ZAMBIAN GOVERNMENT STANDING IDLE AS LIVNGSTONE

C O N F I D E N T I A L SECTION 01 OF 02 LUSAKA 000207

SIPDIS

E.O. 1958: DECL: 03/24/2019
TAGS: ECON EIND PGOV ZA
SUBJECT: ZAMBIAN GOVERNMENT STANDING IDLE AS LIVNGSTONE
TOURISM SECTOR FLOUNDERS

LUSAKA 00000207 001.2 OF 002


Classified By: Ambassador Booth for reasons 1.4 (b) & (d)


1. (C) SUMMAR AND COMMENT Despite its location onthe
Zambian side of Victoria Falls, one of the ntural wonders of
the world, Livingstone has seena dramatic reduction in
tourists. This was a majr topic during the Ambassador's
first oficial trip to the Southern Province's capital city.
Despite professed interest in the tourism sector by the
Zambian Government (GRZ),there seems to be a disconnect
between GRZ officials' understanding of both the current
state of the sector and the full benefits of tourism in
general. While GRZ officials spoke of the healthy state of
tourism, tour operators complained of a large drop-off in
business, job cuts, and the GRZ's seeming indifference. The
main road from Lusaka to Livingstone remains in horrible
condition, and the closure of Zambian Airways has reduced
daily domestic flights to Livingstone to two 18-seat planes
instead of the Zambian Airways B-737. The GRZ solution, at
least in Livingstone, seems to be to sit and wait for donors
to come fix the problems. This lack of imagination, though,
seems to be having a negative effect in Livingstone.
Meanwhile, the Zambezi River is extremely full and expected
to reach levels that may be 40-year highs. However, the GRZ
again seems to be watching idly, assured--somehow--that
everything will work out fine. Many high-end resort owners,
on the other hand, find their properties literally and
figuratively under water END SUMMARY AND COMMENT

GOVERNMENT OF ZAMBIA: DON'T WORRY, BE HAPPY


2. (C) On his first official visit to Livingstone, planned
around the handover of a PEPFAR-funded pediatric clinic to
Livingstone General Hospital, the Ambassador took the
opportunity to meet with GRZ officials, local tour operators,
private sector beneficiaries of USG programs, and also pay a
visit to the very congested border post at Kazungula, where a
ferry connects Zambia with Botswana. Despite different
settings, the common theme emerged that while many in private
sector are seeing red flags in a number of areas, the GRZ
does not seem overly concerned.


3. (C) During a courtesy call with Provincial Minister
Daniel Munkombwe, Munkombwe offered only a rosy assessment of
Southern Province and simplistic responses to the
Ambassador's questions. It was unclear whether he lacked
understanding of the issues, or whether he had little
inclination for such an exchange. He maintained it would be
a good year for crops, dismissing local fears that flooding
and the unusually heavy late rains might damage the harvest.
Likewise, he proclaimed the tourism sector to be "okay."
Despite empirical evidence that suggests otherwise, Munkombwe
insisted that a fall-off in tourism "hasn't been so felt" in
Livingstone, suggesting instead that "business people are
never satisfied." When asked by the Ambassador about the
state of the road to Livingstone, Munkombwe assured him that
the Chinese were currently working on 30 km of the road,
which left 47 km for "investors who must come in."


4. (C) The Minister acknowledged that farmers were
struggling in the Southern Province and that, while the
province was "once the grain basket of the country," droughts
and floods had relegated it to a lower position. Despite the
presence of the fourth largest river in Africa, many people
who live just a kilometer away from the Zambezi often watch
their crops die for lack of water. However, Munkombwe made
it clear that such problems could be mitigated with more
outside investment. When asked about HIV rates in
Livingstone, which are twice the national average, Munkombwe
offered no insights, only that he had "yet to be briefed on
the accuracy of the figures." Adding to his calm assessment
of the area, Munkombwe also did not seem to think that the
crisis in Zimbabwe has had a great impact in Livingstone
either positively (tourists going to Zambia to see the falls)
or negatively (illegal immigration and an increase in cholera
cases).


5. (C) A separate lunch with Livingstone's Mayoress Grace
Shafik, who had sat in on the call with Munkombwe, only
served to reiterate many of these points. Shafik also
assured the Ambassador that the tourism sector was fine.
Interestingly, at the same time, she admitted that once
Zimbabwe was more stable, many Zambian tour operators would
likely leave the country. Despite the fact that the Southern
Province voted overwhelmingly for opposition UPND in the 2008
election, Livingstone is an island of ruling party (MMD)
control, and the Mayoress seems to be President Banda's most
vocal supporter. Time and time again, during the course of
the lunch, the topic drifted from issues on the ground in
Livingstone to the many attributes of Banda.

TOURISM OPERATORS: MANY REASONS TO WORRY

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6. (SBU) Local business owners paint a dramatically
different picture. During a free-flowing 90 minute
discussion with 20 local tour operators, the Ambassador was
told repeatedly that while the GRZ had proclaimed tourism a
priority area, GRZ actions (or, at times, inaction) sent just
the opposite message. The tour operators, who were
represented by a spectrum, from high-end luxury hotels and
adventure tourism operators, to backpacker venues, all
contend that business in 2009 is down-as much as 50 percent
from last year. While the operators understand that the
global financial crisis has played a negative role to play,
they also point to a series of GRZ issues which, they
maintain, suggest that the GRZ has no will to support
tourism. Many highlighted excessive bureaucracy and
unrealistic systems.

7. (SBU) Some tour operators claimed the GRZ lacks
understanding about Zambia's tourism potential. One asserted
that Minister for Tourism, Catherine Namagala, visited
Livingstone in early March 2009, for the first time in her
life--an unconfirmed example of how out of touch the GRZ is
about Livingstone issues. This is manifested in a lack of
planning and many missed opportunities when it comes to
attracting tourists. For example, neighboring countries
Botswana and Namibia (and apparently Zimbabwe, soon) have
waived visa requirements for tourists visiting their
countries. Likewise, the crisis in Zimbabwe, which shares
Victoria Falls with Zambia, has given Zambia nearly a decade
to court investors and appeal to tourists. None of the tour
operators, however, believes that Zambia has done enough to
build on its potential. Said one, "when the sleeping giant
next door wakes up, Zambia will once again take up second
place." He also asserted that hotel properties on the
Zimbabwe side of the river have been well maintained.


8. (U) Investors pointed to excessive and poorly managed
bureaucracy as impediments to the industry. The GRZ has
recently, in the face of a sustained campaign by tour
operators, rescinded the addition of a value-added tax (VAT)
on tourism activities (restoring a situation that had
previously been a long-standing rule). However, the GRZ now
requires businesses to fill out a government form for every
transaction in order to qualify for the VAT exemption. One
operator calculated that they were processing more than 15
thousand forms per month. The GRZ does not have the capacity
to process this volume of forms, and the system has raised
operating costs despite no benefit to government. To the
tourism operators, the GRZ decision to bring in VAT was based
on greed in the first place, and the decision to rescind it
but add paperwork is based on stubbornness and an inability
to appreciate the benefits of tourism.


9. (SBU) Finally, the tour operators are reacting nervously
to the GRZ's announcement that it would ban pricing of goods
and services in U.S. dollars. Most operators quote in and
accept both dollars and kwacha. They fear that the new
policy-the GRZ's and Central Bank's attempt to maintain
confidence in a steeply depreciating kwacha, will be too
stringently implemented or misunderstood at the provincial
level, causing further confusion and loss of business. It
was generally agreed that the tour operators would go out of
business if they were forced to price entirely in kwacha,
though few feared the GRZ would go that far.


BOOTH