Interview: Nura-Lisa Karamagi, CEO, Hotels Association of Tanzania (HAT)
How do taxes on Tanzania’s tourism and hospitality sectors affect local businesses?
NURA-LISA KARAMAGI: The main burden has been the addition of a value-added tax (VAT) on tourism services. This has had a different impact on various players throughout the hotel industry, however. For those providing only accommodation, VAT was already charged. Rather, the impact has been felt by those providing all-inclusive packages on which VAT was not previously applied. This situation has now stabilised because, in the end, VAT is passed on to the consumer. What has been most burdening to Tanzania’s tourism sector is the continuous increase in different fees, levies and licensing costs from different authorities. The removal of exemptions from import duty – which remains a large cost for hotels in terms of uniforms, cutlery, crockery and equipment – has driven up costs and prices, contributing to making Tanzania an expensive destination.
What do you see as the greatest priority for infrastructure investment in Tanzania?
KARAMAGI: The biggest infrastructure challenge pertains to domestic transport. Transportation networks are very limited, causing them to be very expensive, and subsequently increasing the average cost of a safari package. Investments need to be made to develop better road networks, including those in protected areas. We need initiatives to broaden modes of transportation. This would include the establishment of a reliable rail network, along with better incentives and tax relief for aviation companies. The government is trying to do this with road improvements, which will hopefully open up Tanzania’s tourism to other areas; however, a lot more investment is required to link transportation networks. Additionally, if there is a conducive business environment, proper planning and prioritisation in key areas like transport systems, power supply, innovative IT usage, and the development of a skilled and qualified workforce will improve overall quality and standards.
How can private sector operators play a role in boosting local and regional tourist numbers?
KARAMAGI: Private stakeholders, as members of different tourist associations, try to offer different rates for citizens, residents and regional tourists in order to attract them to the market. Furthermore, they collaborate with the government and other private sector players on various programmes and initiatives, creating awareness of tourism and conservation-related issues. Private players also benefit from cooperation with the public sector to help boost domestic and regional tourism across a range of different segments.
Business visas are currently seen as being uncompetitive compared to other African countries; Tanzania loses out to other regional markets in regards to conferencing and business tourism facilities. The fee differentiation pertains only to park entrance costs, and not to any other per-visitor fees that must be paid by a facility. This can create a challenge, especially in creating attractive packages for the domestic market. The main role of HAT and other associations is to continue to engage with the government, as well as to work with the private sector to make Tanzania an affordable destination for all types of travellers and markets.
What can be done to improve the investment attractiveness of the tourism sector?
KARAMAGI: There is a great need for quality budget and mid-level budget accommodation facilities in Tanzania. However, the hotel industry is rather expensive due to differing compliance structures, making the investment case for such types of facilities unattractive. There are several taxes, levies and fees in the tourism sector that, if removed, would relieve investors and operators of a large burden, and ultimately result in greater flows of investment. The most important component for the sector, however, is improving public-private dialogue, and ensuring that previously agreed changes and developments are implemented.