Key characteristics of African tourism GVCs
Africa’s tourism GVCs are notable for many features, including the durability of package booking channels, low domestic demand for tourism, the presence of global – rather than regional – lead firms and the corresponding implications for leakages from the local economy as well as the importance of business travel.
This paper examines some of the most significant aspects of African tourism that influence the economic upgrading that is available to local stakeholders. It then concludes by identifying policy initiatives that may facilitate those upgrading trajectories.
Tourism is a dynamic source of economic growth throughout the world. The industry indirectly supported an estimated 292 million jobs in 2015 and indirectly accounted for 10.2 per cent of global gross domestic product (GDP). Its direct contribution to global GDP was estimated at 3.1 per cent, and tourism’s growth rate (also 3.1%) was higher than those of healthcare (2.8% growth rate), construction (2.8%), agriculture, forestry and fisheries (2.7%), financial services (2.5%), manufacturing (2.4%) and retail (2.3%). Because of this expansion, tourism generated close to 7 per cent of the world’s total exports in 2015. Moreover, the vitality of the industry is not confined to any one region; while Europe remains the most visited continent in the world, accounting for 51 per cent of all international tourist arrivals in 2014, Asia Pacific and Africa had the highest growth rates in terms of visitors over the decade from 2005 to 2014.
Africa affords international visitors a diverse array of potential attractions. While the continent is perhaps best known for its opportunities to see flora and fauna, there is an increasing variety of experiences to be had, from beach packages to urban explorations to cultural connections. Although visitor arrivals decreased from a historical apex of 55.7 million in 2014 to 53 million in 2015, tourism remains a significant component of economic growth. Visitor spending as a proportion of total exports is higher in Africa than in any region in the world, and tourism investments as a proportion of total investments exceed the global average.
Tourism’s economic profile is not uniform across Africa. South Africa has the largest national industry of anywhere on the continent, with nearly US$19 billion in total tourism spending in 2016. Egypt (US$12.4 billion), Nigeria (US$12.2 billion), Morocco (US$11.7 billion), Algeria (US$8 billion) and Kenya (US$4.3 billion) have the next largest economic footprints. At a regional level, East African tourism is driven by foreign visitor spending to a degree that is not replicated elsewhere on the continent – 56 per cent of its tourism receipts were generated by international arrivals in 2016, compared with the global average of 28 per cent. West Africa, on the other hand, is locally oriented, with domestic visitors generating 83 per cent of tourism receipts in 2016. West Africa is also unusually reliant on business tourism (50 per cent of all tourism spending, the highest proportion of any region in the world), while North Africa is geared towards leisure tourism (80 per cent of total receipts). While tourism will continue to be an economic engine, there are characteristics of the global industry that may impede Africa’s development if policy-makers do not recognise them and design strategies to alleviate constraints on firms and other stakeholders.
The tourism industry has been a popular topic among international organisations and academics, which has led to a wide range of recommendations for policy interventions that focus on various areas. Employing a GVC perspective in an analysis provides insights that both reinforce the traditional orthodoxies and offer unique perspectives. Holistic approaches that improve the position of distribution intermediaries and service providers can be prioritised. Although service providers frequently offer the greatest opportunities for employment in each chain, it is the distribution intermediaries that often control the sector’s upgrading potential, as they can facilitate links with end markets. Policy-makers can play a role in helping to overcome barriers that inhibit the kind of upgrading described in the previous section. Broad categories of constraints include the following:
Access to consumers: distribution intermediaries in many regions in Africa are dependent on foreign consumers; travellers in these regions are likely to use global tour operators to arrange packages in the region. This obstacle can be partly mitigated by facilitating product upgrades that appeal to African travellers, such as those employed by African Parks at Akagera National Park, and by reaching out directly to consumers in critical markets. Tourism boards can also play a role in boosting the communication skills of domestic tour operators or travel agents through professional development events and other training.
Skills training: management, organisation, communication and computer skills are critical for distribution intermediaries and service providers that seek to upgrade their position in the chain. There are international programmes designed to teach these skills to students, with the UNWTO.TedQual certification programme being perhaps the most prominent example. However, Africa has only two institutions that have earned certification: Utalii College in Kenya and the Hotel and Tourism Training Institute Trust in Zambia. Governments can play a role in either exploring the creation of hospitality programmes at existing institutions or providing funding mechanisms such as scholarships to enable domestic students to study in Kenya or Zambia.
Concession, investment and management policies: as Christian (2015) noted in her study of Kenyan and Ugandan tourism investment regimes, government policies can allow for varying governance models to take root. Minimal investment regulation has been observed in Kenya; this has encouraged overdevelopment in certain locations, thereby weakening the negotiating position of domestic service providers with distribution intermediaries. Kenya’s approach to tourism investments and concession areas contrasts with those of EAC peers such as Uganda and Rwanda. In Uganda, the Uganda Wildlife Authority exerts significant control over development in and around national parks, limiting the number of concession agreements that are disbursed. While this reduces overall employment, it empowers service providers that are active in the country. In Rwanda, the government takes an aggressive approach to cultivating PPPs with conservation-focused organisations that have allowed Rwandan distribution intermediaries to functionally upgrade through agreements with global lead firms.
Institutionalisation: formal institutions such as ministries of tourism and tourism boards can encourage co-ordination that ensures that stakeholder interests are aligned. Rwanda provides an illustrative example of the benefits of formalising institutions to attract large-scale meetings. The RDB used a loan from the World Bank to enter into a contract with the Business Tourism Company, a firm based in South Africa, and develop a MICE strategy, which was completed in 2014. That document led to the creation of the Rwanda Convention Bureau (RCB). The RCB has helped attract more events by joining ICCA, the industry association that provides public and private sector actors with access to the marketplace for worldwide MICE events.
This paper was written by Jack Daly of Duke University’s Center on Globalization, Governance & Competitiveness. The views expressed here are those of the author and do not necessarily represent those of the Commonwealth Secretariat.