The World Economic Forum (WEF) ranks Tanzania second only to Brazil in terms of natural beauty in its 2011 Travel and Tourism Competitiveness Report. This gives Tanzania’s tourism industry a fantastic advantage.

Wildlife in one of Tanzania’s game reserves

However, both local and foreign investors in the sector are not happy with the current licensing regime. The tourism licensing regime is managed by the Ministry of Natural Resources and Tourism under Tanzania Tourism Licensing Board (TTLB), formerly known as the Tanzania Tourism Licensing Agency (TALA).

However, a major investor recently called it, “bureaucratic, expensive and retrogressive.” He also claims that the regime does not encourage investment in those sub-sectors that have the potential to create more jobs and more quickly, than any other sector in the country, though he wishes not to be named.

The Ministry of Natural Resources and Tourism has immense powers over whether to renew tourism licences and yet are not required to offer an explanation. The investor fears that his licence may not be renewed if he openly talks to the press about it. Other investors in the industry have refused to talk about tourism licensing, describing it as a “very sensitive” issue.

“In international circles Tanzania is being used as an example of tourism licensing gone wrong,” he said. The tourism operator pointed to a study that has a whole chapter dedicated to a comparison of good and bad practice for design and administration of tour operators licences. Tanzania is used as the bad example and Australia for the good one.“ The document is online for the whole world to see and there are numerous other case studies that show our tourism licensing regime is not the best for spurring business growth,” he said.

The study, he was referring to is entitled “Licensing case studies: Tourism sector” by the Investment Climate Advisory Service (FIAS) – a service managed by the International Finance Corporation, the Multilateral Investment Guarantee Agency and the World Bank. The study notes that “bad licensing practices include excessive regulatory and financial requirements in Tanzania which make it difficult for local operators to participate in this market.”

It praises South Africa for good practices for licensing of accommodation, where it is easy for small and medium enterprises to participate. Worldwide, particular sector licences are used to address market failure by offering potential benefits
to the investors and the government. “In the case of Tanzania, tourism licensing is almost entirely a levy collection exercise and locks out small and medium enterprises in the industry,” the tourism operator said.

He added that, worse still, the provision of the licences by the ministry was a “closed door” affair with zero transparency. The ministry decided unilaterally to whom it would grant or deny operator’s licences, despite companies meeting all conditions, he said. He believes that many players in the industry want more transparency in licensing and that there should also be steps to create an environment which allows small and medium enterprises to enter the trade.

According to the FIAS study, “from an economic and business point of view, licensing is a potentially costly and potentially damaging regulatory intervention, when compared to other types of regulation (such as broadly applied competition law and accounting rules or other ‘light’ and targeted forms of regulation). The trader feels that in the case of mainland Tanzania, tourism licensing has created unnecessary entry barriers for the development of the industry.

The FIAS study reviewed licensing practices in the tourism sector in 32 countries. In Tanzania the tourism licence fees ranges from 1,000 to 5,000 US dollars for various categories and before applying, massive investment is needed to be able to meet the terms and conditions set by the ministry. In the past, only investors with a huge capital outlay are able to get the vital documents.

The African Development Bank: Tanzania Country strategy paper 2011-2015 notes that earnings from the tourism sector can be significantly enhanced by strengthening the regulatory environment and incentivizing private investors to undertake infrastructure improvements, amongst other measures. The government and stakeholders all agree that tourism is one of the country’s fastest-developing sectors.

According to the African Development Bank the poverty reduction potential of tourism development is considerable, plus it can provide an economic base for sustainable resource management. But does the regulatory environment allow for the realisation of this potential? That is the big question.

Source Tanzania Daily News