THEFIRST–ORDINARYSESSIONOFTHEAFRICANUNIONSPECIALIZEDTECHNICALCOMMITTEEONTRANSPORT,INFRASTRUCTURE,ENERGYAND

TOURISM

LOME,TOGO13-17MARCH2017

INVESTINGANDFINANCINGTOURISMINAFRICA

by

DrSalifouSiddo

CEO:SMETradeLinks(Pty)Ltd

Backgroundv  Des=na=onsworldwideareincreasinglyopeninguptotourism

ü  createsjobsandenterprises,

ü  Generatesexportrevenues

ü  Leadstoinfrastructuredevelopment(UNWTO,2015)

v  Tourismisamajorcategoryofinterna=onaltradeü  Totalvalueoftourismexports-US$1.5trillion

ü  US$4billionadayonaverage

ü  Interna=onaltourismrepresents7%oftheworld’sexportsingoodsandservices

ü  TourismranksthirdaTerfuelsandchemicalsandaheadoffoodandautomo=veproducts

ü  Inmanydevelopingcountries,tourismranksasthefirstexportsector.(UNWTO,2015)

TourismGrowthfromEmergingMarketsPerspecJve

v  Interna=onaltouristarrivalsintheemergingeconomies(Asia,La=nAmerica,EasternEurope,Africa)

ü  Growingatdoubletherate(4.4%peryear)thatindevelopedeconomydes=na=ons(+2.2%ayear)

ü  Numberofarrivalsinemergingeconomiesexpectedtoexceedthoseinadvancedeconomiesbefore2020

ü  In2030,57%ofinterna=onalarrivalswillbeinemergingeconomydes=na=ons(versus30%in1980)and43%inadvancedeconomydes=na=ons(versus70%in1980)

(UNWTO,2015)

ZoominginonAfrica

v  UNWTOstatsindicate:

ü  Africaa_racted53millioninterna=onalvisitorsin2015

ü  Tourismgrowth:5.4%averageannualgrowthbetween2005and2014(comparedtotheworld:3.8%).

ü  TourismReceipts:USD33billion(Euro30billion).

ü  UNWTOprojectsinterna=onaltouristarrivalstogrowto7%inAfricaby2030.

SituaJonalAnalysis

v  Na=onalgovernmentshavebeenattheforefrontoflargehospitalityinfrastructuredevelopmentsü  Limitedsuccess,ü  Failureinmostcasesü  Governmentisnotknowntobeasuccessfultourismoperators

v  Liberaliza=onofthetourismsector

ü  Newapproachtotourisminfrastructuredevelopmentü  Governmentstocreateaconduciveenvironmentü  Privatesectortoinvestandmanage

v  GrowinginterestinfinancingtourismdevelopmentinAfricabyü  Commercialbanksü  Globalbrandsü  Na=onaldevelopmentfinanceins=tu=onssuchastheIDCinSouthAfricaü  Interna=onalDevelopmentFinanceins=tu=onssuchasIFC,MIGA,AFREXIM

KeyEconomicBenefits-IFCasaCaseStudy

v  Anexcellentexampleofkeyeconomicbenefitsgainedthroughfinancingandinves=ngintourism/hospitality

v  Since1956,IFChasinvestedmorethan$2.5billionin251hotelprojectsindevelopingcountriesworldwide.

v  Theseinvestmentshavehadamajoreffectonlocaleconomiesbycontribu=ngtoeconomicdiversifica=onandsustainablegrowth.

v  Theyhaveboostedthetravelandhospitalitysectorsandgeneratedmuch-neededjobs,foreigncurrency,andtaxrevenue.

v  IFC’shotelinvestmentscreateanaverageof1.5to3jobsforeachhotelroom.

v  Theyalsoprovidesupplychainlinkagesfromconstruc=ontoopera=onandsecuremarketsforlocalfarmersandSMEsuppliers.

AfricaistheNewBaQlegroundforTourismInvestments

v  Africanhoteldevelopmentprojectsatthestartof2013:

ü  Marrio_: 36ü  CarlsonRezidor: 32ü  HiltonWorldwide:29ü  Starwood: 21ü  Mangalis: 17ü  SwissInterna=onal: 16ü  Accor: 12ü  BestWestern: 12ü  Rotana: 8ü  LouvreHotelsGroup:7Source:WHospitalityGroup,2015

MarketEntryStrategies

v  Marketentryapproachesü  NewBuildsü  Acquisi=onofexis=nghotels

Ø  Marrio_HotelsacquiringSouthAfrica’sProteaHotelsGroupØ  RadissontakingoverHoteldu2FevrierrighthereinLome

v  Cherrypickingofinvestdes=na=onsü  Nigeriaü  Kenyaü  Ghanaü  Gabonü  Angolaü  SouthAfrica

ChallengestoInvesJng/FinancingTourisminAfrica

v  Governmentü  Bureaucra=credtapeü  Uncoordinatedgovernmentpoliciesü  Unfriendlypolicies&regula=ons(visaregimes,EIAs)ü  Lackofenablinginfrastructure(Land/loca=onforhotel/resortdevelopment,roads,airports,connec=vity,water,

electricity,sanita=on)ü  Tourismnotalwaysseenasaprioritysector

v  FinanceIns=tu=onsü  Riskaversionoflocalcommercialbanksü  Lackofunderstandingoftheeconomicsofthesectorü  Buildingcosts(costperkey)ü  Profitexpecta=ons

ChallengestoInvesJng/FinancingTourisminAfrica

v  Opera=onalissuesü  Limitedavailabilityoflocalopera=onalskillsindes=na=onsü  Qualityassuranceandstandardsü  Limitedaccesstotouristsourcemarketsduetopoordes=na=onmarke=ngü  Safetyandsecurityissues

v  Othersocio-economicissuesü  Revenueleakagesü  Crowdingoutoflocaltourism/hospitalityentrepreneursü  ExclusionofSMMEsfromfullpar=cipa=oninprocurementvaluechains

RecommendaJonsforImprovingInvestment/FinancingofTourisminAfrica

v  Governmentsü  Createaconduciveenvironmentthatleadstopolicyuncertaintyreduc=onü  Reducebureaucra=credtapethathindersinves=ngintourismü  Ensurepolicycoordina=onwithothergovernmentdepartmentsintermsofdecisionsthatimpacttourism

nega=vely(visaregimesforexample)ü  Ensureavailabilityofwater,electricity,sanita=onü  Recognizetourismasaprioritysectorthatiscapableofcrea=ngjobsandwealthandallocateresourcesaccordinglyü  Ensuresafetyandsecurity.

v  Financingmodelsü  Exploreinnova=veinvestmentandfinancingmodelsthatmeettriplebo_omlinerequirements(Profits,People,

Environment)ü  Partnerwithlocalinvestors/entrepreneurstoco-createwealthü  Establishdedicatedregional/con=nental-levelfundingins=tu=ons/facili=esthatunderstandtourismandareableto

structureappropriatefinancing(IFC,IDC,NEF,SEFA,TourismDevelopmentCorpora=oninKenya)fortourismprojects

ü  Provideappropriateincen=vestoinvestorsü  Provideinvestmentriskmi=ga=onmeasures.

RecommendaJonsforImprovingInvestmentsFinancingofTourisminAfrica

v  Opera=onalissuesü  Ensureavailableofskillslabour(customerserviceorienta=on)

ü  Qualityassuranceandstandards

ü  Implementeffec=vedes=na=onmarke=ngandpromo=onstrategiesthatleadtogoodoccupancies

ü  Encouragethedevelopmentofdomes=ctourism

v  Othersocio-economicissuesü  EnsureinclusivegrowthbyensuringthatlocalSMMEsbecomepartandparcelofthetourismvaluechainandare

givenanopportunitytoprovidegoodsandservices

ü  PromotebusinessdevelopmentservicestosupportthegrowthanddevelopmentoftourismSMMEs.

RecommendaJonsforImprovingInvestmentsFinancingofTourisminAfrica

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