Tourism a blazing star

Last year, tourism companies made a substantial socioeconomic impact on Namibia, with their combined direct and indirect contributions totaling at least N$32.5 billion.

It is likely that their portion of the nation's nominal gross domestic product (GDP) surpassed 16%, according to a study by Simonis Storm (SS), commissioned by the Federation of Namibian Tourism Associations (Fenata).

Their findings “are definitely understating the full impact of the local tourism sector as a whole”, SS said in its report, as only 63 of the 5 547 tourism companies in the country submitted their data to the researchers.

However, SS believes they captured the most important players in most of the sub-sectors of the local tourism industry in terms of company size, profits and market dominance. The surveyed companies represent 30.7% of the most economically significant members of the eight different associations representing different sub-sectors of the tourism industry in Namibia, the analysts added.

The associations are: Hospitality Association of Namibia (HAN); Tour and Safari Association of Namibia (Tasa); Car Rental Association of Namibia (Caran); Association of Travel Agents (Anta); Aircraft Owners and Pilots Association of Namibia (AOPA); Namibia Professional Hunting Association (Napha); Emerging Tourism Enterprise Association (ETEA); and Namibian Association of Community-based Tourism Organisation (Nacso).

SS estimates that the 63 surveyed companies last year had a direct socioeconomic contribution to the Namibian economy and society of N$7.7 billion, about half the economic activity of the industry. Their indirect contribution amounted to N$24.8 billion, or 12% of nominal GDP.



GDP power



The Namibia Statistics Agency (NSA) does not directly measure economic activity in the local tourism sector, but rather measures activity from hotels and restaurants in various parts of the country.

“Long-run growth in the hotels and restaurants sector has averaged 4.7% annually, between 1981 and 2022. As a share of GDP, there has been a meagre increase over the years from 1.0% in 1980 to 1.8% in 2021,” SS said.

However, SS believes that these indicators are not an accurate measure of business activity in the local tourism sector. In 2015, the Namibia Tourism Board (NTB) conducted its 5th Satellite Economic Impact Study, revealing that the domestic tourism industry made a direct contribution of approximately 3.5% to the GDP and an additional 10.3% indirectly.

“This is about double the economic contribution compared to NSA data. In addition, the report indicated that tourism employed about 6.5% of all employed Namibians and supported about 14.5% of all jobs held in Namibia,” SS noted.

To gain a deeper insight into the economic significance of the local tourism sector, SS strongly advocates for more frequent releases of satellite account reports. This practice is essential for ensuring well-informed decision-making among government authorities, stakeholders and the private sector, the analysts said.

The Tourism Satellite Account (TSA) report is expected to be released before year end.



Jobs



Based on the most recent data from the 2018 Labour Force Survey, the accommodation and food services sector ranked as the sixth-largest employer in the country and boasted the second-highest number of employers.

“This implies that the tourism sector is a significant contributor to tax revenue for government and one of the major employers for our nation and can be crucial in reducing unemployment, if the sector is adequately supported by government and stakeholders,” SS said.

It's important to emphasise once more that "accommodation and food services" doesn't encompass all the activities within the tourism sector. Consequently, when considering all relevant components, tourism could potentially rank among the top four or five largest employers, not necessarily sixth, according to SS.

Using the social accounting matrix (SAM), the employment multiplier for the hotels and restaurants sector is 11.5. This is the fourth largest employment multiplier across all other sectors, SS pointed out.

This implies that for every one job in the hotels and restaurant sector, up to 12 other jobs are directly and indirectly created or supported.

The 63 surveyed companies employed 3 483 workers - 49% male and 51% female - with 99% of workers being Namibians and 87% who were hired on a permanent contract, SS said.

Using the SAM, the 3 483 workers created or supported 41 796 additional jobs directly and indirectly, according to the analysts. This is about 3.8% of Namibia’s labour force and 5.7% of all employed Namibians.



Wide value chain



“This supports our notion that tourism has one of the widest value chains in Namibia and can be one of the biggest catalysts in reducing unemployment (particularly in the rural areas of Namibia where many lodges are situated),” SS said.

The expansive value chain of the tourism sector encompasses various professional services, including forex trading, banking, travel agencies, beauty and spa services, as well as retail and car rental establishments. Additionally, government revenue sources, such as tourism levies and airport taxes, are significantly bolstered by the local tourism sector, SS elaborated.

These elements complement the more traditional tourism businesses like accommodation providers, safari and tour operators, hunting guides, and aircraft charter services, they added.



Wage bill



The total wage bill for the 3 483 workers at the surveyed companies was N$292.6 million, which generated personal income tax of N$54 million.

Utilising data from the Namibian Statistics Agency (NSA), SS computed a Marginal Propensity to Consume (MPC) of 0.69 in Namibia. This indicates that, for every N$1.00 earned, Namibians tend to spend 69 cents and save 31 cents.

Based on this, SS’ estimate suggests a multiplier of 3.23 for Namibia, signifying that each N$1.00 of income generated or spent triggers an additional N$3.23 of expenditure within the economy.

Considering that the 63 companies collectively disbursed N$235.5 million in total after-tax salaries, SS inferred that 69% of this amount, equivalent to N$162.5 million, was allocated for consumption spending, as determined by the MPC.

Applying the multiplier subsequently, these after-tax salaries stimulate an additional N$525 million in spending or income across the Namibian economy, SS said.

In a similar fashion, when SS considered the money disbursed to suppliers, applying the multiplier suggests that out of the N$1.6 billion paid by these 63 companies, an extra N$5 billion in income or spending cascades through the economy.

This represents approximately 3% of the total consumption expenditure in Namibia, as determined by the National Accounts from the NSA, according to SS.



Public finances



The N$269.8 million in total taxes paid by the 63 companies represents just 0.5% of the government's overall tax revenue. However, it constitutes a substantial 45.3% of the total budget allocation for the ministry of environment, forestry and tourism in the latest fiscal year, SS pointed out.

Furthermore, this tax contribution comfortably exceeds the approximate annual budget allocation of N$3 million to the Namibian Tourism Board (NTB). In nominal terms, the taxes paid in 2022 also surpass the highest budget allocation ever recorded for the NTB, which stood at N$50 million in 2014/15, SS added.

“This indicates that the tourism sector is definitely adding value to public finances as only the 63 companies can foot the annual bill for the NTB’s operational expenses. This also warrants an increased resource allocation to the NTB,” SS said.

In 2022, the tourism industry contributed N$9.2 million in tourism levies to the government and N$2.7 million to the Namibia Training Authority (NTA).

The revenue generated solely from tourism levies could easily exceed the N$3 million budget allocation designated for the NTB. It's essential to note that this calculation doesn't include the levies paid to conservancies, which constitute a significant financial commitment for local tourism companies, SS said.

“One therefore needs to ask why the Board’s [NTB] budget allocation remains insufficient for them to do their jobs adequately. A frequent complaint from the Board is that they cannot do proper marketing to attract more travellers due to budget constraints. When looking at the numbers, this should not be the case,” according to SS.



Budget



The ministry of environment, forestry and tourism (MEFT) in March this year announced six plans that will be executed with the N$595 million it was allocated from the national budget in the current fiscal year.

These plans encompass the following areas:

• Tourism growth development and gaming regulations (N$23.6 million);

• Protection and management of key species and natural habitats (N$29 million);

• Infrastructure and development, maintenance, monitoring and evaluation (N$63.7 million);

• Policy supervision and support services (N$102 million);

• Environment and natural resources protection (N$154.8 million); and

• Wildlife and protected area management (N$224.4 million).

While the budget allocation to the MEFT is a lot more than other ministries, “complaints from various stakeholders still indicate that tourism often gets sidestepped for the favourable consideration of other sectors such as mining”, SS said.

However, it's worth noting that within the ministry, tourism typically receives approximately 8% of its overall budget. The bulk of the ministry's budget is predominantly allocated to the environment and forestry components.

“So, even within the responsible ministry itself, it appears that tourism is not taken seriously,” SS said.

They added: “In addition to this, one crucial problem is that the private sector is of the opinion that government does not protect the interests of tourism companies operating in especially sensitive environments and it could do more to help conserve the tourism product in these areas to the benefit of future generations.

“It could also improve business conditions by refining current policies on the allocation of tourism concessions, among others.”