Zim plans tourism satellite account

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TOURISM minister Mangaliso Ndlovu says Zimbabwe will soon be utilising a tourism satellite account
system to capture all income contributions in the sector.

This comes as there are fears that some players in the hospitality industry are illegally transferring their
earnings into offshore accounts, thereby depriving the government taxes necessary for economic
development.

Zimbabwe earns an average of US$1 billion in tourism receipts per year, about 10 percent of gross
domestic product, but Ndlovu believes that this figure is “grossly understated”.

“This emanate mostly on our failure to implement the tourism satellite account, which would correctly
capture all the tourism receipts. For instance visa fees are not recorded, revenues from the hunting and
fishing subsectors are recorded as coming from agriculture – for some weird reason – but we are
working on perfecting this to ensure that we know how much tourism is contributing to the economy,”
he said last Friday during an online discussion forum organised by the Global Renaissance Investment.

The tourism industry, which has been hard hit by the coronavirus pandemic, is expected to earn US$7
billion by 2030, but experts say the country may not achieve this target unless the government plugs
holes of illicit financial flows and makes its political and economic systems work in terms of deploying
functional state institutions to enhance taxation.

For instance, Kenya earned over US$1,5 billion in 2018 following the arrival of 2,020 million tourists,
while Tanzania’s tourism receipts reached US$2,4 billion from 1,49 million tourists who visited the east

African country. These figures compare unfavourably with Zimbabwe’s US$1 billion earnings from 2,6
million visitors in the period under review.

“Most companies in the hospitality and safari sectors usually instruct foreign tourists to make payments
into their offshore accounts on the pretext of wanting to use the money on capital expenditure, but
some of the money rarely makes its way into Zimbabwe. The country only gets a portion of the money
when tourists spend some of their finances here,” said a person familiar with operations in the sector.

Economic analyst Francis Mukora said the sophisticated and rampant trade misinvoicing, which is a
major aspect of illicit financial flows, in the tourism industry was a bottleneck on Zimbabwe’s growth
and opportunities.

“The practice is not only denying the government billions of dollars in foreign exchange and taxes
revenue each year, but it also weakens political and economic institutions that are key to state building
because misinvoicing make it harder for concerned state institutions to collect taxes and levies,” he told The Daily News.

Mukora said research has shown that international tourists spend an average of US$1 250 for the stay in
Zimbabwe compared to US$310 spent in regional countries.
“Judging by these figures alone, Zimbabwe could have earned more than US$3,2 billion in foreign
currency, which is way above the US$1 billion declared by tourism players,” he added.

Operators in the tourism industry are treated by the government as exporters have 90 days in which to
transfer to Zimbabwe earnings from abroad, but it is hard for the authorities to establish when the
receipts are understated.

The Zimbabwe Economic Policy and Research Unit (Zeparu) recently indicated that despite the
government recognising the potential that the sector possesses, the country's tourism industry
continues to suffer from growth-inhibiting challenges, thus undermining its overall contribution to
growth, export earning, employment creation and poverty reducing programmes.

“Some of the challenges currently affecting the growth of tourism in the country are; skills flight, poor
state of the roads, poor tourism infrastructure, water and electricity shortages, few direct flights to and
from source markets, and high utility charges which increase the cost of doing business in Zimbabwe
thus making the destination less competitive,” the local think-tank said in a research note.

Furthermore, both air and ground transport network remain compromised. The country’s the road
network is in a dilapidated state while major airlines are shunning the route to Zimbabwe. Over the
years the country suffered the withdrawal of major airlines citing viability concerns.

Zeparu noted that to address the above challenges as well as leakages in the sector, government should
introduce a tourism satellite accounting system for effective tracking and efficient accounting of the
contribution of tourism to growth.

“Stakeholders in the industry are passionate about the need to accurately capture tourism inflows into
the economy, thereby curbing leakages, through the operationalization of a tourism satellite accounting
framework,” the research unit added.

Finance minister Mthuli Ncube said government was concerned about low taxes being collected from
the sector, which has a potential to boost the country’s ailing economy.

“We keep hearing about the issue of money being illegally kept out of the country, and government –
through the central bank – is working on measures to ensure that all those engaged in illicit transfers are
made to bring the money back into the country,” he said in an interview.

In his 2020 national budget, Ncube said Zimbabwe was putting in motion programs meant to steer the
country towards the adoption of a tourism satellite account as a way of bringing transparency into the
hospitality industry.

“The tourism satellite account is important as it will help the country to accurately account for the
economic benefits of tourism to guide policy makers on the real economic value of tourism to the
national economy,” he said.

“The country has completed the critical surveys required to complete the tourism satellite account and a
roadmap has been produced in consultation with Zimstat, and funding is being availed,” he added.

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