The Implications of Zambia’s Revised Visa Fees in the Tourism Sector
Tourism Council of Zambia
March, 2008 from The Livingstone Weekly
1. Background
Business success, whether at the industry level, or the level of the individual entity, depends on the quality and competitiveness of a combination of: product, location, service delivery and price. A survey of international tour agents conducted during research for this paper suggest that Zambia’s tourism sector is performing well on at least the first three of these four criteria - Zambia is seen as an expensive destination - at the national level.
However, two conditional statements on Zambia’s tourism pricing are required to place this statement in context:
firstly, Livingstone and the south-western tourism circuit and some elements of the Lower Zambezi and South Luangwa tourism areas, are linked into cross-border tourism circuits and the South African supply chain and are more price sensitive than internal tours and are subject to some market resistance from Zambia’s rising prices. This is now being emphasised with the apparent re-emergence of Zimbabwean tourism; and the cost of carbon taxes, departures taxes, fuel levies, visas and the like is increasing the ancillary cost component of holidays to southern Africa to a level where clients are now aware of and sensitive to these additions.
Tourism is now recognised as an important contributor to the economy and has been formally placed as one of four key pillars of growth driving the Fifth National Development Plan. In spite of recent economic skewing created by the exceptional price of Zambia’s base and precious metal exports and associated mining investments, the tourism sector is performing quite competitively with critical regional tourism markets – especially Botswana, Tanzania, Namibia and even Zimbabwe (which it is now starting to show signs of recovery).
The medium term (1999 to 2006) moving average for total visitor arrivals has increased from 8.2% to 9.4% per annum; following a significant 13.2% increase in 2006 to 756,860 visitor arrivals (2007 data are not yet available). The 2006 growth rate exceeds the World Tourism Organisation data for both sub-Saharan Africa and Africa as a whole. Perhaps even more important is the exceptional 17.7% increase in holiday tourist arrivals in 2006 (over 2005 arrivals), to 242,358, or 32% of all arrivals.
These figures should be seen in context – they are more than three times higher than growth rates in the early 2000’s – and confirm that Zambia is now on the tourist map. Current arrivals trends suggest that Zambia will achieve between 1.4 million and 2.0 million arrivals by 2015 (see Figure 2). This will probably generate between 450,000 and 650,000 holiday tourist a year by then.
But to put Zambia’s progress in perspective it is worth noting that Zimbabwe achieved in excess of 2 million visitor arrivals in the 1990’s.
Where do Zambia’s tourists come from? In 2005 Southern Africa was the most important source area for holiday tourists, providing 38% of holiday arrivals, with Europe next with 31%, the Asia Pacific region providing 11%, the Americas 10%, and the rest of Africa another 10%.
This changed dramatically in 2006 with the share of European tourist arrivals increasing by 39% to 37% of the market; American arrivals by 66% (to 14%) and Asian/Pacific arrivals by 13% (to retain 11% of the market). Simultaneously, and significantly, the southern African market share has fallen from 38% to 31% (with a reduction in approximately 3,000 tourists). What has changed?
Data collected from the Ministry of Tourism, Environment and Natural Resources, 2008
all suggest that after many years of hard work Zambia’s tourist industry is beginning to take off. It is at this critical point that the potentially damaging 2008 budget adjustments to the visa regime have been introduced.
2. Issues from the New Visa Measures
This paper examines the issues as an objective risk assessment of possible impacts on future tourist arrival patterns and revenue streams. And also possible constructive modifications to the visa measures. The paper is based on data from the Ministry of Tourism, Environment and Natural Resources, official publications from the Immigration Department and a Tourism Council of Zambia questionnaire that was circulated to principal tour agents around the world that serve the Zambian market.
The principal issues are threefold:
Zambia is on the brink of major tourism growth - and unnecessary regulatory, or other changes can interrupt, or even reverse, the momentum achieved;
the introduced visa fee increases apply to and directly affect Zambia’s principal off-shore source of tourists – the United Kingdom; as well as a large and rapidly growing market source – the United States (10.6%) – as well as business visitors from these countries; and the removal of the visa waiver facility (that allowed bone fide tourists staying with licensed tourism operators to a waiver on visa fees), affects all non-African nationals visiting Zambia.
3. International Tourist Responses
Responses to this tour agent questionnaire that was circulated widely in the United States, the United Kingdom, the rest of Europe, Australia and southern Africa are unequivocal about two issues. The top-end tourist market (logically), will be less affected by the visa increases than other market sectors. These clients pay significant amounts for a 6- to 14-day holiday to Zambia and the region and an additional US$140 per person is unlikely to deter them (however, even these tourists will be deterred). This is reinforced by another finding of the questionnaire; that many tourists (23% of responses) see Zambia as a “must visit” destination, with a further 23% of responses seeing Zambia as a more interesting destination. In short Zambia is a “new” tourist destination and as such is beginning to draw high-cost tourists who have not visited before.
On the other hand, the questionnaire response was equally definite that some top-end, as well as mid-range and budget holiday clients from at least the UK and USA will be deterred by the new visa measures. These clients made up approximately 40% of the 2006 arrivals to Zambia and probably increased in 2007.
4. Reasons for the 2008 Visa Measures
The 2008 changes to the visa regime are understood to be mainly a rationalisation of reciprocal visa charges with Canada, the United Kingdom and the United States of America. However, given Zambia’s tourism sector objectives under the FNDP, the visa fee increases were presumably also introduced as a revenue-generating measure. It is also assumed that this was a calculated risk that increased fiscal contributions from the sector through the new visa fees would exceed any losses due to tourists diverting to other destinations. The validity of this assumption is discussed in section 7.
The United Kingdom contributes a full 14% of all holiday tourist arrivals to Zambia and the United States another 10.6% - the two largest tourist source countries after South Africa (22%) - who do not pay visas. Canada only contributes around 2% and is not significant to any arguments for or against visa changes. Thus if an increase in visa revenue is the overall objective, the countries chosen coincidentally also contribute a quarter of all holiday arrivals to Zambia – and strongly support this government fiscal strategy.
As already noted, the 2008 visa schedule also removed the “visa waiver” facility, where tourists staying with a licensed tourism operation were not required to pay visa fees. Some argue that the visa waiver facility was ineffective as it was sometimes poorly administered – leading to disgruntled tourists on day one of their holiday – and was not readily accessible to those organising their own holidays.
5. 2008 Visa Fee Revenue Benefits
Assuming that 70% of all arriving holiday tourists were accessing the visa waiver facility, the 2008 visa measures overnight increased visa revenues by US$ 50 all “other national” tourists due to pay visas, possibly including Canadians, but otherwise US$ 55 for Canadian tourists, US$135 for United States tourists and US$ 140 for United Kingdom tourists – a major windfall estimated at US$ 4.3 million from Canadian, UK and USA tourists alone (calculated on the basis of the available 2006 holiday tourist arrivals data).
6. Anticipated General Tourism Sector Impacts and Responses
Assuming this windfall tax revenue potential is sustained, are the medium-term financial and economic effects of the measures as beneficial as they look at first sight? And why does the tourism industry have major concerns about the new visa measures? The latter question is discussed first and falls into seven main categories.
Market Loyalty – tour agent markets are reasonably robust, but events such as the Asian tsunami, the Zimbabwean situation (see further below) and recently Kenya, demonstrate that rapid re-orientations of tourist preference can happen in real time. Tour agents are now required to comply with significant international health and safety and holiday insurance requirements. Therefore, sudden shifts in their loyalties are understandable where factors increase their risk. The visa fee measures introduce two risks:
the visa fee increases were made practically immediately, thus forcing affected tourists who had already paid for their holidays to an unexpected increase of around US$ 280 per couple, or US$ 560 for a family of four. Our questionnaire indicates that 51% of all tourists to Zambia include other countries in the region in their packages. In many cases this requires a multiple-entry visa, so for a UK family of four an unexpected increase of US$ 1,768 has occurred where a visit to Botswana and or Namibia or Zimbabwe was included with a return through Zambia; and Zambia is a relatively new destination, especially for USA and European tourists and sudden policy changes in this new market area is likely to have negative impacts on tour agents’ confidence about the security of other issues;
Administrative Effectiveness – regrettably the introduction of the new visa regime was made with immediate effect. As the tourism industry works a year ahead of actual arrivals (for brochure production, clarification on entry requirements, airline schedules and bookings and so on), and holidays are often booked at least 6 months in advance; this created an unnecessary negative impact. The Department of Immigration have recently reported the difference in visa fee collections for a 10-day period before the new measures and a 10-day period immediately following their introduction. Their report enthusiastically highlights a 200% increase in US$ visa fee receipts and a 1,000% plus increase in UK Sterling visa fees. It is of considerable concern that the report is numerically incorrect, but also that its authors are unaware that the obvious reason for the apparent absence of immediate resistance to the visa fee increases is that holidays are booked months in advance and late cancellations, or changes, result in significantly reduced refunds.
Of equal concern are four other issues:
in this crucial period of regulatory change, the Immigration website, the official statements from the Immigration Department and the practical interpretation of the new visa regulations at different ports of entry all varied;
it appears that tourists are now no longer unable to purchase multiple entry visas on arrival in Zambia;
the third issue is that the US$ 10 “day visitor” visa for relevant nationals visiting from neighbouring countries for day activity purposes – crucially important especially to activity providers in Livingstone – was halted and remains an area of confusion; and
the extreme cost (US$ 440) of the multiple entry visa for UK nationals introduces doubts that the reciprocity of this measure has been accurately applied – and in any case when combined with application procedures is now a major deterrent to UK multiple entry tourists.
Visa Competitiveness – although, as noted earlier, the new visa fees for UK and USA citizens are in themselves apparently insignificant in the context of a 10 to 14 day African holiday package, of more relevance to Zambian tourism is the cost in comparison to alternative regional destinations is big enough to create immediate consumer resistance. This is particularly so where tours are routed through South Africa, to Namibia and Botswana, with Zambia as a possible add-on destination. It is equally important for the rapidly growing American market where Zambia is not yet seen as a primary destination;
Effects on Zambia’s UK Tourist Base – The UK has, since independence, been a main source area for Zambia’s tourism industry – its tourists often being more willing than most to explore new destinations and activity areas. At a personal level these tourists, many of whom are multiple-returning clients, or use the multiple-entry facility in planning their holiday, see being specifically penalised by a reciprocal immigration arrangement, however justified, as a holiday obstacle (see Annex 1). At the industry/tour agent level it is seen as strategically short-sighted in the context of probable negative impacts on the 14% of arrivals contributed by UK nationals and therefore also on future revenue streams; but also on the uninterrupted growth of tourism into Zambia;
Impacts on the Growing USA Market - In the 1980’s USA clients represented a significant element of Zambia’s foreign tourist traffic. This decreased with the economic decline of Zambia in the late 1980’s and 1990’s and culminated in the September 11th 2001 catastrophe. Since the mid-2000’s the USA tourist numbers have slowly increased in spite of big global gains elsewhere (in part this reflects the ineffectiveness of Zambia’s national marketing effort in that country - which is a separate but important issue). The 2006 data show that although many Americans are still woefully ignorant about Zambia’s geographic location and tourism opportunities, the “new destination” driver has increased the number of USA tourists to nearly 11% of all arrivals. A sudden increase in visa fees to a client base that is often enticed into Zambia on the back of a South African, Namibian and Botswana tour, could immediately reverse these hard-won gains – as many recent client and agent comments suggest;
Stimulus for the Recovering Zimbabwean Tourism Sector – over the last five years Zambia has benefited from a notable diversion of tourism flows from Victoria Falls in Zimbabwe to Livingstone (as well as a migration of other Zimbabwean tourist clients and tour operators). The resulting 50% decline in tourist arrivals to Zimbabwe (see Figure 1 above), is now being reversed by aggressive strategic responses from the Zimbabwean tourism industry. The recent significant increase in Zambian visa fees will very likely strengthen the diversion of US and UK (as well as South African and other) tourists from Livingstone to Victoria Falls; as well as budget tourists travelling in southern African;
Charter Pilot and Crew Visas - unfortunately the 2008 visa increases come in the wake of an equally sudden and dramatic increase in light aircraft aviation charges that were levied by the National Airports Corporation in 2006. They were only reversed after serious industry consultation, but also involved many of the same tourism agents and operators now being impacted. Charter pilots and crew bringing tourists into Zambia are still required to pay visa fees.
Perhaps most telling is the strength of response received to the foreign tour agent questionnaire sent out in late-February to assess responses to the new visa scenario. In 2006 a World Bank-funded Tourism Supply-Side Study sent out a similar questionnaire to tour agents around the world. Only 28 responses were received from 166 questionnaires that were distributed. On this occasion more than 147 responses have been received at very short notice and without undue soliciting; including more than 49 UK agents; more than 32 USA agents; 50 Southern African agents and 16 “other country” (mainly European and Australian) agents – a reasonable representation of the contribution of Zambia’s main tourist origin regions.
7. Anticipated Financial and Economic Impacts on the Tourism Sector
Our research suggests that the likely financial and economic impacts of the new visa measures reflect the disquiet that the above comments create.
Visa Fee Revenues
Analysis based on World Bank demand-side research of the Zambian tourism industry in 2006 (that calculated an average tourist spend in Zambia of US$ 1,100) and the disaggregated 2006 tourist arrival data, indicate that the 242,358 tourists that visited Zambia in 2006 will have contributed around US$ 269 million to the economy through payment for goods and services. If the 2008 visa regime had been applied at that time Zambia would have earned at around US$ 13 million in visa fees.
Sector Financial Losses
On the basis of comments received from tourists and agents while researching this paper (please refer to Annex 1), it is assumed conservatively that 1% of top-end tourists, 3% of middle bracket holiday makers and 15% of budget holiday makers will be diverted from Zambia as a tourism destination; or not come to Zambia. The financial impact of this loss in tourist earnings using a weighted expenditure pattern (US$ 1,500 for top-end; US$ 1,000 for middle bracket; and US$ 500 for budget holidays) on the reduced arrivals will be an estimated US$ 29 million – more than double the visa earnings from the increased visa fees.
Negative Sector Economic Impacts
Placed in an economic context, and again referring to the 2006 World Bank tourism sector research that calculated a tourism sector economic multiplier of 2.1, the negative impact on GDP is conservatively estimated to be in the region of US$ 63 million.
Another important factor is that tourism earnings circulate within and contribute to the communities where they are spent. On the other hand fiscal revenues are returned to government accounts with limited returns to the tourism sector.
8. Conclusions - Big Picture Considerations
In calculating the financial and economic impacts of tourists being diverted to or remaining in alternative destinations by Zambia’s new visa measures, one should not lose sight of the bigger picture. Four factors need consideration in an increasingly competitive world:
1) growth curves suggest that world tourist arrivals will grow to 1 billion by 2010 and that competition for a bigger slice will be intense in emerging markets such as Africa – especially in the run-up to the 2010 World Cup in South Africa;
2) the negative perception impact of the new visa fees is widespread, but particularly evident in the recently growing USA market and in the South African budget market that still supports Zimbabwean tourism – and is a principal sources of tourists to Zambia (especially Livingstone);
3) between 21% and an estimated 30% of tourists to Zambia stay in budget accommodation of one sort or another. Many of these facilities are newly created investments by Zambian entrepreneurs and will be the most heavily impacted by the removal of the visa waiver facility and the tourist visa increases. It is precisely this sub-sector that government committed to supporting; and
4) while Botswana, Malawi, Namibia and South Africa are well prepared for the SADC Tourism Protocol Univisa (with zero visa status for all tourists and free flows between the countries), Zambia may be perceived to be taking a separate approach by increasing its visas.
In an overall context, unless addressed, these circumstances will do much to damage the tourism sector objectives of the FNDP, but more seriously, Zambia’s image in the international tourism world. With the conservatism of international tour agents the image factor could have effects long after the FNDP ends in two years’ time. More unfortunately, this damage is likely to have a double effect.
Initially it is expected that there will be losses through disruption to the impetus achieved by Zambian tourism operators, their agents, the Tourism Council of Zambia and the Ministry of Tourism, Environment and Natural Resources and its statutory bodies (National Heritage Conservation Commission; National Museums; ZAWA; and ZNTB – now ZTB), over the last five to ten years; but secondly there will be the loss of a proportional share of the markets that Zambia could have diverted from neighbouring countries (particularly Botswana – Zambia’s chief competitor – Malawi and Namibia; but also Kenya and Tanzania – another of Zambia’s chief competitors).
The hasty introduction of the 2008 revised visa schedule and subsequent events bring to the fore a number of issues:
the long-acknowledged absence of a practical, medium-term tourism strategy that government is able to work towards;
the important implications that a tourism strategy would have for how tourism development could be nurtured in the cross-border Livingstone areas; compared with the centre and east of Zambia; and particularly Zambia’s still undeveloped northern circuit;
the lack of consultation between elements of the public service and between the public and private sectors (tourism has been acknowledged by government to be a private-sector driven industry – so why not consult them, however difficult this may seem at times). Zambia’s tourism sector and its selected offshore agents have invested heavily in developing Zambian tourism and the visa measures indicate an unnecessary and possibly unwarranted disregard for their efforts;
that short-term, apparent financial windfalls are not always as real as they may seem and may have significant negative short-, and especially medium- and long-term financial and economic impacts; and that although conditions have improved, the administration of tourism arrivals (and particularly the administration of changed circumstances), still leaves much to be desired in coherence, consistency and simplicity – key factors that impact immediately on tourists at point of entry and their desire to visit, and return.
Comments received from tourists and tour agents have indicated a high level of criticism for the new visa measures. This having been said, it is believed that a positive and innovative response to the situation could reverse the damage done - but the strategy needs to be carefully choreographed.
Comments received suggest that the following factors that may be worth considering are:
the Livingstone area is unique in the tourism sense that with the new regional flight opportunities provided by the lengthened Livingstone Airport runway, it stands to gain considerable incoming traffic that will benefit the “Four Corners” area (Botswana, Namibia, Zambia and Zimbabwe) and also flows of tourists generated by the South African tourism supply chain. It also stands to lose significantly from two factors: a) the re-emergence of Zimbabwe as a significant and highly developed tourism destination; and b) the loss of traffic and revenue that will result from the high cost of single entry visas for UK and USA citizens and multiple-entry visas for UK citizens wishing to extend their Zambian stay with visits to neighbouring countries - and Zambia’s non-competitive visa position relative to these neighbouring countries;
also in Livingstone, the continuation of the day-visit visa is critically important to supporting Zambia’s competitive edge in adventure tourism, by drawing visitors from Zimbabwe, Botswana and Namibia wishing to fly over the Victoria Falls, white-water raft, bunji jump, or partake of Livingstone’s numerous other cultural and physical activities. These tourists contribute an estimated 30% to the turnover for these entities – income which may be critically reduced if the day visitor facility is removed, and/or the new visa costs equal or exceed the cost of the activity itself – and possible lead to business closures;
the administration of visas would be infinitely simplified if a single visa fee was levied on non-African nationals and purchasable easily at the port of entry. In these circumstances standard visa application forms could be provided with arrivals forms on all incoming flights and at ports of entry; tour agents and tourists could be advised through the official web site to have a US$ bank note of the required denomination available to reduce the need for change and transaction time at entry points (poor port of entry facilities and management, particularly at Kazangula, are a common theme in complaints from tourists);
the tour agent questionnaire indicated that 51% of responding tour agents provide east and southern African holidays that include more than one country. In these circumstances the easy availability of multiple-entry visas at ports of entry (not requiring prior application), would encourage visits to and longer stays in Zambia (the holiday stay length in Zambia is of the order to 6 days compared to around 14 in Namibia). The 2006 World Bank Tourism Demand-Side Survey has demonstrated the significant financial and economic benefits to Zambia of increasing tourist stay length;
fixing the standard visa rate for all non-African nationals at reasonable levels would send a positive message to tourists that may wish to divert, or extend their holidays to Zambia from other regions. Zambia’s main southern competitor countries have zero visa policies that Zambia could progressively work towards in the context of the SADC Tourism Protocol due for implementation by 2010. But most international tour agents indicated that a reasonable visa rate is not a present deterrent, even though Zambia’s previous tourist visa waiver facility was generally seen as an innovative, if often inefficiently administered development;
removing the current need for visas for pilots and crew of charter operations bringing tourists to Zambia would have very little fiscal impact; bring this sector in line with the treatment of aircrew of scheduled services, and particularly for multiple destination air-chartered holidays, would make Zambia procedurally more attractive;
Government’s further consideration of the current visa measures could be scored around two issues: firstly an honest appreciation that Zambia was listening to its valued tourist clients and their agents and had recognised the need, not to reduce visa fees (revenue was needed to fund the continual improvement of immigration services), but in response to visitor and agent comments, to re-arrange them in a simplified and rationalised format; and secondly that appreciation was being given to Zambia’s commitment to the SADC Tourism Protocol and the need to start an early move towards the Univisa concept.
A smooth and tourist-aware response to the current visa measures is likely to permit the growth in tourist arrivals from the key UK and USA markets to resume with limited negative impacts. It would also minimise the possible diverting effect to Zimbabwe for South African tourists.
However, most importantly, the early application of a raft of appropriate tourist arrival incentive measures will: 1) place Zambia in an excellent position to challenge Zimbabwe’s return to its previous apex position in regional tourism north of South Africa; and 2) to position Zambia to gain a major market share from the 2010 World Cup.
