“We Need to Recover Before we Pay Taxes!”

Andinet Feleke President, Ethiopian Tour Operators Association

Andinet Feleke, born and raised in Addis Ababa, had an upbringing typical of the city during. Starting from her early schooling at the Indian National School, she was known to be self-reliant. Andinet received a bachelor’s degree from Haramaya University, continued her education in the tourism industry, and then joined the University of South Africa, where she obtained a master’s degree in Business Leadership. Her first job was as a tour operating office, where she discovered her passion and potential for tourism. Along with her late husband, she founded Jacaranda Tour and Travel PLC in 2003, which is currently one of the top tour operating companies based in the capital. In addition, Andinet is the woman behind the opulent Gondar Hills Resort, which is perched on the highest mountain of the historical city of Gondar, overlooking the famed castles.

Andinet joined the board of the Ethiopian Tour Operators Association in 2015, and has been serving as the president since 2018. The association has 276 members and has been the representative of private sector tour operators on different platforms. This association is one of the major players in the tourism sector and has a significant impact on how the sector develops, by actively promoting Ethiopia as a tourist destination and advocating for the development of the sector.

In this interview with EBR’s Addisu Deresse, Andinet talks about women in business, the challenges of the tourism sector, and its recovery following the severe impact of COVID-19 and conflicts, among other issues.

What do you think are the challenges facing women in business? What should women do to curb those challenges?

The experience of a woman who grew up and lives in urban society may not be reflective of the challenges facing all women across the nation. But my personal thought is that the main challenge is within our internal perception more than the external challenge that comes with stereotypes. The fear of failure, not taking risks, and unsupportive life companions are some of the challenges I feel predominantly affect women’s success.

When it comes to business, most of my challenges are also faced by my male friends in the same and different sectors, so I don’t see much difference. I am not sure what ‘gender’ we give our bureaucracy, but that’s the common challenge we face among all entrepreneurs.

You are a family woman, a businesswoman, an entrepreneur, and the president of an association. How do you balance all these responsibilities and ensure success?

I think the different responsibilities help you balance your life. My children are always my top priority, but spending as much time with them as I would like has not always been possible. I try to compensate for it with quality time. Regarding my business, one thing I love about being your own boss is that no one can fire you for making a mistake, so you have all the freedom to make lots of mistakes and learn from them. That is why I love it. Regarding serving the association, I am passionate about the tourism sector, and I see so much untapped potential. So by serving the association, I take it as a chance to contribute to the sector’s growth, through which we as a company will also grow and help the sector flourish at the same time.

You are the owner of Gondar Hills Resort and Jacaranda Tour and Travel. How did you choose the sector when you first decided to become an entrepreneur in Ethiopia?

It was not really a life’s calling at the beginning or anything like that. I always wanted to be a lawyer, rather. But back then, if one passed the college entrance exam, the only choice was to study in the department to which you were assigned. After graduating, my husband, who was then my friend, proposed that I join him in the company he had established. We dissolved one and created a PLC, which I have been running as the general manager ever since.

It is usually said that Ethiopia has rich tourism potential, but has not fully realized that potential. What are the major obstacles hindering the country from benefiting from that potential?

Yes, it’s a very rich and diverse country with abundant tourist attractions. But attraction cannot be a product by itself. We have to develop it, market it, manage it, and work on its sustainability. It’s a sector that can serve as a significant source of foreign currency. For countries like Kenya, it has been one of their main economic pillars for years. And they succeeded in benefiting from it because they managed the whole ecosystem of the sector very well. They and other countries with a well-developed tourism sector have clearly positioned their product for the market segment they want to attract and aligned their policy, strategy, and execution plan accordingly by deploying the right resources. If you take our company as a small example, the main reason we decided to vertically integrate to develop upmarket properties was to fill the gap for our clients. In this process, we secured 100 Pct of our imports for the project with the foreign currency we generated from the tour company. This is just one very tiny reference to show that if we exert the right effort, it can surely serve to make a significant contribution to the forex shortage we have as a nation, but of course, it needs a well-planned effort.

The COVID-19 pandemic has taken its toll on almost all businesses in the tourism industry. How do you explain the challenges it posed to your line of business? How did you cope with those challenges?

To help the sector sustain itself, three associations— the AA Hotel Owners Association, the Hotel Federation, and our association, the Ethiopian Tour Operators Association (ETOA)—had worked on getting approval for a soft loan with low interest, mainly because the government had a directive not to lay off any employees. It was a loan with better interest compared to the commercial rate but still with interest nonetheless, but it provided temporary relief. The loan was only for one year, with a promise of extension, but this did not happen. Rather, there was a stand that the sector had recovered, so financial institutions had to force tour operators to settle the loan in a very short period of time. Though all attempts with the National Bank and a few other private banks failed, Zemen Bank offered a bailout for the sector. When the pandemic hit, they took the initiative to reduce the interest rate. Next, they gave us a very flexible and attractive package to help tour operators sustain themselves. Taking this opportunity, I would like to thank Zemen Bank for supporting the recovery of our sector and entrepreneurs in the industry.

After the pandemic, instability in the country has also severely challenged the country’s tourism sector. How did that impact your businesses? How did you cope with the challenges?

The sectoral reforms had really given hope to the sector. Having a standalone ministry, including the sector as one of the economic pillars, the shift to economic pillars, and the mega investments in some market segments are all positives. On the other hand, during this time when the sector was hit hard by the pandemic and the civil war, we have seen that restructuring alone would not guarantee the recovery of the sector. We have seen that the Ministry has limited back-end support in order to bring change to the industry, mainly in leisure tourism. I say this because most of the joint efforts we made to save players across the value chain didn’t succeed.

Same for us, we had to make several adjustments in the resort, downsize the tour company, and halt all other projects. But since we still had to pay employees, cash flow was a huge challenge during both crises. Therefore, we had to use all kinds of innovative and traditional methods, including liquidating, downsizing, and diversifying, in order to sustain the company.

I believe the way financial institutions and government officials managed the crisis was a very big lesson. Also, I am sure future collaborations and building the confidence of the private sector for future investments will require a significant effort.

As someone who is engaged as a tour operator, tell us about what a tour operator has to do to attract tourists to the country. What are the challenges to attracting tourists to Ethiopia?

Tour operators’ task starts way before tourists come to the country. We mainly work with established companies like us throughout the world. We create customized packages, attend different trade fairs worldwide to promote these packages, and invite all potential buyers to Ethiopia at our expense for familiarization trips. We then convince these companies to sell Ethiopia as a tourist destination. Then, when tourists come, we handle the whole ground arrangement, from entry to departure. We generate an income and distribute it to the vast service providers such as hotels, guides, air, land, and water transporters, attraction sites, scouts, cooks, etc. So, managing this vast value chain is a huge responsibility. If one thing goes wrong, the whole thing goes wrong.  With such a huge gap in supply and demand among service providers and varied skills across the value chain, it’s a very challenging task.

The country’s historic sites and religious festivals are the usual tourism products Ethiopia has been selling for many years. Why are we not developing new tourism products? What is the challenge around that?

Some of the main problems are lack of expertise in product development for a targeted market segment, lack of resources, and lack of commitment. Of course, as a nation, our competitive advantage for leisure tourism is our history and authentic culture because, if you take the Safari Beach Holiday and other known African products, our competing countries have better and more well-managed products. And so, Ethiopia is like an exotic destination for the leisure tourism market. However, there is a huge opportunity to develop new products and add them to the traditional products, which gives a chance for visitors to extend their stay in Ethiopia. If we take all the national parks, such as Bale National Park, Omo National Park, and others, if they are well managed, they can definitely compete with those in other African countries. But it has to be developed and managed in the right way.

A new draft policy stipulates that tourism should not be among the sectors that enjoy VAT privileges. What is your take on that?

The VAT issue had been a longstanding concern in the sector, mainly for two reasons. One, the country will not be competitive, and there is no level playing field for tour operators. The tour operation license does not force all tour operators to register for VAT, so there are registered ones, unregistered ones, and briefcase operators, and yet we are all selling the same third-party products. On top of this, the majority of the tour components we use are VAT exempt and we pay for those eligible for VAT through our suppliers and don’t claim it back. As a simple example, if you check the entrance fee for Unity Park online, it says USD 50. If the tourist comes through a legal tour operator, we should charge USD 50 + 15 Pct and since the park doesn’t give us a VAT receipt, we can’t claim it back. So almost all the payments we make are of this type. We are expected to collect consumer tax, which we can’t collect back, and if we just add the margin on the tourists, the package price will be high, and ultimately, the legal tour operators will be out of competition.

We had been requesting the government to fix this for years, and we had been promised that it would be done in the coming revision. However, the government has issued a draft VAT amendment with no response to the sector’s demand. We recently had a consultative meeting with the Ministry of Finance regarding the draft regulation, where we discussed all the challenges. I’ve learned that there are similar challenges in other sectors, though the degree and complexity in our case are very high. Regulations are set knowing that the practice is different due to poor law enforcement. I was wondering why we can’t draft the regulations based on the practice until there is reasonable law enforcement.  Why should legal operators suffer due to the government’s failure to enforce the law? In this way, illegals will flourish and legal operators will gradually vanish.

I have also learned that there are different definitions for the same term for different purposes. Our policy clearly states that tourism is a service export, but it was explained that for tax purposes it is not. However, and most importantly, we’ve come to the common understanding that we need to recover first before we pay taxes. We need to be able to sell the country as a tourist destination. Foreign companies selling Ethiopia have no special attachment to Ethiopia except for doing business, so they have to believe they’ll make money to offer it as a destination. If they don’t make money and if the country is not competitive, they have no interest in putting us back on the travel map. When setting a package cost, peace and security, plus the level of every service, matter: from our pre-arrival visa service to the airport experience and all other inland services. The fact is, for the service we provide, we are a very expensive destination, and this is continuously increasing with what seems like no control, and no one seems to care. We have been in a civil war where most of our major attractions are still in the red zone, and most embassies have put up travel alerts on Ethiopia, which will make insurance coverage difficult and expensive. So, pushing to recover amid all this is not easy.

We are asking the government to see other countries’ experiences, especially the amendments they made after COVID. Kenya has exempted tour operators from VAT, and with a significant income from the sector,  there will be no reason to do this unless exempting the sector outweighs the levy. At this stage, we want all tour operators to come through the formal channel, promote the sector with confidence, and help the recovery without fear of the usual tax allegations with authorities. Once the sector recovers, the government can study the pros and cons and revise the regulation. But first, let’s do what it takes to help the sector recover.

Tourism is also a huge tool in terms of global diplomacy, impacting the global image of countries in good or bad ways. Do you think it is understood with that level of significance? What more should be done?

We accommodate all kinds of travelers, including potential investors, leisure travelers, and so many others. Hence, it’s a sector that helps to build positive national branding, which is important to leverage. On the several trade fairs we participate in, we are promoting not only the tourism but also what the country offers in general. If there had been better cross sectoral planning, I believe a lot more could have been achieved.

As the president of the ETOA, what have been the biggest challenges and achievements as an association and as an individual?

As an association, I can say our members have played the most crucial role in putting Ethiopia on the travel map. Through all the ups and downs, we strived to push and promote. We played a key role in the establishment of a tourism board that is composed of key stakeholders such as Ethiopian Airlines, Ethiopia Immigration Services, the Federal Police, the Ethiopian Investment Commission, etc., and helped with proactive and reactive solutions. Our main challenge as an association was and still is to convince decision makers how the sector, and especially the leisure market, operates. The frequent turnover of leaders in the sector has dragged our efforts backward.  And recently, COVID and the civil war have reduced the source of income for the association, limiting our scope of engagement. Lack of coordination among stakeholders is also a challenge that will have a negative impact on the recovery process. In general, when you say a sector has not developed, it also applies to both public and private players. So, some of the challenges are also the lack of a collective vision and exerting equal effort to change things. Sometimes there’s a tendency to see only the short term. From the sectoral leadership perspective, there is a long-standing trend of very limited commitment to work with associations. We had been pointing out the sectoral challenges and possible solutions for years, but most things have not changed. And talking about the same problem for years is frustrating for the private sector.

What is your hope for the tourism sector? Do you think it will survive the severe impacts of the pandemic and the political instability? What should be done to get the tourism sector back on its feet? What more should be done so that tourism could get even bigger and help the country benefit from its full potential?

Tourism is a very resilient sector, as has been proven during the different crises that have occurred worldwide. There are also countries that operate tourism amid crises. Just before COVID started, we had seen the highest level of interest ever, which probably would have continued if the war hadn’t started. So, I am very optimistic about the potential of its recovery.  But I am concerned about the disintegrated efforts and lack of coordination among stakeholders, including the Ministry of Tourism. Just to give you one example, recently immigration significantly raised the price for entry visas, and no one, including the Ministry, had the information. It’s also time for stopover tourism to be promoted, and packages have  already been offered. No one knows when we are going to resume the visa upon arrival. If you take countries like Kenya, such a decision will neither come out as a surprise nor get approved without prior consultation with stakeholders.

The Tourism Board, which was dissolved after the reform, had been composed of these stakeholders, and its purpose was to avoid such issues. The other concern I have is the vacuum on the supply side that occurred due to COVID and the war. We had been insisting that there is no recovery without the supply side, so some sort of support has to be given to revive the different service providers. The other concern is the price escalation, unless we have regulatory intervention to halt the price increase across the value chain, we can’t be competitive as a country. In general, a lot of resources, both money and time, had been invested to put Ethiopia on the travel map and promote its traditional historical and cultural sites, which served as our main competitive advantage. So, it’s very important to maintain these sites and leverage them while adding new products. I also strongly believe that we need to recognize the reality on the ground and come up with a realistic plan that can be executed. We can’t say to the world that we are open for tourism and have no way of tracking the safety of travelers. We need to set a clear direction on our product offering, market segment, marketing strategy, essential investment, and most importantly, ensuring the safety of travelers.

EBR 11th Year • April 2023 • No. 116

Addisu Deresse

EBR Editor-in-Chief

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