This post is part of a blog series by our Business Manager Paula Tommila. She will be travelling across southern and eastern Africa for the rest of the year and writing about the different African Landscapes of Entrepreneurship. Read the first part here.
In tourism, Africa is on the path to become the next Thailand. African tourism industry provides an opportunity for substantial revenues through reasonable investments, with a potential for significant development impacts. The Dqae Qare San Lodge in Western Botswana and Liquid Dive Adventures resort in Mozambique perfectly exemplify how tourism can create real local impacts.
Infrastructure develops alongside the rapidly growing African economy. Improved flight connections and good quality roads make Africa’s stunning destinations more accessible than ever. Lack of time difference and mass tourism, as well as wide use of European languages are all benefits that should attract more and more European visitors looking for new holiday destinations.
For example, Mozambique has all the potential to be the next Thailand with its endless beaches, exceptionally diverse marine wildlife and laid-back atmosphere, while the whole continent is full of natural and cultural wonders waiting to be visited. Also, the growing African middle-class creates new demand for tourism services within the region.
The future of African tourism is expected to be on the growth track, and African destinations are hoped to become regular options also for the common international holidaymakers. Globally, tourism is one of the fastest growing industries, but in most of the African countries the global growth is yet to be reached. In 2016, Africa was the destination for 5.1% of the worldwide tourism arrivals, while the share of related income was only 3.0%.
International clientele combined with often affordable human resources is a combination attractive to investors in the workforce intensive tourism sector. Many large hotel chains are rapidly expanding in the African markets, followed by smaller players. Biggest growth in hotel rooms is planned for large capitals like Lagos, Cairo, Abuja and Addis Ababa, all attracted by business visitors. Statistics are not perfect, however, and updated figures for the growth in rural tourism such as wildlife safaris and beach resorts are not yet available.
Within the African tourism sector, future growth can be expected especially in mid-range options, as the volumes of tourists increase, both within the continent and from overseas. Africa will no longer be either a once-in-a-life-time safari experience with fancy (and pricy) luxury camps or a simple backpacker route but it will also cater to regular middle-class travelers and families looking for comfortable and memorable holidays. The required services are being created now, offering opportunities also for small-scale foreign investors.
Local business creates local profits
In 2017, travel and tourism related jobs accounted for 6.5% of total employment in Africa, equal to 22.8 million jobs. The high impact on job-creation makes tourism interesting for public investors, such as development finance institutions bound to creating lasting development impacts through their investments.
Tourism is not, however, a business for foreign investors only. While direct and indirect jobs created through tourism can make a big difference in communities, also the profits can be held at home through locally owned businesses. In addition to the several South African hotel chains and individual guesthouses, more and more businesses are locally or community-owned across the continent.
In the middle of the arid Kalahari Desert, Western Botswana, Dqae Qare San Lodge is owned by the local San tribe. The lodge and services are all operated by local villagers, while the community has hired external support for some of the managing tasks. In addition to accommodation and meals, guests are offered traditional bush experiences from bushcraft and fire making to traditional dance shows and story-telling sessions, all organized in the way they are done also when tourists are not around.
The business that started as a community project funded by a priest now stands on its own and is fully financed through the income generated. At the end, all revenues are pocketed locally.
Foreign investments without external investors
Another example of alternative investments in tourism can be found from Tofo Beach in Mozambique. Liquid Dive Adventures is a complex of a dive center, beach front accommodation and a restaurant, owned and run by four Finns. Apart from the dive shop license, the owners have established it all from a scratch with no previous experience in entrepreneurship nor the African continent.
“Many things here are against common sense but still very good. By doing this we can make true something we have always dreamed about and do it just the way we like. We’ll be entrepreneurs forever after this experience” says Satu Forsman, one of the original founders of the business.
Access to finance was difficult when it was most needed, thus the whole business had to be established with owners’ own capital. Once it was visible that the site had been built, dive shop was running, and visitors kept coming, external investors showed keen interest from different directions. By then, however, the business could stand on its own, thus the decision making could be kept in own hands.
Once you learn the rules, running a business in Africa is possible and positive also for Europeans but you can’t do it alone. For a foreigner, a trusted local support is a must. The regulation can be unclear, and authorities don’t always seem to coordinate, thus the foreign bureaucracy can feel overwhelming.
“The biggest surprise has been how well it all has gone, after all. Everything is possible and negotiable as long as you stay calm and keep smiling” continues Liquid Dive Adventures’ other co-founder Jari Forsman.
In line with the examples of Dqae Qare San Lodge and Liquid Dive Adventures, the relatively low investment costs, significant employment impacts, and growing international clientele of international tourism can rapidly modify African economies and strengthen their service sectors. By turning the developing side of the tourism sector into a business opportunity, the sector can also boost infrastructure and private sector development through indirect linkages, contributing to the growth of national economies and well-being at large.
- Paula Tommila, Business Manager, Gaia Consulting, email@example.com