Results

World Bank Group

07/29/2021 | Press release | Distributed by Public on 07/29/2021 01:27

Tanzania Economic Update: How to Transform Tourism into a More Sustainable, Resilient and Inclusive Sector

DAR ES SALAAM, July 29, 2021-Tourism offers Tanzania the long-term potential to create good jobs, generate foreign exchange earnings, provide revenue to support the preservation and maintenance of natural and cultural heritage, and expand the tax base to finance development expenditures and poverty-reduction efforts.

The latest World Bank Tanzania Economic Update, Transforming Tourism: Toward a Sustainable, Resilient, and Inclusive Sector highlights tourism as central to the country's economy, livelihoods and poverty reduction, particularly for women, who make up 72% of all workers in the tourism sector.

'Without tourism, the situation would be bad,' said Rehema Gabriel, a hotel attendant in Dar es Salaam. 'I have been working in the tourism industry for eight years now, so I do not know what it would be like without it.'

The economic system around tourism had grown in value over the years and in 2019 was the largest foreign exchange earner, the second largest contributor to the gross domestic product (GDP) and the third largest contributor to employment, the report says. On the semiautonomous Zanzibar archipelago, the sector has also experienced rapid growth, accounting for almost 30% of the island's GDP and for an estimated 15,000 direct and 50,000 indirect jobs. However, the report notes, only a small fraction of Tanzania's natural and cultural endowments has been put to economic use through tourism development.

'Tourism offers countries like Tanzania, with abundant natural and cultural endowments, access to many foreign markets,' said Shaun Mann, World Bank Senior Private Sector Development Specialist and co-author of the Tanzania Economic Update. 'But the absence of tourism revenues, as we have seen during this pandemic, compromises the integrity and viability of not only endowments, but also the economic, environmental and social ecosystems built up around those endowments.'

Amid the ongoing COVID-19 (coronavirus) pandemic, the World Bank estimates that Tanzania's GDP growth decelerated to 2.0% in 2020. Business slowed across a wide range of sectors and firms, especially export-oriented sectors such as tourism and manufacturing. The report highlights the impact of the crisis on tourism specifically, which has had consequences beyond just the industry, given the many other sectors that support, and are supported by, tourism. The 72% drop in the sector's revenues in 2020 (from 2019 levels) closed businesses and caused layoffs.

Zanzibar's economy was even more severely impacted with GDP growth slowing to an estimated 1.3%, driven by a collapse of the tourism industry. As the hospitality industry shut down between March and September 2020, occupancy rates dropped to close to zero. While the Zanzibar tourism sector started slowly rebounding in the last quarter of 2020, with tourist inflows in December 2020 reaching almost 80% of those in 2019, receipts from tourism fell by 38% for the year.

As the tourism sector transitions gradually into recovery mode with the rest of the world, the report urges authorities to look toward its future resilience by addressing long running challenges that could help position Tanzania on a higher and more inclusive growth trajectory. Areas of focus include destination planning and management, product and market diversification, more inclusive local value chains, an improved business and investment climate and new business models for investment that are built on partnership and shared value creation.

Tanzania is a globally recognized destination for nature-based tourism, a competitive market segment in eastern and southern Africa. Beyond attracting tourists, the country's landscapes and seascapes produce a wide range of ecosystem services, including carbon sequestration and biodiversity co-benefits that are not efficiently priced and often generate little or no financial return. The global climate crisis has created significant demand for investment in these forms of natural capital, and Tanzania is well positioned to take advantage of nature-positive investment opportunities. The additional revenue derived from global climate programs could be an opportunity to ease the government's fiscal constraints while also supporting the livelihoods of local communities.

'While restoring the trade and financial flows associated with tourism is an urgent priority, the disruption of the sector has created an opportunity to realign tourism development with economic, social, and environmental resilience,' said Marina Bakanova, World Bank Senior Economist, and co-author of the report. 'The pandemic has created an opportunity to implement long-discussed structural reforms in the sector and use tourism as a leading example of improvement of the overall business climate for private investment.'

The authors suggest five priorities for a sustainable and inclusive recovery that lay the foundation for the long-term transformation of the tourism sector:

  • Creating an efficient, reliable, and transparent business environment to reduce red tape and multiple distortions and inefficiencies, hindering decisions on private investments, domestic and foreign
  • Establishing an information-management system that consolidates data from tourists and firms, enabling policymakers to improve sectoral planning and identify viable investment opportunities
  • Ensuring that firms across the sector, as well as those in downstream value chains, have access to affordable transitional finance
  • Consistently promoting, monitoring, and reporting on adherence to health and safety protocols.
  • Developing co-investment and partnership arrangements to support nature-based landscape and seascape management