An expansion in air connections, including low-cost routes, is expected to help sustain Tanzania’s growth in visitor numbers and strengthen its tourism sector.
Last month the UAE-based low-cost carrier flydubai announced that from late October it will launch six flights per week between the UAE and Kilimanjaro, the site of Africa’s tallest peak. The airline already operates services to Dar es Salaam and Zanzibar, and has plans to increase the number of direct flights to the latter from three per week to eight.
“With the addition of the service to Kilimanjaro and more direct flights to Zanzibar, flydubai will operate 14 flights a week, marking a 133% increase in capacity to the market compared to the previous year,” Ghaith Al Ghaith, CEO of flydubai, told media in June.
Long-haul capacity increased
Another move to expand passenger capacity was undertaken by the government in December of last year, when it made purchase agreements worth $200m with Canadian plane manufacturer Bombardier for a Q400 turboprop aircraft and two CS300 jetliners.
That same month the state also made a $10m down payment on an order for a Boeing 787-8 Dreamliner. With 262 seats, the plane will serve long-haul passengers and is expected to be ready to enter service by June of next year.
National flag carrier Air Tanzania will lease and operate the new aircraft, with the government allocating TSh500m ($223,500) to the company under its FY 2017/18 budget to help complete payments for the two Bombardier CS300s and the Boeing Dreamliner.
Air Tanzania saw its passenger numbers rise by 46% year-on-year to 47,510 between July 2016 and March of this year, according to figures from the Ministry of Works, Transport and Communications, with the addition of two, 76-seater Q400 planes to its fleet last September helping facilitate these gains.
Further growth potential
These recent developments come on the back of solid growth in both arrivals and revenue last year. Tanzania welcomed 1.28m tourists in 2016, an increase of 12.9%, according to the Ministry of Natural Resources and Tourism (MNRT), with sector revenues rising by 5% to $2bn. This put tourism’s contribution to GDP at 17.5%.
These numbers are expected to increase further over the coming decade, with the most recent report on Tanzania from the World Travel & Tourism Council (WTTC) forecasting nearly 7% per annum growth in visitor exports through to 2027 to reach TSh10trn ($4.8bn).
The WTTC also projects the sector’s direct contribution to GDP will rise from $2.1bn last year to $4.1bn by 2027, while its direct contribution to employment is expected to increase by 56% to around 732,000 jobs.
To help meet this projected growth and increase the sector’s regional competitiveness, the government is working to push through a number of infrastructure projects, including a new apron at terminal two of Zanzibar’s Abeid Amani Karume International Airport.
A Chinese delegation is scheduled to visit the site next month to conduct studies for the project, 50% of which will be funded by a loan from the Export-Import Bank of China. The planned apron area will allow the airport to handle larger aircraft, and therefore more passengers and cargo.
Zanzibar, which boasts a range of attractions – from the historic Stone Town to white sand beaches – hopes to attract 500,000 visitors a year by 2020, a roughly three-fold increase in a decade.
Evolving policy frameworks
To help fund ongoing improvements to infrastructure across the country, in July last year the government removed a value-added tax (VAT) exemption for tourism services, which are now subject to 18% VAT.
The new levy helped increase tax revenues from 12.6% of GDP in FY 2015/16 to an estimated 13.3% in FY 2016/17, with expectations of a further rise to 14.2% laid out in the latest budget statement.
However, some observers have suggested that VAT could weigh on revenue for tourism services providers and hotels this year. For example, in a report released at the end of June, consultancy PwC forecast that hotel room revenue would drop by 3.5% this year to $216m, though it ultimately expects improvements to infrastructure and air connectivity to push up income in the medium term.
This Tanzania economic update was produced by Oxford Business Group in partnership with TIC and TPSF.