Zimbabwe’s battered tourism industry is facing an imminent viability crisis as local banks are walking away from funding the ailing sector, Business Times can report.
The ravages of the Covid-19 pandemic have turned the country’s tourism sector upside down, which has fallen off a cliff due to the ravages of the virus, which has not only been disruptive but also devastating for many travel and tourism companies.
Many players are now at crossroads.
Executives from the banking sector told Business Times that the country’s lenders were reluctant to financially support the hospitality sector, which has been contributing about 10% to the country’s gross domestic product.
Tourism Business Council president, Wengai Nhau, expressed concern, saying local banks were shunning the tourism sector.
“There is no business without risk. It seems bankers do not find our industry viable because of Covid-19. But, if they do not do [funding], we cannot close our businesses because somebody is not seeing sense in our businesses,” Nhau said.
Efforts to get a comment from the Bankers Association of Zimbabwe were futile.
But, the permanent secretary in the Ministry of Finance and Economic Development, George Guvamatanga said local banks were caught between a rock and a hard place.
“We are very aware of the difficulties the tourism sector players are battling with, especially failure to access funds from the banks. We are also aware of the volatility of the industry, which has been forced by the pandemic.
However, it’s simply a business strategy by the banks so say if I lend today, and the pandemic ravages the sector again, would the tourism companies pay back with less than 50% sitting capacity. I still find it very reasonable.”
He added: “For one to be successful in business, you need a minimum number of customers. Current volumes have not justified that. We have, however, been engaging banks on the matter.”
The Zimbabwe tourism sector is estimated to have lost billions of dollars in potential revenue in the last 12 months due to the Covid-19 pandemic.
Prior to the pandemic, more than 400 000 tourists each year visited Zimbabwe’s tourist destinations.
But, after the outbreak of the pandemic, tourists’ activities were shut down, leaving tourism companies in severe financial distress.
With the reopening of the sector, hopes are also high that a vaccine rollout, implemented by the government, could bring back the much-needed tourism in the resort towns.
But players in the tourism sector have been scrambling to access funding from banks to kick start their businesses.
In his 2021 National Budget, Finance minister Mthuli Ncube said the Tourism Recovery and Growth Strategy launched by President Emmerson Mnangagwa was set to revive the growth in the tourism sector.
He said the revival of the tourism industry was set to achieve a US$5bn sector by 2025, anchored on the country’s abundant natural resources, rich cultural heritage and diverse scenery.
Government has also exempted VAT on all tourism services for domestic tourists in a bid to reduce the prices of tourism products and services.