Zambia's Tourism Sector

UNCLAS SECTION 01 OF 03 LUSAKA 000322

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EIND ZA
SUBJECT: Zambia's Tourism Sector

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1. (SBU) Summary: The global economic downturn and the subsequent
drop in commodity prices, particularly copper, have forced the
Government of Zambia (GRZ) to re-examine one of its most neglected
economic sectors, tourism. Despite Zambia's natural wonder -
Victoria Falls - and abundant wild game parks, the ambivalent
management of the sector by the GRZ reflects two key legacies: its
socialist history and the related perception that foreign investors
reap the benefits without giving back to the local communities. To
successfully unlock Zambia's potential in tourism, the GRZ must
tackle these legacies. End Summary.

2. (SBU) In its effort to diversify its economy away from its
dependence on the always-undependable price of copper, the GRZ has
identified tourism and agriculture as the two priority sectors with
the most economic development and job creation potential. Government
officials have recently been quoted in the press expressing optimism
that tourism will create new jobs to offset job losses in the mining
sector.

3. (SBU) Despite its enormous range of tourism attractions,
including world-class game-viewing opportunities and natural
wonders, Zambia is one of the least-developed tourism destinations
in southern and eastern Africa. Although the 2010 FIFA World Cup is
coming to nearby South Africa, Zambia appears ill-prepared to draw
from (or cater to) the influx of tourists to the region.
Zambia - the Real Africa...

4. (SBU) Zambia's 17 protected game parks, 34 game management areas
and natural attractions provide world-class tourism possibilities.
However, beyond a few well-traveled destinations such as Victoria
Falls and South Luangwa National Park (often cited as one of the top
ten game parks in the world),tourism in Zambia is a
still-developing sector that, along with other commercial sectors in
Zambia, is still struggling to overcome a legacy of state control
that only ended in the mid-1990s.

5. (SBU) The Zambian Tourism Board (ZTB) introduced a five-year
"Visit Zambia" marketing campaign in 2005, using a "Zambia - the
Real Africa" tagline to entice potential visitors. From a baseline
of 515,000 tourist arrivals and $174 million in direct tourism
receipts in 2004, the GRZ has set a goal of one million visitors and
$300 million in receipts by 2010. According to the ZTB, 2006 drew
over 756,000 tourists, a 13 percent increase over 2005, and over
850,000 tourists visited Zambia in 2008. Much of the increase in
recent years reflects the negative impact of political turmoil in
Zimbabwe and redevelopment of 4 star and 5 star hotels near Victoria
Falls by Sun International Hotels (Note: Victoria Falls can be
viewed from both Zambia and Zimbabwe). The GRZ estimates that
tourism currently contributes approximately six percent of GDP when
direct and indirect linkages are included. Despite this impressive
growth, the economic downturn is likely to disrupt the GRZ's goal of
one million tourists by 2010, and the receipts goal (reaching 8
percent of GDP) is unlikely to be met.
...With a Real African Approach to Business

6. (SBU) The increases in sheer visitor numbers hide numerous
problems plaguing the tourism sector, however, and recent government
budgets have not addressed critical constraints to tourism, such as
inadequate infrastructure, an expensive, unskilled, and unhealthy
labor force, and high transport costs. Additionally, tourism
operators face the same obstacles as other private sector firms.
Over-regulation and burdensome taxation make doing business in
Zambia difficult and expensive. Relative to other countries in the
region, Zambia is a high-cost, high-effort destination; the average
daily expenditure of a tourist in Zambia is about 30 percent higher
than in competing countries, and as a landlocked country, Zambia
must rely on increasingly expensive air links for the bulk of its
tourist arrivals. The USAID-funded Market Access, Trade and
Enabling Policies Program (MATEP) conducted a competitiveness study
which showed that, on average, a Zambian tourism enterprise is
between 60 and 100 percent more expensive to operate than those in
other countries in southern and eastern Africa.

7. (SBU) In addition, Zambia does not have an effective tourism
classification and standards system, and while a new Tourism and
Hospitality bill was passed in 2007 to try and address the complex
and costly licensing requirements, tourism operators complain that
not many improvements have been made and, in some areas, the new law
marks a setback. These realities were highlighted in a 2007 World
Bank Study, which illustrated that Zambia continues to underperform
in tourism compared to neighboring countries. As a result, most
tourists visit only one site (only 12 percent of tourists more than
one),stay less than seven days, and generally package Zambia with
other destinations in the region.

8. (SBU) The GRZ, particularly its officials who retain ties to
previous socialist governments, perceives the private sector as a
source of income, rather than an engine of growth and development.
Consequently, regulatory barriers abound (hotels can be required to
obtain several dozen operating licenses) and taxes are high (and
generally rise if a sector begins to show promise). In tourism, the
government has underinvested in marketing and wildlife protection.
Additionally, some in government believe that the tourist sector is
controlled by and benefiting only foreign citizens. The head of the
Tourism Council of Zambia, a private sector-led industry
association, told poloff that former minister of finance Ng'andu
Magande once said to her, "Tell me what your tourism brings us,"
because he believed that foreign operators repatriated their profits

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to their home countries instead of keeping them in Zambia.
President Banda also was in the headlines recently complaining that
white safari operators were blocking Zambian operators from opening
lodges in the popular South Luangwa area.

9. (SBU) A recent study of the economic impact of tourism in Zambia
found that of the average USD 1,100 that each tourist spends in
Zambia, only USD 200 is "leaked" - that is, leaves Zambia to pay for
goods not available here. The USD 900 per person expenditure that
remains compares favorably with the amount spent per tourist in
South Africa (USD 879). This may explain the GRZ's renewed interest
in the tourist sector, as it repudiates the public's perception that
foreign investors in tourism are repatriating their profits.

10. (SBU) The economic downturn and the subsequent loss of jobs in
the mining sector have these traditionalists re-evaluating their
skepticism toward tourism and hoping the tourism sector can absorb
job losses from the mines. Despite some resentment towards
foreign investors, Minister of Tourism, Environment and Natural
Resources Namugala recently promised that the GRZ "will do
everything possible to ensure that all processes pertaining to
facilitating investment in the country are expedited so that
investors are able to start operations as quickly as possible."
If You Build It, They Will Come

11. (SBU) As part of this plan to attract investment, Zambia has
bold plans to diversify the tourism sector and promote attractions
outside of the popular Livingstone and South Luangwa areas.
Minister of Finance Situmbeko Musokotwane recently urged World Bank
Group's International Finance Corporation to partner with the GRZ to
help develop Kasaba Bay, on Lake Tanganyika in Northern Province,
into a major international travel destination, which Minister
Namugala described as a "pristine ... world class destination."
Minister of Commerce Trade and Industry told the Ambassador in
November 2008 that the GRZ hoped to entice visitors to do a circuit
of Livingstone/Victoria Falls, South Luangwa Game Park, and Kasaba
Bay (for beaches). He hoped that low-end tourism would be more
immune to financial crises than high-end, but his strategy for
attracting budget hotels was to attract five-star facilities first.
In addition, he was not able to explain how to get budget travelers
to take three (expensive) domestic flights to get to each of these
places, to which there are not adequate roads. Despite the lofty
rhetoric, Kasaba Bay lacks the basic infrastructure required to even
begin such a project. Roads, airport facilities, electricity, water
and telecommunications are currently insufficient or nonexistent.

12. (SBU) To address the infrastructure shortfalls, the GRZ trebled
the tourism budget in 2009, 65 percent of which (USD 10 million)
will go toward electrification, roads and airports at Kasaba Bay.
The GRZ assured skeptics that as many as 12 hoteliers had expressed
interest in investing in Kasaba Bay to turn it into a world class
conference venue.

13. (SBU) The Zambia Wildlife Authority (ZAWA) and the Ministry of
Tourism, Environment and Natural Resources - both key institutions
given tourism's close links to nature in Zambia - have been severely
under funded. The Zambian Tourism Board also received very little
government support - its budget was $1.5 million in 2006, compared
to budgets for similar regional boards of $7 million in Botswana and
$6 million in Namibia. Minister of Tourism Namugala recently
dissolved the boards of both the Zambia Wildlife Authority (ZAWA)
and Zambia Tourism Board (ZTB),suggesting that she considered them
obstacles to sectoral growth. Namugala recently said that while
"budget constraints are the national anthem of Zambia," tourism
sector promotion does not require a large budget. In her speech at
the opening of the second annual Zambia International Travel Show
(ZITS),Minister Namugala also suggested that the tourism sector
should continue to look at Zambia as a regional destination and
encouraged attendees to piggyback efforts of neighbors like Botswana
to benefit from their better funded international tourism
promotion.
2010 World Cup; Is Zambia Ready?

14. (SBU) With just over one year until the opening match of the
2010 World Cup, Zambia seems largely unprepared to gain from the
increased visitors to Southern Africa. While original estimates
predicted over 900,000 visitors, South Africa World Cup organizers
have drastically revisd that number by more than one-half, in light
of the global economic downturn.

15. (SBU) Despite te numerous obstacles, Namugala recently
challengd the tourism sector to attract 20 percent of Worl Cup
visitors to South Africa. Her optimism, hoever, is not an accurate
reflection of the sectors capability at this time, and her
statement fro the ZITS further reflects the GRZ's haphazard
aproach to tourism promotion. Smply put, the capacity to bring
such a large number of tourists to Zambia, let alone to house them
all, in such a short period of time, does not currently exist. In
addition, a representative poloff spoke with at ZITS suggested that
World Cup fans can not be viewed as typical tourists expected to
travel extensively, particularly during the current economic crisis.


16. (SBU) Comment: The GRZ's desire to exploit its tourist potential
is prudent, but the challenges to unlocking Zambia's potential are
considerable. It does not have the resources or the capacity to
create the infrastructure for mass tourism. It would be better off
focusing on the facilities that it does have and bringing their
3-star quality up to the level of their 5-star prices. In the near

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term, however, it should focus upon alleviating the difficulty of
doing business in the country -- regardless of the sector. By
rationalizing regulations and standardizing taxation, it could
unleash potential in tourism and other critical sectors.

BOOTH