Consult more meaningfully and in a more timely manner with private sector - meetings should be regular and private sector inputs should be reflected accordingly in decisions taken. This will ensure legislation is practical and relevant in order to enhance not inhibit the sector. This should result in a TOURISM MASTER PLAN that is acceptable to Government and Private Sector, that will guide policy, regulation and taxation for the betterment of the Nation. Currently the approach by Government to tourism is haphazard and uncoordinated resulting in underperformance of the sector. Increase the ZTA national tourism marketing budget dramatically but engage private sector to develop the marketing plan so the monies are spent effectively. This will ensure maximum benefit for minimum cost in order to attract more tourists and investment in the sector. Make tourists and investors feel welcome by facilitating entry formalities, reducing red tape and eliminating harassment and corruption by officials this too will attract more tourists and investment in the sector. - Reduce red tape and rationalize licensing in all relevant authorities including reverting to previous ZTA licensing and guest registers in order to create a more relevant and useful system; create the one-stop-licensing-shop where all current relevant information for investors new and old can be sourced easily and costs reduced. This will make the sector more efficient and transparent.#26SOLUTIONS: Articulate and make transparent the licensing procedures at DNPW for the establishing of hunting quotas and the issuance and/or amendment of tourism and hunting concession agreements. In fact make all legislation transparent, easy to access, easy to understand and easy to comply with; any new legislation should be timed sympathetically to minimize disruption - see ZTA, MOTA & DNPW. This would increase efficiency, reduce corruption and make investment in the sector more attractive. Reduce taxes on anything that increases the cost to the traveler or tourism business, especially for domestic travelers, and increase incentives for tourists to visit and investors to invest. This will attract more tourists and investment to the sector. These include VAT, service charge, Import & Excise taxes, Tourism Levy ... tourism should enjoy Non Traditional Export Status such as with Agriculture. Increase wildlife and habitat protection through strengthened budget, laws, status (obtain UNESCO World Heritage status for Lower Zambezi NP, North & South Luangwa, Busanga Plains, Kafue Flats, Bangweulu Swamps all of which are unique eco-systems worthy of such status) and enforcement, whereby the resource should be subsidized and protected by the users and not the other way around; and by ensuring CRB's are strengthened so that communities better participate in benefit sharing. This will enhance the resource through rehabilitation and sustained protection, whilst ensuring buy-in from local communities, which will attract more tourists and investment in the sector. Develop management plans for NP's and GMA's prioritizing the prime tourism and wildlife areas so that there is something for everyone but ensuring the high- end and mid-range tourist safari experience is protected and enhanced as it is this market that requires a more exclusive wildlife safari experience and that generates 85% (in South Luangwa) of all of wildlife tourism revenues likely to be a similar ratio in LZNP and KNP in Zambia's protected areas. This will enhance and rehabilitate the resource whilst rationalizing the visitor use of the resource, which in turn will attract more tourists and investment in the sector. -#27SOLUTIONS: Encourage and facilitate PPP's, Park Management Boards consisting of meaningful private sector representation, and concessions to reduce burden on Government, and Trusts/Boards in GMA's to ensure meaningful involvement of all parties through performance based agreements applicable to all parties. Use Botswana as a model to consider. Devolve DNPW into a regulator instead of a manager. This will reduce costs to GRZ but increase revenues through an improved resource and increased visitation by tourists. It will also attract increased investment from higher caliber investors. - Encourage and facilitate game farming through revised legislation as recommended such as legalizing & facilitating the sale of game meat - use Namibia as a successful model to consider and which cites its success as giving power and ownership to the people not the State. This will provide alternative employment in remote areas and a cheap, reliable source of protein for Zambia whilst preserving the wildlife resource through reduced poaching and increased wildlife populations. Encourage and facilitate fish farming to replace netting especially in areas where tourism and consumptive fishing conflict. This will provide alternative employment and source of protein whilst protecting the fish resource and improving the visitor experience for angling tourists. Liberalise aviation and do all necessary so that additional airlines will operate in Zambia, domestic and international including a non-stop service to UK/Europe. This will make travel to Zambia more convenient and more affordable, attracting more tourists and investment in the sector.#28SOLUTIONS: Revitalise vocational training for tourism and at the same time encourage skilled workers to work in Zambia by easing work permit and resident permit restrictions. This would ensure that tourism destinations are staffed by skilled employees, making for a more enjoyable tourist experience that would in turn attract more tourists and more investment in the sector. Make all legislation transparent, easy to access, easy to understand and easy to comply with; any new legislation to be timed sympathetically to minimize disruption - see ZTA, MOTA & DNPW. Change the ZESCO times at the Victoria Falls power station so that during the day, during the dry season, the Zambian side has water flowing over the falls - this would attract many tourists who visit the Zimbabwe side of the falls because the Zambian side is dry whilst the Zimbabwe side remains impressive. Reinstitute some law and order, pride and discipline with regards to litter, loitering, public drunkenness, drunk driving, dangerous driving and the like. Livingstone in particular should take steps to make its border crossing and any areas where tourists frequent more attractive and visitor friendly at least by discouraging litter and loitering but ideally countering all the above issues. This would make Zambia more attractive to tourists and investors in the sector.#29To conclude, Zambia has put itself at an obvious disadvantage in Tourism when: the Zambian side has diverted the water from the Falls to a power station leaving the Zambian side dry and the Zimbabwean side full during the peak tourist season the Zambian side is 30%+ more expensive to visit than the "better" Zimbabwean side due to high taxes and counter-productive bureaucracy This summarises Zambia's entire tourism industry whereby decades of poor planning, wrong decision-making and lack of Government investment in protecting wildlife and promoting tourism has resulted in a poorly performing tourism industry that is over- taxed and over-regulated with unhelpful laws and levies, making it more expensive than its competitors whilst its protected areas are being emptied of wildlife, its rivers/lakes/ dams being emptied of fish, its forests being emptied of trees, and even its prime tourist attraction - the Victoria Falls World Heritage Site - is being emptied, making Zambia much less attractive than its competitors. Zambia's neighboring countries (competitors) are profiting from this disaster because "tourists and investors vote with their feet and money". They can and do go to more attractive alternatives easily. The solutions however are simple and all lie in the hands of Government - corrective legislation and investment through MEANINGFUL private sector involvement in conformity to a TOURISM MASTER PLAN that should be acceptable to Government and Private Sector alike, and implementation of the same, is the only way forward now if the ongoing suppression of Zambia's tourism industry and destruction of Zambia's natural resources is to be reversed. ZIMBABWE ZAMBIA#30The preceding steps will reduce costs and incentivize both tourist and investor alike whilst sustaining and rehabilitating the natural resources which tourism requires; which in turn will increase tourism's contribution to GDP, employment and Government revenues. Post Script: This paper has been compiled in the national interest to facilitate improved performance of the tourism sector in Zambia through meaningful dialogue with Government. The information is by no means complete or exhaustive, and merely outlines priority areas for improvement where timely remedial action will ensure meaningful positive outcomes. It will remain a work in progress and will be updated periodically in order to at any time be as relevant, current and inclusive as possible. Thank you.