Faltering tourism sector knocks point 8 percent off growth forecasts in Kenya

KENYA GOVERNMENT FINALLY ADMITS THAT TOURISM DOWNTURN IMPACTS ON GROWTH

(Posted 14th September 2014)

When Kenya’s Treasury Secretary earlier this week revised the country’s growth forecasts from 5.8 percent to 5 percent for 2014, it was for the first time that a senior government official actually owned up and acknowledged that the faltering tourism industry did after all have a significant effect on Kenya’s economy.

The downturn was already in progress when this government came into office, inherited from the previous administration which had ignored all the writings on the wall and had neglected to allocate sufficient funds to the tourism board to begin a hard sell campaign in key tourist source countries. This was needed at a time when pre-election jitters spread across the markets and the impact of the Lamu incidents made heavy waves. But funds were not forthcoming as the then tourism minister fought personal and in the end losing battles with the KTB chief instead of fighting for his sector in cabinet for more funding.

The downturn in arrivals, as a result of foreign tour operators showing caution over potential election violence, was already manifest when the new government’s first budget then introduced tax measures on tourism services which proved utterly detrimental to the industry, adding a 16 percent VAT charge on a range of components which, at a time when the markets had turned soft already made visits to Kenya substantially more expensive and driving tourists in their thousands to opt for holidays in neighbouring Tanzania or Uganda instead where similar tax measures were rescinded when their negative side effects was explained to parliament by tourism trade associations.

Not in Kenya though where a spirited campaign by leading stakeholders met with icy silence and even when finally a few months ago the state of the industry could no longer be ignored and counter measures were announced, the removal of VAT was not one of them.

It goes to demonstrate what many stakeholders had expressed here in the past that you ignore their advice at your peril and dozens of comments were streaming in since Henry Rotich made his remarks, most saying in unison ‘We told you so a year ago but you did not listen’. One other regular contributor added ‘The private sector proposed a recovery package and that only in part found its way into executive decisions. Some of the announcement made by the President were helpful but a lot more has to be done. That costs money. It is not enough to promise 200 million or 900 million when that is all there is, a promise. The money has to go to KTB when it is needed, not many months afterwards. VAT has to be removed from tourism services. The institutional set up has to be reviewed too and I stand by what I said last year and this year repeatedly, we need a strong tourism authority where all those stand-alone parastatals must come under one roof. If government wants to save money, that is the way forward, not merging KTB and submerging it in the process. Making announcements based on spite for Europe and America that the country will get more tourists from China was also not helping our cause. For one, it will take years before new and emerging markets will make up for the loss of numbers. It is good to see that there was a change of heart and that our existing core markets are getting attention after all. At the same time, the coast needs special attention. It is true that as a destination we must diversify but there is no doubt that the largest number of tourists has always gone to the coast in the past. Now hotels are closed and those still open struggle to survive. For the coast security is a key issue and we had a couple of bad patches over the past few months. Government has to visibly upgrade the number of police patrols, strengthen the tourism police and put boots on the ground. That is both a deterrent and a sign for tour operators that security is receiving attention and then, and only then, can we reasonably expect to have these damned travel advisories revised’.

With the admission by the Treasury Secretary that the downturn in tourism fortunes is a major cause for the slower than expected economic growth and poorer than projected performance, it is perhaps time to take stock, again, and then implement those recommendations by the tourism recovery committee which have been put forward but until now ignored. After all, Kenya as a destination still got what it takes and it only needs that extra bit of executive attention to stop the rot and make sure recovery is starting to take root.

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