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Harare - South African visitors to Zimbabwe have been hard hit by the country's 15% value added tax for the tourism and hospitality industry.
A hospitality industry executive has warned that South African tourists, already battling a massive decline in the value of the rand, could start staying away from their northern neighbour.
Zimbabwe is trying to revamp its attractiveness as a tourist resort, seeking to capitalise on foreign currency earnings from visitors spending cash while staying in the country.
READ: Tourism a spark of hope in ailing Zim economy
South Africans and other international visitors have however had to factor in a 15% rise in bookings as well as other services and activities in the tourism sector. Despite protestations from Tourism Minister Walter Mzembi, the government has refused to lift the 15% VAT on the industry.
John Moxon, chairperson of Pick n Pay's Zimbabwean partner Meikles Limited, said the tax has hurt South African tourists the most. Meikles runs city and resort hotels, and South Africa is apparently a key source market for the company's hospitality unit.
"The introduction of VAT has effectively made Zimbabwe an expensive destination, and the South African source market, given the depreciating rand, was significantly affected. This has impacted negatively on occupancy growth in the last quarter of the financial year," Moxon said in the company's 2015 annual report released on Thursday.
Meikles has just undertaken refurbishment of its Harare and Victoria Falls hotels to help them withstand competition from rivals. Moxon said Meikles was undertaking phase two of the refurbishment exercise for the Victoria Falls hotel which will be completed by July next year.
However, despite worries over the Zimbabwean tax, trading in the Meikles hotel division during the year to March 31 this year has been described as “satisfactory”. Revenues at US$16.4m were up 5% on the prior year period.
“This increase was assisted by a 13% rise in food revenue at Meikles Hotel and a 15% growth in revenue per available room at the Victoria Falls Hotel. Ebitda (earnings before interest, tax, depreciation and amortisation) for the year was $1.9m, reflecting a 46% increase on the previous financial year and is testimony to the resilience of group operations,” the company said.
Zimbabwe is expecting the tourism sector to make a significant contribution to economic growth this year. However, Finance Minister Patrick Chinamasa has revised the economy's growth prospects for 2015 from 3.5% to about 1.5%.
