Tourism needs three bln birr bailout in Ethiopia

The coronavirus pandemic, which has plunged the global economy into recession, is hitting Ethiopia’s service sector hard, to a point where the government’s intervention is required for a possible 3 billion birr bailout, as reported by the Reporter, one of Ethiopia’s English weekly newspapers in Ethiopia

Sileshi Girma, Chief Executive Officer of Tourism Ethiopia, government organization mandated to develop tourism products and destinations across Ethiopia has told The Reporter that the impact of the pandemic is disproportionately affecting jobs and a loss in hard currency revenue than anticipated.

Following the dwindling occupancy rate across hotel establishments coupled with the massive labor costs, hoteliers are echoing the need for some sort of support mechanism, in the form of loan repayment extensions, tax waivers and the like, so that they could keep the labor force on the payroll.

In that regard, according to Sileshi, the hoteliers are looking for a year-long loan extension for close to three billion birr bank credits they have accessed in the past. Hotels in Addis Ababa alone have monthly loan repayment obligation ranging up to 130 million birr. The annual aggregate is some 1.5 billion birr in repayment requirement. Add to that, hotels across the regions have bank loan repayment obligations totaling 2.5 billion birr which is going to be difficult to service in the current conditions.

Hence, the idea is that, banks will be approached to consider an extension for at least one year. And the hotels, on their part, will be required to keep employees on their payroll.

Hotels in Addis Ababa have reported some 87 million birr labor cost in the form of wages and salaries. Across the nation, the industry has some 150 million birr in salaries and wages every year. In fact, some establishments have told workers to stay at home with paid annual leaves and others have chosen to refurbish and renovate their properties.

However, the hospitality sector is not the only sector that is looking for some form of a bailout. Across the board, the livelihoods of hundreds of thousands of people, who depend on incomes generated from tourists, are at stake. For instance, out of the 500 legally registered tour operators, 100 have accessed bank loans in order to import V8 and Coaster Bus vehicles. A tour operator has a duty free privilege to import at least three V8 four-wheel and mini bus cars to expand its business. For that reason, as many as 100 tour operators have taken out bank loans and now are faced with the same fate as hoteliers are. Sileshi argues that these are just the tip of the iceberg and emphasized that they just showcase the impacts.

The Tourism sector contributes five percent to Ethiopia’s GDP and has a 30 percent share from the services sector export earnings. “Employment opportunities remain at the hands of the private sector,” Sileshi said. There have been engagements with the Ministry of Finance and players in the private sector, to find ways to protect as many as 12,000 employees’ jobs, working in some 130 star rated hotels in Addis Ababa.  

For the current fiscal year, luckily, Ethiopia’s peak tourism season has already concluded three months ago. October, November, December and January included are the hot months where major events are held. Because of that reason, COVID-19 will have less impact on the expected tourism revenues and two third of the entire 2019 and 2020 target revenues, even if there could be a five month total lockdown which the government reassures will not happen.

However, the situation is likely to be exacerbated, as core leisure tourism markets such as Germany, Spain, Italy, the US and France are currently grappling with the pandemic and remain to be closed for unforeseeable time. There are also the likes of South Korea and China which are considered as emerging markets for Ethiopian tourism. Globally, by the estimates of the United Nations World Tourism Organization (UNWTO), the world tourism is expected to plummet by about 20 to 30 percent in 2020.

However, Tourism Ethiopia, a state run entity mostly working at developing national tourism marketing and destinations, is currently actively engaged with a task to rebrand the sector. A new branding package was scheduled to be unveiled in Europe until COVID-19 became the priority. Nevertheless, Tourism Ethiopia is extending solidarity and considering new marketing strategies, to the extent of free visa services, in order to revive the sector.

Source: thereporterethiopia/ By Birhanu Fikade