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20 April 2017

A ‘golden age’ of tourism should mean plenty of legal work in areas such as project finance but are sub-Saharan countries – and their lawyers – geared up for it? Ian Gaitta, Partner at AC&H, has been interviewed by The Lawyer magazine.  [caption id="attachment_4348" align="alignleft" width="150"] Ian Gaitta[/caption] Q: The economy in sub-Saharan Africa is set to grow significantly, which should mean a rise in tourism and hospitality-related projects. What opportunities is this likely to create for Africa’s leading local law firms? We anticipate a growth in transactional work. Also, in some markets where government has traditionally been a key player in the hospitality industry we expect to see privatisations as governments divest themselves of their operations. We also expect to see more financing and real estate development work related to hospitality and tourism projects, and tax and regulatory advisory work in this sector should also increase as projects are developed. There will be increased activity around contracts such as hotel management and hotel franchise arrangements as international hotel brands grow their portfolios.  Q: Which countries have most potential for tourism and how is the legal market adapting in response? From the perspective of tourism’s contribution to the job market, based on research published by the African Development Bank countries such as South Africa, Ethiopia, Nigeria, Tanzania and Madagascar in sub-Saharan Africa have the highest tourism employment numbers on the continent. In terms of tourism employment as a percentage of total employment, the small island nations such as Seychelles, Cape Verde and Mauritius rate highest in the region. From the perspective of number of openings or anticipated openings of internationally branded hotels the data we’ve seen indicates that countries such as Nigeria, Angola and Zambia, which are highly dependent on commodities for government revenue and foreign exchange but have traditionally featured high on the wish lists of international hotel brands, are showing slower hotel pipeline growth. Countries with more diversified economies such as Ethiopia, Kenya and Tanzania seem to be attracting more interest from international hotel brands. The legal market is responding by developing sector-specific legal expertise and experience. Lawyers and firms with a sound understanding of market trends and key commercial drivers from the perspective of investors, owners and operators in the hospitality sector, and their lenders as well as the experience of structuring and negotiating transactions and contracts in this sector, will have an edge.  Q: How is sustainable infrastructure to accommodate the fast-paced growth of the tourism sector in sub-Saharan Africa being developed? The idea of sustainability extends beyond the traditional focus on the use of ‘green’ or efficient technologies and environmental protection to such matters as indigenous people’s rights and human rights generally, sustainable consumption and community benefit and participation. A good example of sustainability in tourism is the conservancy system in Kenya.Conservancies are, in simple terms, joint venture arrangements between local communities (as the land holders) and commercial tourism ventures (as the operators). The system developed as a response to challenges experienced in some of Kenya’s main wildlife tourism areas as a result of uncontrolled tourism facility development and operations, environmental degradation and concerns over host community exploitation/lack of benefits/ poaching/antagonism. Under the conservancy arrangements there is better oversight of tourism development and operations in the area, more streamlined land use both for tourism and for human activity by the host communities and better enforcement of environmental safeguards. Host communities have also realised tangible economic benefits through land leases to the operators, revenue-sharing and job opportunities. Conservancies have also led to more acreage being used for tourism, a significant reduction in poaching and the regeneration of wildlife habitats. It is important that governments, private operators and local communities in the region work together to explore similar initiatives to encourage sustainable tourism operations and conservation efforts that engender trust and participation in the local community.  Q: How do you see foreign investment related to tourism and hospitality being encouraged in sub-Saharan Africa, and how could this be improved? There are efforts by regional governments to promote foreign investment. Governments that have previously been players in the hospitality market as owners or operators of hotels are divesting and encouraging private sector ownership and operation. Also, governments are addressing macro issues such as security and road and telecoms infrastructure improvements to improve access to tourism facilities. And governments are collaborating with each other to ease regional travel and promote tourism into the region as a whole. Examples of this include the Greater Virunga Transboundary Collaboration, an initiative that co-ordinates conservation efforts in the Greater Virunga landscape shared by the Democratic Republic of Congo, Rwanda and Uganda, and the Northern Corridor Integration Projects, an initiative between Kenya, Rwanda, Uganda and South Sudan for collaboration in various areas including air space management, immigration and tourism. Governments are also offering fiscal incentives such as capital allowances on the taxation of inputs into hotel development, as well as other allowances applicable during the operational phase. For example, industrial buildings allowances in Kenya apply to hotel buildings too. Other similar governmental initiatives include removal of capital controls to facilitate efficient capital injection and the repatriation of profits from tourism operations, and streamlined visa and immigration processes. Governments have also sought to implement quality assurance initiatives in relation to tourism facilities through standardised hotel grading and classification. There have been such initiatives across the EAC, using standardised criteria. It is hoped such initiatives will enhance tourism and that increased demand will stimulate more investment. There is, of course, room for improvement. Concern has been expressed in some markets over the level of taxation of tourism-related activities ranging from aircraft landing fees to game park entry charges to VAT on ancillary services. There have also been concerns over the cost, time and uncertainty of the approval process for construction projects and, in some cases, duplication of roles between national and local governments. Greater transparency and efficiency around the approval processes would help.Sub-Saharan African governments should also give renewed impetus to the implementation of the ‘Yamoussoukro Decision’ to realise truly open skies in the region.  Q: What are the biggest challenges facing sub-Saharan Africa in terms of promoting tourism and its related infrastructure or investment projects? In terms of promoting foreign tourism, one of the major challenges is airlift capacity. There is a shortage of quality airport infrastructure and regional airlines. In addition, intra-African transport is quite expensive due to the ‘closed skies’, as many countries still protect their air space and national airlines at the expense of greater access and competition. Although many sub-Saharan African countries are signatories to the ‘open skies’ Yamoussoukro Decision, implementation is poor. This has dampened the growth of intra-African air transport and curtailed tourism. Apart from air transport, the on-the-ground transport, telecoms and security infrastructure in the region still needs improvement to ease access to tourism facilities and enhance visitor experience, and also to help develop secondary tourism markets. A related issue is the restrictive visa policies of various countries, which add to the cost of accessing tourism offerings. There is need to make visa processes more efficient and cost-effective, and also take advantage of the regional blocs such as the EAC and ‘Ecowas’ in West Africa to promote freedom of movement. There are also significant challenges arising from overall land use policies. The primary form of tourism is nature-based and lack of proper enforcement of sustainable land use practices causes degradation of the water catchments, forest cover and land and marine ecosystems that are critical to wildlife. This also encourages encroachment on wildlife areas and migration corridors by agriculture and settlement. Another critical issue is poaching and the illegal hunting of wildlife which, if uncurbed, will decimate species such as the rhino and the elephant. Data indicates that the continent has lost 100,000 elephants to poaching in the past three years alone, and the rate of rhino deaths by poaching now exceeds the rate of births. The value chain that supports poaching must be dealt with decisively if wildlife-based tourism is to be sustained.  Courtesy of: Matt Byrne   

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