Local Tour Operators Under Threat

Due to its ancient history, remnants of past civilizations, diverse cultures and natural beauty, Ethiopia has the potential to be a must-see destination for tourists. The country aspires to increase earnings from the sector which currently stand at close to three billion dollars annually, according to the Ministry of Culture and Tourism. Tour operators have a massive impact on the industry. In Ethiopia there are close to 500 individual tour and travel companies that are actively engaged in providing tours and tour operation related services. This is a massive increase compared to ten years ago. However, tour operators are facing new challenges from foreign and illegal tour operators that are snatching customers from them. EBR Ashenafi Endale explores the issue.

Ethiopia is among the top countries in Africa that are sources of illegal financial flows, which costs the country six percent of its gross domestic product annually. Money laundering, trade misinvoincing and transferring dirty money to foreign accounts are the major ways of moving capital out of Ethiopia. But it is surprising to hear that a significant amount of foreign currency is slipping away via tour operators.

Fikre Selassie Admassu, general manager of FK Explorer Ethiopia Travel and Tours, a company established 24 years ago, explains how illicit financing occurs among tour operators. “There are foreign tour operators that are not registered in Ethiopia, which bring tourists to the country after settling the payment abroad in hard currency. This way, these operators avoid bringing foreign currency in Ethiopia although the tourists receive service at Ethiopian tourist sites.”

Getnet Yigzaw, director of the Public Relations and Communication Directorate at the Ethiopian Tourism Organization (ETO) agrees. “The tourists come and go but the country earns no hard currency. In addition, some locally registered tour operators network with foreign tour operators to bring in visitors after the payment is made outside Ethiopia.”

Although the tourist flow is currently reviving, after a slow down in the past few months due to the political unrest, stakeholders stress that legitimate tour operators, which follow the laws of the country, are losing ground. “The growth of illegal operators that conduct businesses under the tax radar, coupled with many persisting problems, is challenging the survival of the industry,” elaborates Fikre Selassie, whose company used to host 150 to 200 tourists annually five years ago. This has fallen to below 100 over the last three years.

“Tourists sometimes cannot differentiate between legal and illegal tour operators,” adds Bewnet Shambel, CEO at Imagine Ethiopia Tour. There are two types of tourists: those who use tour operators and those who come by themselves. Tourists, who come on their own usually pay guides and agents in foreign currencies after they arrive in Ethiopia. On the other hand, those who come with illegal operators settle payment in foreign countries.

In both cases, transactions are done without the involvement of commercial banks operating in Ethiopia, as well as behind the back of the Ethiopian Revenues and Customs Authority. As a result, not even a penny of the hard currency these tourists pay goes to the country.

For legal tour operators, the concern is not only loss of foreign currency, but also the tour operating business overtaken by foreigners and illegal operators. “There are many foreign tour operators and guides operating in Ethiopia, especially Chinese. They snatch tourists from us. They bring their own nationals,” says Bewnet.

Insiders say most of the illegal operators are owned by foreigners, especially Italian citizens. Recently, Chinese operators are also becoming more involved, even though they have no legal representation and do not work with local operators. “Nowadays, Chinese visitors prefer to tour with Chinese guides, and the same goes for other nationalities. They only rent vehicles from the locals. These operators work using the infrastructure of the country but they are never taxed,” says Getinet.

Tour operators and officials say such undercuts are making it difficult to assess tourism related activities, including the tourist flow, in addition to the loss of already scarce hard currency. To make their case, industry players indicate the annual report prepared by the Ministry of Culture and Tourism (MoCT), which they say does not reflect what is on the ground. “Tourist flow has dwindled over the last three years, but the Ministry reports that it is increasing, while a significant portion of tourists are using informal channels,” argues Fikre Selassie. “Officials sit in the office and don’t know what is going on in the industry. What is more disturbing is that Parliament accepts their cooked data.” According to MoCT, the tourism sector generates close to three billion dollars annually, employ close to one million people and accounts for 4.5Pct of gross domestic product.

In fact, the performance reports of MoCT usually appear exaggerated compared to reports released by the World Tourism Organization (WTO) and other international institutions, especially over the last few years. According to the World Economic Forum’s global Travel and Tourism Competitiveness report, published three month ago, the revenues that Ethiopia claims to collect from tourism have estimation errors. The Ministry reported that USD1.8 million was collected from the tourism industry over the first six months of the 2017/18 fiscal year. However, the World Economic Forum’s report reduced this figure to USD444 million, which is only 24Pct of the figure released by the government. The report stated that the figure released by the Ministry was not reached using globally accepted estimation standards.

The Ministry basically collects data through forms filled by tour operators. Up from 120 ten years ago, currently there are 580 tour operators recognized by the Ministry, of which 380 are based in Addis Ababa. In the past three years, the number of tourists increased from 700,000 to 900,000, according to the MoCT. But Habte argues in favour of using the WTO definition of tourist, which states a tourist is someone who stays away from their home country for over 48 hours. “The Ministry included any foreigners that came to Ethiopia for other purposes as tourists,” he says.

Fikre Selassie, on the other hand, states that even if one assumes each tour operator hosts 500 tourists per year, which he says is highly exaggerated, the number of tourists wouldn’t pass 300,000. “Tour operators bring visitors by selling packages at trade fairs, or through advertising on their website. Both methods have low potential. By and large, they enter agreements with outbound tour operators in foreign countries and receive visitors they send to Ethiopia.”

Tour operators criticize the government for not giving due attention to regulating and developing the sector, while officials at MoCT claim operators lack ethics. “But we do know there are loopholes and various factors keeping us from better exploiting the potential,” says Ermias Derbew, director of Tourist Services Competence and Grading Directorate at MOCT.

In terms of historical, natural and cultural heritages, Ethiopia is among the top African nations. However, it is still not one of the top tourist destinations on the continent. Ethiopia has 32 tourist sites registered by UNESCO, more than any African country. Despite this fact, the World Travel and Tourism Council ranked Ethiopia as the 120th tourist destination globally in 2017, which MoCT officials do not accept.

Due to fewer jobs done in developing new sites, most visited destinations are common historic sites like Axum, Gondar and Lalibela. There are also festivals like Timket, and Meskel. The high peak seasons are December through March. Tourist sites located the southern part of the country are visited from June to July because of bright weather.

Industry players point their finger to the existing policy gaps, the limited capacity of government institutions responsible for supervising the industry and swelling corruption practices in the country.

Haimanot Asmamaw, an expert in the field, explains the tourism policy has laid out directions but still needs further enforcement tools, capacity building activities and integration of the tourism industry with the long term targets of the country. “The Ethiopian Tourism Council established in 2009 lacks strategic guidelines, finance and human resources,” she explains.

Fikre Selassie says the sector has no responsible body. “Marketing, promotion, developing packages and taking care of destinations is all on our shoulders, because the Ministry and ETO have failed to undertake their mandates. They present cooked up data at end of the year. I do not know why the Parliament accepts the report without asking us for comment.”

Bewnet underlines that the Ministry does not undertake performance based evaluation. “They sit and evaluate each other on party loyalty. Nobody is asked what they have practically done and contributed to the sector and security and safety is also deteriorating.”

The major problem is Ethiopia has no big tour operators, even after half a century, according to Habte. “Tour operators cannot grow due to bad policy and small profit margins, and now unfair competition. If there were large tour operators, they could compete with mega operators working globally and bring more tourists.”

Fikre Selassie underlines that the sector will gradually spiral out of control, unless new legal framework is introduced, based on genuine insight, commitment, professionalism and efficient implementation. “Ethiopia’s tourism is hanging on the shoulders of mega tour operators in other countries. More tourists come to Ethiopia because they are recommended by mega tour operators, than are attracted by local tour operators. So a legal framework that takes this into account is needed.”

6th Year . June 16 – July 15 2018 . No.63


Leave a Reply

Your email address will not be published. Required fields are marked *

Ethiopian Business Review | EBR is a first-class and high-quality monthly business magazine offering enlightenment to readers and a platform for partners.

2Q69+2MM, Jomo Kenyatta St, Addis Ababa

Tsehay Messay Building

Contact Us

+251 961 41 41 41