Tourism firms should remain calm: All businesses will be affected

26Mar 2020
The Guardian
Tourism firms should remain calm: All businesses will be affected

A STRIDENT call has been heard from tourist sector companies, or rather their collective representative body, for a series of bailout measures especially in terms of tax exemptions. The Tanzania Association of Tourism Operators (TATO) by the voice of a veteran operator in the industry and-

-now their legal consultant talked of convening the legislature to table a ‘Covid-19 Bailout Bill,’ to save the sector as it is collapsing after travel cancellations with the onset of the pandemic. Is that right?

There are questions to be posed by economic observers on the tone and content of the appeal as it came from tourism companies, but it forms part of a tradition that with this appeal, the public may now appreciate its drawbacks. It is true that tourism has been affected and tour companies would be facing plenty of difficulty but how far does that add up to a bailout bill – and for specific companies for that matter? Tourism has for some years replaced gold as the top foreign exchange earner, and if it is failing, where does the government get the needed bailout funds?

What is likely to be more relevant is a wider fiscal and monetary initiative that seeks to postpone debt payments, or as the tourism sector legal consultant pointed out, even rents and a number of liabilities they have with banks and statutory bodies including the Tanzania Revenue Authority (TRA). It is these liabilities that can be offset by postponement of payment of debts and fiscal arrangements for that situation not to grossly affect Treasury budget management, in particular. But there are parameters of risk which will affect various companies differently, and these can’t possibly be the object of a public financing exercise within a systemic crisis.

The background event to this appeal appears to be the cotton sector bailout plan of 2009 where a total of 1.7trillion/- was paid out by the Bank of Tanzania to creditors of cooperative unions and cotton purchasers, owing to diminished demand and lack of export outlets following the global financial meltdown. The difference between that situation and the present is that it was a sector relating to global payments and thus impact on exports and imports. It wasn’t an emergency that puts in peril the very foundations of productive activity, for instance when a lockdown comes up to stop the fast spreading of the coronavirus, as it is elsewhere.

Looking at the Covid-19 pandemic, it isn’t just the tourism sector that is being affected, in the sense of hotel occupancy or conservation area revenues, etc. It is a whole stretch of sectors, where it is the health sector that comes up uppermost, though we aren’t there yet as the pandemic is either just starting. Or as many of us hope, will never settle intensely in Tanzania or Africa, if by climatic conditions

While the financial sector meltdown was limited in its physical structure and just touched the health of investments or future projections of worth of shares, Covid-19 is different. It puts onerous burdens on public expenditure. In that case the tourism sector should not start talking in the past tense. They are saying the rest of us are well but they have been grossly affected. Yet it is far too early to make that assertion, and until the pandemic is declared as over, let’s not count chickens yet.