LATEST CENTRAL BANK OF KENYA REPORT A DAMNING INDICTMENT OF FAILING GOVERNMENT POLICIES ON TOURISM
(Posted 09th May 2014)
The latest credit survey by the Central Bank of Kenya names transport, tourism and hospitality businesses as an upcoming high risk sector with looming defaults on loans and rising foreclosures in coming months.
Non-performing loans are already on the rise, according to the study revealed earlier in the week in Nairobi, exposing the soft underbelly of Kenya’s economy and the sharp contradictions between the government’s sunshine speeches and the reality on the ground. The report also details that credit lines by commercial banks, as a result of the downturn in fortunes of what was once Kenya’s best performing sector of the economy, have already been reduced and overdrafts curtailed as tourism continues to decline during the ongoing low season, which is likely to become the litmus test of who will and who will not survive the current crisis.
Imposition of VAT on tourism services is among the key factors cited, a damning indictment of the government’s policies on tourism which are the complete opposite of what has been promised in pre-election campaign assurances and of course a confirmation of what tourism stakeholders have warned government last year would happen if VAT would be imposed on tourism services.
Aviation pundits now fear that the latest tax imposition on airlines for new aircraft and aircraft spares will in months to come have similar consequences and have urged the Kenyan government to most urgently review their taxation policies of the sector – something the tourism and hospitality businesses did too but got no favours but instead verbal broadsides of what the private sector has been doing to improve their situation.
The business community also expressed concern over the rising interest levels, caused to some part by added government borrowing on the open market, which now makes loans and overdrafts even more expensive, further eroding profitability of hotels, resorts, safari and air operations.
Early indication is that the powers that be are not entirely happy with the fact that the Central Bank of Kenya in such a candid fashion exposed the challenges of the tourism industry as one of the few government institutions not playing ostrich and sticking the head in to the sand.
Watch this space for breaking and regular news about the tourism industry across Eastern Africa.
