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Demand Fuel Tax Relief

Tanzania hotel operators decry over escalating power crisis

Apolinari Tairo, eTN  Jul 29, 2011

DAR ES SALAAM, Tanzania (eTN) - Due to escalating power crisis in Tanzania, hotel and hospitality industry stakeholders are looking for a fuel tax relief of at least 20 percent to relieve them from extra fuel costs incurred as a result of devastating effects of poor electricity supply.

Members of the Hotel Association of Tanzania (HAT), an umbrella organization that oversees 80 leading and key hotels in Tanzania, said they were incurring extra costs for fuel to run activities that need power.

Damas Mfugale, Chairman of HAT, said their long-term goals have been thrown into disarray by the power crisis.

The hotel industry, just like the rest of the production sector, has been hurt in one way or the other by the power crisis, he said, pointing out how the industry has been hit hard.

Mfugale said that power shedding was a safety risk, especially at night, adding that in case of fire systems failure, it would be a disaster in the making, adding that hotel operators as well, want the Tanzania Electric Supply Company to come up with a reliable power-rationing schedule to allow them to carry out hotel services smoothly.

“We are sure that the Tanzanian government is doing all it can to reverse the situation, but in the meantime, we plead with it to consider our request,” said Mfugale.

He said power shedding was damaging the image of tourism in Tanzania. “Visitors don’t appreciate traffic lights not working, elevator breakdowns, and no lights at hotel rooms. Sometimes visitors can’t even have their laundry done! And remember it takes years to rebuild a damaged image,” he said.

Mfugale, who is also a leading hotelier in Tanzania's capital of Dar es Salaam, said the power crisis was hurting subsidiary operations like laundry and dry-cleaning services, as well as putting workers through tremendous problems, with no power at home or work.

Mfugale said: “It has also increased the cost of operation for all: generators making overtime; power bills still the same, even with less power supplied! Available studies indicate that the administrative costs of doing business for the Tanzanian tourism sector including [the] hotel industry exceeds US$1 million per year. The power crisis is likely to double or triple this cost."

He said HAT was pleading with the policymakers as to what has to be done without delay to rescue the situation.

Mfugale continued: “We are pleading with the government of Tanzania to consider the following two requests, which can go a long way to mitigate the crisis for the hotel industry.

"First, the power utility company should come up with a power rationing schedule that allows generators time to rest with power cuts of a maximum 6 hours and a schedule that is reliable, so that companies can plan properly for maintenance, etc. to reduce the risk of a major catastrophe happening.

"Secondly, the government should consider a tax relief on fuel of at least 20 percent so that the extra costs that are currently being made can be reclaimed, even if it is for a limited period until the power crisis is over."

He also disclosed that due to the power crisis, many hotels expect to register huge losses this year, which does not auger well with the economic prospects for the country. “Tax authorities, must be well aware of this fact from the word go,” he said.

If the crisis continues, it might even force some investors out of Tanzania's tourist and hospitality sector. In fact, Tanzanian government should be aware that the longer the crisis continues, the more it will hurt the tourism industry and hotels in particular, he said.

Tanzania is a great country, with huge potential for tourism and the hotel industry. For it to grow, there is need to check the costs of doing business, which at the moment is impeding the sector’s growth.

The hotel industry is tourism’s biggest employer, with contributions to the national Gross Domestic Product lumped together with tourism standing at over 17 percent per annum.

At the same time, hotels and tourism industries rank as the second highest foreign exchange earner after agriculture in this East African nation. To say the least, this is an industry that needs to be nurtured at all costs, considering Tanzania’s natural gifts of nature in attracting tourists.

Some hotels have incurred extra operational costs of between US$1,000 to US$18,000 a day since the power shedding started. There have also been complaints that the power company continues to send bills in much the same way as it did when it supplied less power.

Movenpick Royal Palm Hotel, Tanzania's biggest and leading hotel, spends about US$6,000 a day on fuel to generate enough electricity for the hotel. It now spends over US$15,000 a day on fuel and maintenance of power generators.

“We need power to run air conditioners, elevators, laundries, dry cleaners, and other utilities,” one hotel official said.

Power shedding is also damaging the image of Tanzania’s tourism, and it may take a long time to rebuild it, said another hotel manager. It has been observed that in a 5-year plan ending 2011, the Tanzanian government projects the growth of hotels and restaurants by 7.7 percent and 9.9 percent in 2015, but this dream proved futile with only 5.9 percent growth.

Mfugale said the power crisis had raised the cost of doing business and was likely to affect long-term plans for the sector’s growth. “If the crisis continues,” he warned, “some investors might even be forced out.”

Tanzania hotel operators decry over escalating power crisis
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