NEW TANAPA FEES CALLED ‘SUICIDAL‘ BY TANZANIA’S TOURISM INDUSTRY
(Posted 24th May 2017)
‘If TANAPA wants to commit suicide that is one thing but to murder the entire tourism industry at a go with them is just crazy, stupidly and irresponsibly crazy‘ let a regular tourism source from Arusha fly a few days ago when first passing the information of the planned tariff hikes by what can only be called wildlife managers gone bonkers.
Emotions are once again running high, similar to when the Tanzanian government slapped VAT on a range of tourism services, making safaris in particular vastly more expensive overnight.
Said a source close to TANAPA at the time on condition of strictest anonymity:
‘I can give you one example Daktari. Look at the tours into the Ngorongoro Crater. The numbers have become unsustainable to a point that we have to eliminate full day tours to make the extra space for tourists who want to do the tour. During the peak season we count four hundred or even five hundred 4×4’s going into the crater. You are an economist by principal profession so it cannot be new to you that when the demand exceeds carrying capacity it is only over the price that numbers can be regulated. So VAT serves this purpose in part and to another part can the treasury earn more money from the sector. Forget about our politician’s hymn sheets when they say we want so many or that many million tourists by a certain time in the future. Most of those added tourists they hope to attract to beach destinations on the mainland and on Zanzibar. But as far as the parks are concerned I am looking at overall carrying capacity and believe me, others should do the same. The Masai Mara during the peak season is completely overrun by tourists and you have those nightmare scenarios of 100 minibuses around a pride of lions or even more at the wildebeest crossing points. That cannot be sustainable. Therefore, please think again before you condemn us so sharply even when the private sector applauds you as their uncrowned champion. We have known each other for long and I beg your understanding‘.
This feedback, as it came late, was not posted as the controversy raged on but now is as good a time as any to make this view public and in the context of yet another rise of cost, this time directly by TANAPA through new concession fee demands which, made effective immediately, threaten to cut the proverbial throats of the lodges, safari camps and tourism operators at large.
The move reminds of the equally controversial rise in gorilla permit fees in Rwanda, which also overnight, in what many since described as a cloak and dagger action deep in the night over a weekend, clearly aimed to delay protests and perhaps even prevent people from rushing to court for an injunction. There, according to usually well informed sources, have sales of gorilla permits all but collapsed in comparison with a year or two years ago while in comparison in neighbouring Uganda have permit sales rocketed since Rwanda doubled their fees – notably including for Rwandan citizens who previously paid RWF 30.000 – to US Dollars 1.500. Ugandan operators pointedly posted a great many thank you messages to Rwanda at the time and are now promoting the daylight out of their main tourism attractions with other parks in tow of course.
Like Uganda’s tourism sector is celebrating their windfall will no doubt Kenya’s tourism sector do the same, should the Tanzanian action not be reversed on the double, though there, like in Rwanda, is the stubborn defense of the indefensible the order of the day. Kenyan hotel and safari operators are preparing for a marketing onslaught, using their price advantage as their major selling point to carve out additional market share for themselves at the expense of their East African neighbours.
So what exactly has been happening vis a vis concession fees in Tanzania?
Wrote HAT, the Hotel Association of Tanzania and sectoral apex body for the hotel industry, to their members yesterday:
Start quote:
Dear All,
As you may all be aware now – Government Notice 194 – herein attached was gazetted sometime earlier this month. HAT received notification of this Thursday night 18th May.
Since that time HAT and TCT held meetings in Dodoma . We met with the following:
1. The Minister of MNRT
2. PS of MNRT
3. Various TANAPA officials – unfortunately not the DG of TANAPA (letter sent and acknowledged receipt from him)
4. The chairperson of TTB
5. The Budget Committee
and argued along the arguments set in the memo attached.
We petitioned our case to the Budget Committee both on Sunday and Monday, prior to the reading of the MNRT budget to try and showcase to the government the negative impact the enforcement of this GN will have on the market that is still recovering from the introduction of VAT on tourism services, given without due notice, amongst other issues.
HAT has also written to TANAPA and a follow up letter will be sent to TANAPA tomorrow to insist on a formal notification for the GN 194 and the government stance on the matter to international operators along with an insistence that due notice be respected as is practice in the sector especially for confirmed bookings.
OUTLOOKS FROM DODOMA:
1. Many members of Parliament are misinformed about both the payment of Concession fees up to date and feel that private sector in tourism were evading to pay proper dues (this matter seems very political at present)
2. Though there seemed to be an inclination to consider extension, the result lays with them after consultations with us and the Ministry (which seems inclined to implement as of 1st July,2017. Further more, the matter seems to be out of TANAPA’s hands)
3. The issue of Standardised Licence Agreements is acknowledged, and TANAPA says (informally) it is be ready to engage and sign – the content in relation to terms and conditions are not specified with the exception of the fees that have been specified in GN 194
HAT’S REQUEST TO MEMBERS:
1. We welcome your view points on how you wish to approach the matter so we can form a consensus on HAT’s stance and how members want to proceed – please send in viewpoints by COB 25th May, 2017. Following which HAT will compile these comments into a common position to share with you.
2. If possible – to counteract the argument by government that tourism in Tanzania is not affected (especially since VAT did not affect Tanzania as a destination) – we request if you can give us your occupancy numbers from 2015 to present to highlight our argument.
HAT’s POSITION AT PRESENT:
1. The main arguments from HAT is that this once again affects the credibility of Destination Tanzania- due notice not given in consideration of how the industry operates
2. No proper consultation with stakeholders within the areas affected prior to decision making
3. The operation of concession fees up to date with no Standardised Licence Agreements.
4. HAT is continuing to engage with Parliamentarians on the matter, TANAPA and hopes to meet with Ministry of Finance this week
NB: At present, as we await the decision of TANAPA and the Budget Committee, however, it would seem that GN 194 will be implemented on 1ST July, 2017.
Looking forward to your comments, this may not affect all of us directly, but we are all working for the industry and destination Tanzania as a whole.
With Kind Regards,
HAT Secretariat
End quote
An even fuller understanding can be gained when looking at the Memorandum from HAT and TCT, as it explains in great detail over 6 pages the various stages how this intolerable situation evolved, how TANAPA broke their agreement with the private sector and how greed, combined with arrogance and ignorance how the sector works led to such outrageous concession fee demands.
Start quote:
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TANAPA Concession Fees
The Tourism Private Sector, represented by the Hotels Association of Tanzania (HAT) and the Tourism Confederation of Tanzania (TCT) through this memo would like to clarify on the issue of concession fees.
Concession fees are a fee/rent paid to TANAPA by any tourism organisation with buildings or permanent structures on National Park land in Tanzania. They are a fee paid per tourist/per night.
A. Tourism is a Global business that is very sensitive to price and stability. Tanzania has become an expensive destination for our hard won tourists and we are losing potential tourists to other destinations that are cheaper and have a more stable market and predictability.
B. The effective combined fees (entrance and concession fees) for a tourist to stay one day for example in the Serengeti now increases overnight by 20-50%. This is a very steep increase and it is very disruptive for the industry to have to deal with this only 2 months before the high season and effective date, with most safaris for the high season already
confirmed. Further, they are among the very highest in sub-saharan Africa, while no other conditions are met to justify this.
C. The gazetting of GN 194 is a shock to the industry as it once again:
i. Did not undergo the process of consultation with stakeholders to access impact both on the market and for businesses involved given the present business environment context.
ii. A unilateral increase of fees of this magnitude, without proper notice or legal investor documentation (eg Licence Agreement), is very negative for the trust of long-term investors – both current and potentially new ones- in the country.
The impact if GN 194 is enforced on 1st July, 2017:
From a business angle this creates immense challenges:
A. Rates and Safari Packages have been set using the existing concession fee rate (10% Half Board rate). Rates and Packages have been published in international brochures all over
the world and bookings have been taken on the basis of these published rates well into 2018.
B. Ideally many tourist and international operators book and pay for safari 6-12 months prior to their travel. Last minute changes in price that are affected by a change in taxes or fees result in a disturbance in an already sensitive market. It leads to chaos which is very detrimental to Tanzania’s credibility with overseas agents, which do not want to have these risks and therefore prefer to sell away from Tanzania, promoting our biggest competitors, Kenya and Botswana instead. The smaller local operators and agents that operate on such small margins and will be forced out of business. C. Disincentivizing the investment of permanent properties within the Parks.
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ANNEX 1:
WHAT ARE THE FACTS
Background Information on Concession Fees
The issue of concession fees and Standardised License Agreements goes as far back as January 2006 when TANAPA attempted to propose and implement fixed fees the first time. Starting 2009, the Industry and TANAPA have sat together and excellent work had been done to come to a good WIN-WIN solution that is both conducive to additional government revenues and to further industry growth. The work done included an in depth analysis by an outside consultant, a highly transparent PPD process that involved dozens of meetings (5 different ministers were party to these) to find the best solution for all. It culminated in a legally binding agreement for
permanent facilities inside National Parks including treatment of concession fees.
What is a Concession Fee (CF)?
All properties (Hotels, Lodges and Camps) that have permanent structures established in the National Parks under TANAPA jurisdiction are required to pay a Concession Fee to TANAPA. This is stipulated under the legislation establishing TANAPA.
In simple words, a Concession Fee is like a land rent (a consideration of payment for use of an area situated in the Park by an Owner of a Hotel, Lodge and Camp).
The 2002 legislation prescribed under item ‘M’ of 1st Schedule to the National Parks Act (supra) Government Notice No. 50/2002, provided for Concession Fees to be charged at a rate of 10% of Half Board.
In January 2006 TANAPA attempted to propose and implement fixed fees the first time and failed.
Following a series of meetings since 2006 between TANAPA Board of Trustees and attended by representatives from TANAPA, NCAA, HAT and TCT, an agreement was reached and signed
(between all parties) on Concession Fees rate of 10% of Half Board Net of VAT and started to be implemented in July 2009.
In July 2011, TANAPA tried again, deciding to renege from the “Agreement” by unilaterally informing the Tourism Private Sector of a unilateral decision to impose changes to the agreed Concession Fees formula and rate of July 2009, with effect 1st August 2011. This second attempt instigated the decision for Hotel Investors to take TANAPA to court.
Concession Fee Important History Dates
January 2006-2007: TANAPA attempted to propose and implement an illegal, arbitrary flat rate fee (fixed), per bed night sold. This was despite the Law stating 10% Half Board, signed contracts/lease agreements between TANAPA and Investors, and also TIC investment conditions.
June 2009: following a series of meetings between TANAPA Board of Trustees and attended by representatives from TANAPA, NCAA, HAT and TCT, an agreement was signed (between all parties).
July 2009: the Concession Fees rate of 10% of Half Board Net of VAT was implemented.
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October 2010: an agreement was signed between TANAPA and HAT covering the way forward on this and other matters (The Standardized License Agreement).
July 2011: regrettably, the matter resurfaced, when TANAPA reneged from the “Agreement” by unilaterally informing the Tourism Private Sector of a unilateral decision to impose changes and increases to the agreed Concession Fees formula and rates by between 200% and 1000% – an
astounding increase that the tourist industry strongly condemned as potentially damaging to tourism numbers, and thus the business environment and ultimately Government revenues.
These were meant to come into effect August 2011. TANAPA sought to apply a flat rate fee (fixed), per bed night sold as opposed to 10% of Half Board (variable). You may recall the newsworthy disorder it caused in 2011, when hundreds of tourists were stopped and inconvenienced at the Park gates for hours.
August 2011: Tourism Private Sector represented by TCT and HAT continued to be opposed to the arbitrary process to changes Concession Fees without adequate consultative process (including basis for change; timing of tourism seasons; adequate notice etc.). In August 10th 2011, Hotel Investors challenged TANAPA in court for the decision to change Concession Fees
from 10% Half Board rate to a flat rate per bed night sold as at the time it was contrary to the legislation (2002).
August 2011: An Injunction/Stop Order was sought by the Investors and granted by the High Court barring TANAPA from implementing their proposed rates pending ruling of the main case.
September 2014: the High Court, in its decision rendered, sustained the Investors contention that the new fixed rates were not legally in force since they had not been gazetted, the court also awarded costs to be paid by TANAPA’s Lawyers to the Investors. Despite winning, the Investors appealed because not all their requests were answered in the judgement specifically
TANAPA’s decision to ignore the legally binding agreement it signed with the Hotels/
Accommodation Facilities.
March 2015: New legislation was published “Government Notice No. 104 (The National Parks (Amendment) Regulations 2015” imposing arbitrary Fixed Rates of Concession Fees as of 1st July
2015.
May 2015: GN No. 104 is unceremoniously revoked and replaced by GN No. 206 published May 22nd 2015, changing the effective date of new Concession Fees to May 25th 2015 from July 1st 2015.
A. In 2011, TANAPA decided to arbitrarily increase concession fees by between 200% and 1000% – an astounding increase that the tourist industry strongly condemned as potentially damaging to tourism numbers, and thus the business environment and ultimately Government revenues. In the same year, the Hotels Association of Tanzania (HAT) took TANAPA to court over this increase in concession fees and decisively won the
case in a judgment delivered on September 12th 2014.
B. TANAPA lost the court case on the grounds that the new fixed fees were illegal and costs were awarded to HAT. Following this TANAPA and MNRT rushed through two Government Notice (GN)’s to legalise the imposition of fixed fees (Government Notice Nos. 104 and 206, The National Parks (Amendment) Regulations 2015). The notices however remained unsigned.
C. On 20th April, 2017, Government Notice 194 was signed and subsequently gazetted declaring that it would come into force 1st of July, 2017.
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1. ABOUT THE COURT CASE
Why did Hotel Investors file a Court Case?
TANAPA sought to apply a flat rate fee (fixed), per bed night sold as opposed to 10% of Half Board Net of VAT (variable).
This led to Hotel Investors to go to Court to challenge TANAPA in court for the decision to change Concession Fees from 10% Half Board rate to a flat rate per bed night sold as at the time it was contrary to the legislation (2002).
An Injunction/Stop Order was sought by 27 Hotels/Accommodation Facilities and was granted by the High Court barring TANAPA from implementing the proposed fixed fee rates pending ruling of the main case.
What was the Court Case about?
The court case being referred to was High Court Civil Case number 25/2011 which was filed by Hotel Investors on 10th August 2011 challenging the decision by TANAPA to impose fixed rates of Concession Fees. The decision by TANAPA to impose new fixed Concession Fees was
communicated to the Investors vide TANAPA’s letter with reference TNP/HQ/L.10/24 the rates were to take effect on the 1st August 2011.
The Investors were dissatisfied for many reasons, briefly amongst them were: the new rates were not valid for want of being gazetted. In the alternative investors had argued that they were not consulted prior to the imposition of the new rates of Concession Fees, they also contended in the alternative that the new fees breached a Standardised License Agreement
signed and adopted on 27th October 2010 by the Investors on the one side and TANAPA on the other side. The Investors also contended in the alternative that the new Concession Fees were discriminatory in nature, that they were uneconomical, unreasonable etc.
Who won the Court Case?
Aside from the Injunction/Stop Order, which was issued against TANAPA restricting them from implementing their proposed fees, and following three (3) years in court, on the 12th day of September 2014, the High Court in its decision rendered sustained the Investors contention that
the new fixed rates were not legally in force since they had not been gazetted, the court also awarded costs to be paid to the Investors. To be more explicit, the High Court judge ‘condemned’ the TANAPA legal officers to pay costs to the Hotel Investors.
Against this brief background it is wrong to suggest (as it appears in the media) that TANAPA had won the case. This is not the case. It is equally incorrect that TANAPA could have collected the new fixed rate immediately after the court case while such rates remained invalid.
Let it be noted that, while the court had made findings that the rates were not legally in force, all issues pertaining to whether the rates are discriminatory, uneconomical, reasonable etc. are still at large. The court had no occasion to render any decision on those issues either way. The
court had issued a ruling on only some parts of the Investors’ case.
To put the record in its proper perspective it is imperative to note here that, while the High Court had ruled on the suit only on the legality or otherwise of the new fixed rates, it left other contested matters such as the disregard of the legally binding Standardised License Agreements
which were signed between Hotels/Accommodation Facilities and TANAPA unresolved. Against this background the Investors processed an appeal immediately after (17th October 2014) against that part of the decision or lack thereof.
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2. LOSS OF GOVERNMENT REVENUE DUE TO DELAY TO GAZETTE
These figures are shocking and require further amplification because they bear no relation to reality.
The figure of TZS 80 Billion loss per year/TZS 1.5 Billion per month has yet to be explained and or substantiated by TANAPA and the Ministry. It certainly cannot be based on Concession Fees alone. There are approximately 50 permanent establishments situated inside the National Parks!
ARE HOTELIERS WITHIN NATIONAL PARKS REFUSING TO PAY AND/OR SHORT CHANGING
TANAPA IN CONCESSION FEES?
Hotels/Accommodation Facilities within National Parks have been paying Concession Fees based on 10% of Half Board since 2002 as prescribed under item ‘M’ of 1st Schedule to the National Parks Act (supra) Government Notice No. 50/2002).
Based on the records of the Hotels Association of Tanzania (HAT), who incidentally represents a majority of the permanent Accommodation Facilities situated within the National Parks in Tanzania, hoteliers have contributed a significant amount towards Concession Fees alone.
It is also prudent to mention that Concession Fees only comprise just a fraction of total annual payments to TANAPA, since in addition to Concession Fees, Hotels/Accommodation Facilities
pay: camping fees (seasonal/mobile camps); vehicle fees; tourist park entry fees; walking fees; driver/guide entry fees; aircraft landing fees etc.. Thus, for every tourist group that a Hotel Investor attracts to the park, TANAPA is not only paid the concession fee, but also an entry fee for every tourist and driver, guide, translator, etc. and an entry fee for every vehicle.
To date, records from Hotels/Accommodation Facilities show Concession Fee payments ranging between USD 10.06 and USD 28.62 per guest depending on the establishment.
In 2014, HAT members within TANAPA jurisdictions contributed a total of over TZS 4.5 Billion in Concession Fees alone (HAT member establishments only). Statements in the media such as “…a hotel room rate is between USD 100 to 150 and TANAPA was entitled to receive between USD 5 and 8 per room per person….. same hotel room had increased the rate from USD
100 to USD 600 and yet TANAPA continues to collect between USD 5 and
USD 8…”
This statement is grossly erroneous in several facets. The 2002 legislation provides for Concession Fees to be charged at a rate of 10% of Half Board Net of VAT. Thus, it means that any increase to cost of hotel rooms will directly impact and translate to an increase in Concession Fees revenue to TANAPA accordingly.
The reality and bottom line remains:
At a time, when tourism on the African continent is being negatively impacted by numerous serious challenges, some beyond our control, which have resulted in a decline in forward bookings for the next 12 months. The wanton destruction of Tanzania’s strategic natural resources (Poaching and Dynamite Fishing), weak Euro, the insecurity, Ebola, and the fragile
world economy to name a few, are all hurting tourism, but they remain beyond our control. The matter of concession fees and Standardised License Agreements are something the Government of Tanzania can control. It should be used as an opportunity to improve the prospects of the
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industry. In many African countries, governments are doing exactly that, for example by waiving visa fees. Tanzania would be much helped by taking a similar approach.
However, the reality is Tanzania Tourism is currently being unreasonably persecuted in the name of revenue collection. Instead of nurturing the industry to facilitate further growth of the Industry and in turn the nation’s economy, forces are adamant to “Kill the Goose that Lays the
Golden Egg”. Tourism is this nation’s number 1 Foreign Exchange Earner (Tanzania Tourism earned 1.95 billion US dollars in 2014, up from 1.88 billion US dollars in 2013). All the efforts and opportunities identified to “Double the Growth Rate of Tanzania Tourism” will remain to
be a “Pipe Dream”. There has been unfortunate statements being published in the media, such as”…why should the government consult stakeholders while when they increase the cost of room they do not consult those who use the services.” and “Do these government officials protect interests
of investors or the public?”. Such statements clearly depicts that one does not value the key and important relationships that exist between TANAPA and Investors (Hotels, Lodges and Camps) who have been welcomed and allowed to invest in TANAPA areas of jurisdiction.
The key relationships being undervalued are:
1. Business Relationship between TANAPA and Investors. The two are business partners and must consult on everything that will impact the investment model the two negotiated at the start of the business ventures.
Changes in fees is certainly one of the issues.
2. Symbiotic Relationship – TANAPA is the ‘Conservator’ and the Investor is the ‘Business Engine’ generating the required income for TANAPA. This interdependent relationship, as partners, requires the two to continuously consult in many aspects.
To undermine, belittle and ignore these relationship will only impact negatively on the partnerships and relationships to the detriment of conservation.
The bottom line and most likely result of the new GN and action by TANAPA and the Ministry is a LOSE-LOSE outcome for everyone – Government, TANAPA and Investors and the economy!
In conclusion, we the Tourism Private Sector continue to stress that moving forward, and to ‘move forward for the betterment of Tanzania Tourism’, it is imperative, that a consultative process is valued and adhered to so that TANAPA and Stakeholders can achieve a ‘WIN-WIN’ situation in the interest of Conservation and Tourism Business Models.
End quote
Like in Rwanda, this is sadly a manifestation of decisions arrived at in total isolation, leaving out the private sector which in fact drives the industry and without which wildlife based tourism would not be what it is today.
To make it worse, dismissing out of hand the need to hold consultations with them before arriving at such decisions speaks volumes about the mindset of those responsible in the public sector and reminds of the biblical saying that arrogance comes before the fall.
And I dare say, when that fall comes, it will no doubt be celebrated by those affected now by such fatally wrong decisions playing havoc with people’s livelihoods.
Quod erat demonstrandum!
