Tourism To The Rescue?
With the recent decline in the price of
commodities, Emerging Markets are trying to increase and maintain their growth
levels through other mediums. Tourism could help them on their mission. Indeed,
whereas in 1990 the number of visitors in Sub-Saharan Africa was just over 6
million, in 2010 this increased to over 30 million by 2010, highlighting how
tourism can play a large part in increasing aggregate demand in these
developing nations.
It is well known that the tourist industry is
labour intensive, and thus an increase in arrivals is likely to decrease the
unemployment rate in these African nations. Tourism will increase employment
for hotel workers, cleaners as well as waiters and waitresses. However,
employment will also increase due to derived demand. For example, the demand
for hotel accommodation will in turn increase the demand for food, which can be
provided by the local agricultural sector. Moreover, the Footsteps Eco resort
in The Gambia is helping to increase employment in the local community as the
resort has signed contracts with local craftsmen, who are employed to create
furniture for the resort from local wood. In turn, these craftsmen will also
create employment in the community as they spend the money on food and
necessities, stimulating the multiplier effect. Therefore, through involving
the local community, sub-Saharan African nations can increase employment in
their countries both directly and indirectly, thus increasing aggregate demand
to higher levels. Indeed, Zanzibar’s president, Dr Ali Mohamed Shein, has
forecasted that in 5 years time half of the country’s population will be
directly or indirectly involved in the tourist industry. Moreover, an increase in tourism in South
Africa should help to bring greater equality between males and females. This is
due to the fact that 80pc of males are employed in Sub-Saharan Africa, compared
to 60pc of females. However, in the tourism industry women account for 70pc of
the labour force.
Obstacles: Viability
Critics may argue that development on tourism
is not a viable growth plan. However, tourism is not expected to pull people
out of poverty; tourism is intended to increase growth in these developing
nations by a significant amount by increasing their incomes. Through increasing
the incomes of domestic citizens through tourism, further innovation and
businesses may develop which will increase aggregate demand further. Moreover,
with greater incomes, local citizens will have the means to access these local
businesses and buy local goods, increasing the aggregate demand of the economy
through consumption. Indeed, it has been highlighted that Cape Verde’s growth
rate of 6.5pc for the past 10 years, comparable to China, has mainly been due
to tourism.
However, it is true that there are many
obstacles that need to be overcome before tourism can be used to stimulate
growth in the economy. Indeed, tourism tends to be seasonal, resulting in high
levels of employment in the summer months and a sharp increase in unemployment
in the winter months, as fewer tourists tend to travel to sub-Saharan Africa. Moreover,
tourism is highly dependent on the global climate; should a global recession
ensue, it seems unlikely that global tourist levels would be high, thus
resulting in a reduction in aggregate demand in tourist destinations. Indeed,
during the ‘Great Recession’, global tourism decreased by 4pc.
Furthermore, a significant proportion of the profit
from tourist destinations in developing countries is known to ‘leak’ abroad,
meaning that the aforementioned increase in incomes of local citizens is
minimal. For example, in Vanuatu, a country in the Pacific Ocean, 90pc of the
profits from tourism go to foreign companies, and thus ‘leak’ out of the
economy to the company’s country of origin. A further example of profits
‘leaking’ out of the country is found by the case of Machu Picchu in Peru,
where all of the large hotels and the train line is owned by The Orient-Express
Hotel groups, and thus all of the profits flow out to its Head Quarters in Bermuda. Critics would counter and argue that
this provides adequate grounds for developing nations to focus on growing
agricultural produce, rather than relying on tourism. However, it is important
to note that in Tanzania, although foreign companies capture 50pc of the
profits from the tourist industry, farmers receive only 8pc of the retail price
of the coffee that they produce. This highlights how developing countries such
as Tanzania would thus receive greater benefits from focusing on tourism.
Obstacles: Infrastructure
However, sub-Saharan Africa needs to improve
its infrastructure in order to make it an attractive destination for tourists.
There are poor roads and few airports, meaning that tourists find is difficult to
reach these destinations and so few travel on these routes. The airlines that
do travel to airports in the capital cities of these countries have high fares due
to the lack of competition. However, this further reduces the influx of tourists,
as few are willing to pay prices that can be up to 35pc more expensive than
flights to other parts of the world that are a similar distance away. Moreover,
tourist visas can be particularly difficult to obtain in these nations, and
this further acts as a deterrent for potential tourists who do not wish to
spend excessive amounts of time obtaining a visa to visit a country of which
they have little knowledge about. If visas took less time to obtain, more
potential tourists may visit the country as the cost of obtaining a visa no
longer outweighs the benefit of discovering a new holiday destination.
Indeed, a reduction in obstacles can
drastically increase the number of tourists visiting these developing
countries. This is evidenced by the fact that there was a rapid increase in
tourism due to the abandonment in visa requirements of countries in the
‘Southern African Development Community’ recently. This ensured that travel
between nations become much easier, as there are fewer regulations. Indeed, in
Mozambique the number of tourists increased by just under 300 pc between 2005
and 2010, and most of these visitors were from nearby developing nations.
Therefore, in order for sub-Saharan Africa to
benefit from tourism, she needs to invest in infrastructure to attract the
marginal tourists. Capital can be attracted if these countries register to sell
government bonds, and the government can then embark on these public building
projects. Alternatively, governments of Western nations could engage in FDI,
using money from the 0.7 of GDP Aid Budget, rather than giving the money to
corrupt governments who misuse the funds.
Tourism: A viable solution?
Tourism can help sub-Saharan African nations
to increase aggregate demand in their economy, as foreigners come and spend
money in hotels, restaurants and participating in local activities. However, in
order to induce the marginal tourist to visit, developing nations need to
increase investment into infrastructure, as well as reducing government ‘red
tape’, in order to reduce the costs and difficulties of visiting. Western
nations could engage in FDI projects as part of their Aid Budget in order to
help these developing countries more directly. However, it should be noted that
it tourism will only help in increasing incomes and aggregate demand in the
country initially, and citizens must use the growth generated by tourism to
invest and create their own businesses in order to ensure sustainable
development. This is because tourism is highly cyclical, dependent on global
conditions and most of the profit ‘leaks’ from these countries.
