Incentives are imperative for hospitality industry

By Francis Ngwenya

INCENTIVES for the hospitality industry will mean affordable holidays for locals and creation of more jobs in the industry.



sans-serif”>Why should incentives be given to the hospitality industry? And what will be the effect on the economy and Zimbabwe as a whole?


If you ask most hotel and catering managers in Zimbabwe, they will run out of good reasons as to why incentives must be given to the hospitality industry. The tourism industry is small in Zimbabwe and in the region, we need to look at all the cost structures that affect the final prices of the services and goods produced in the hospitality industry, with particular emphasis on hotels and restaurants.


An industry that is still in its early stages of development and is growing, needs assistance by way of incentives which can take the form of tax holdings for new developments, import duty concessions for goods, training and development grants for job creation and skills enhancement.


Despite the fact that the tourism industry, in particular the hospitality sector in Zimbabwe has finally been granted export status, the benefits that go with this status are yet to be seen by the industry.


The hotel industry has an above average initial capital outlay requirement and most of the operations inputs have to be imported. This applies especially to establishments catering for the international market since the international traveller expects to get all their needs catered for, to the same high quality standard at all times.


To date, the industry is yet to enjoy some of the concessions promised and this is having an adverse effect on the ability of the industry to reduce costs so that local tourism can be increased and consequently create more jobs. I am a firm believer in promoting Zimbabwean products not just because of the current environment but because of the positions we need to take as Zimbabweans.


Why can’t Zimbabweans enjoy the delights of travel and tourism offered by the hospitality industry here in Zimbabwe?


Maybe it is because of the cost structure, where a customer indirectly pays 140% duty in foreign currency at the customs rate of exchange for the glass in which their beverage is served (our only glassware manufacturing company closed), and 140% duty on the new television set in their room, world trends now require hotels to have special televisions that can only be used in the hotel with internet and interactive facilities which are a luxury.

Similarly, the customer is paying for the simple cutlery at the dining table which should be of an acceptable standard – 18/10 stainless steel at least, so that the fork does not bend in one’s hands at the table nor the spoon cut your tongue as you sip your soup; which is common with some cheap products from the Far East. The key inputs in the industry, which continue to be classified as luxury goods attract maximum duties and one wonders when we will get everybody to accept that certain items which are classified as domestic utensils and luxury for the hotel industry, are basics.

Hotels must have them in order to meet minimum customer expectations.

It is only fair that the Arts get these concessions and removal of duties for equipment and instruments. With this in place, I am sure that the efforts of the industry will be enjoyed by all.


The Zimbabwe Electricity Supply Authority (Zesa) which benefits from the 50% foreign currency allocation to government for importing power has not made efforts to spare the industry despite pleas by the Hospitality Association of Zimbabwe and the Zimbabwe Council of Tourism for them to give the industry some concessions. Zesa has targeted some hotel establishments and sent them electricity bills using a US dollar tariff system with premium rates that hinder the cost management efforts being carried out by the industry.


The effects of these costs, which are beyond the hotel manager’s control, have seen job reduction of up to 41% in major hotel groups since 1999 and this figure could increase if benefits and assistance are not forthcoming.


The Zimbabwean tourism product is perceived to be expensive and in some cases it is not feasible to reduce prices to similar levels as others in the region, the Far East or even Europe in the low season. Estimates are that if the expenses of the Zimbabwean tourist were lowered by 15% we would have an increase of about 30% in terms of volumes since the product will become more affordable to a larger market; especially the local and regional market based mainly in South Africa.


Profits shown by Zimbabwe Sun hotels, Meikles Hotel, the Rainbow Tourism Group and Cresta Hospitality need to be looked at from an investor’s point of view using indicators such as the return on the current value of capital invested which is extremely low. In the Zimbabwe Council of Tourism, Value Added Tax (VAT) submission to government, ZimSun showed a return of 2,1% and RTG 2% which is not at all a reflection of poor management, but overloading of taxes and duties on the capital inputs required for the industry.


We await patiently for the 2004 Budget looking forward to tourism getting zero rated when VAT is finally introduced, with substantial duty concessions on tourism related capital inputs and equipment. We would like to see a great platform created for meaningful new investment that would not only bring about more jobs but also promote indigenisation as the industry becomes much more viable and attractive.


So next time you are having a meal at your favourite restaurant, or enjoying your stay at one of our wonderful resorts – remember that your experience is currently regarded as a luxury. But let us wait for the 2004 Budget; we might be in for affordable hospitality for local and regional tourists at competitive rates.


This article was compiled by Francis Ngwenya, operations director of Cresta Hospitality. Ngwenya is also president of the Hospitality Association of Zimbabwe.

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