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Tourism Budget

Huge differences in tourism budgets across East Africa

Wolfgang H. Thome, eTN Africa  Jun 23, 2008

The tourism industry across Eastern Africa is undoubtedly a major, in some cases the biggest contributor towards foreign exchange earning, providing jobs and spreading income opportunities even to secondary and tertiary levels in the respective national economies. Yet, there is a marked difference in how governments across the region treat tourism within their annual budgets, a clear sign just how well some governments understand tourism and value it beyond the usual verbal avalanches, while others simply do not in spite of all efforts by the respective private sectors and tourism guru’s to change this.

Kenya, emerging from some rough patches after the post-election violence that wiped out the gains made in recent years, indeed put their money where their mouth is and allocated a nearly quadrupled budget to the tourism ministry for 2008-2009. This comes after already devoting a 1.5 billion Kenya shillings (approximately US$23 million) package to promote the country in core, emerging and new markets and return the sector to a steady growth path. A further 600 million Kenya shillings (US$9 million) were allocated for the next financial year to the Kenya Tourist Board to sustain the impact of its present marketing campaigns, a sum called inadequate by the Kenyan Tourism Minister Najib Balala, who demanded an annual minimum funding of 1 billion Kenya shillings (US$15 million) for the tourist board. Minister Balala made the remarks while addressing the Annual General Meeting of the Mombasa and Coast Tourist Association last week. At the same time, he asked the hotel sector to pull up their socks and renovate and upgrade their hotels to bring them in line with current international standards in competing destinations.

Also smiling in Kenya will be national airline Kenya Airways, which seems to have gotten the tax relief it was asking for, i.e. zero rating of Value Added Tax on its services instead of “exemption” as the airline can now claim it “input taxes” back from the Kenya Revenue Authority. This will boost the competitiveness of the airline on domestic and regional/international routes and add to their recovery program put in place at the height of the country’s post-election violence during the first quarter of this year. Licensing of tourism businesses will also benefit as the previous number of up to 25 licenses was reduced to only two, easing the administrative cost and saving resources for investments and marketing.

In Uganda, tax and duty exemptions for construction in the hospitality sector were extended by at least another year, which will help developers offset some of the cost increases caused by steadily rising energy cost, soaring prices of building steel and cement and other inputs like transportation. However, the duty and tax refund facility on diesel used for generators with a capacity above 100 kilo volt-ampere (kVA) will now be terminated, as government considers to have done enough to provide reliable electricity supplies through the introduction of thermal power plants. This will affect hotels to some extend whenever their power is off as they then have to pay for the full diesel price.

The airline industry was also exempted from income tax, while withholding tax on aircraft leases was also waived. The latter a point this correspondent in a different capacity had lobbied government for the past few years on behalf of the domestic aviation association, Uganda Association of Air Operators. It is, however, unlikely that this will translate in lower ticket prices any time soon, as more fuel surcharges on tickets are imminent.

Substantially, more money will be poured into road construction and rehabilitation, while funds to complete a new rail ferry presently under construction have also been set aside in the budget. What was sadly missing, though from the generally positive budget for the business and agricultural sectors, was the much hoped for sharp increase in funds allocation for the Uganda Tourist Board and neither did the Ministry of Tourism, Trade and Industry fare much better, as it remains one of the least facilitated government ministries for at least another year. The Ugandan 2008-2009 budget reduced donor reliance to about 30 percent, compared with well over 50 percent just a few years ago and is expected to be the last budget without oil revenues featuring in the government income column, as production of crude oil is expected to go underway sometime in 2009.

Huge differences in tourism budgets across East Africa

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