Fresh approach: Tourism body overhaul will increase funding and reshape the sector

Following parliamentary approval of the 2011 Tourism Bill, the transformation of the Ghana Tourism Board into a fully fledged, income-generating authority is a promising step for the sector. Private players and public sector officials are hoping that the radical changes will increase funding and facilitate the implementation of a new orientation towards greater expansion and harnessing of resources. The new Ghana Tourism Authority (GTA) will collect levies through income-generating programmes, develop the regulatory framework for tourism activities and market Ghana as a destination. Emerging from years of under-financing, the sector is expected to receive a legislative and financial boost. The World Travel & Tourism Council (WTTC), an international tourism body, expects investment into the country’s tourism sector to increase by 7.3% in 2012 and by 3.2% per year over the next decade.

Although the 2011 Tourism Act (Act 817) officially established the new body, much legislative work remains to be done. “The general law has been passed, but we still need legislative instruments approved by parliament to be able to implement the authority’s new responsibilities,” said Julius Debrah, the CEO of the GTA. This means that a series of new laws organising the sector are to be designed and put into place. The GTA will see its powers clearly defined and the sector will get fresh directives to drive development over the coming years.

The first step came in August 2012, with parliamentary approval of the proposed 1% levy on tourism activities. Initially planned out as a specific “bed tax”, to be added on top of each night sold by hotels, the government eventually decided on a more comprehensive measure to collect financing for the sector. A full tourism levy will now be added to every business transaction by a registered tourism enterprise. After it becomes operational, the GTA will charge a 1% tax on all earned sales from tourism-related services. This includes everything from hotels and restaurants to car hire and tour operators. The money will be collected in the New Tourism Fund, which will be used to invest in the sector. Promotion abroad will be one of the main priorities, but the government also plans to use the fund for infrastructure expansion, training human resources and encouraging entrepreneurial activities.

TOURISM FUND: Although most of the long-term financing will come from the new tourism levy, the GTA hopes to capture some initial seed money from the government to kick-start activities. The GTA has been reluctant to advance any specific figures of how much it expects to collect annually through the new tax, but private operators have expressed support towards a move that will exponentially increase available financing for the sector. “If correctly applied, this could make the authority one of the best-financed bodies in government and unleash a big amount of investment,” said Bruce Potter, the general manager of the Holiday Inn in Accra. “The money could be used to improve infrastructure and brand the country.” Potter estimates that Ghana’s top 10 hotels alone probably have an annual turnover of up to $15m each. Hotels will be a big part of the equation, but the amount of businesses registered as tourism operators is bound to increase. The 1% surcharge will also be applied to restaurants.

Although the Tourism Fund will be part of the GTA, the levy will be administered by a slightly larger group comprising the GTA’s board of directors and a representative of the controller and accountant general. Alongside direct financing of sector activities, Debrah foresees the possibility of investing part of the fund in specific long-term placements to increase its value.

ENFORCING THE NEW RULES: The transformation will require the GTA to establish new standards and apply them. One of the additional laws to be taken to parliament in 2012 will focus on licensing tourism activities. Businesses that were not necessarily registered as tourism operators under the previous rules will now have to list with the GTA, abide by specific rules and pay the new tax. This will help to increase the safety and quality of tourism products. In essence, it will also enlarge the base of businesses taxable by the GTA, by defining them as tourism activities. The new registration model for tourism businesses will apply not only to accommodation establishments, but also to other operations, such as resorts, nightclubs, spas and banqueting facilities. It will also specifically designate activities that need to be under the supervision of the authority, such sports fishing, boat riding or paragliding.

CHALLENGES: The challenge now will be how to determine and correctly apply standards to an overabundance of activities with disparate purposes. “We are charged with establishing new rules for everything,” said Spencer Doku, the director of planning and business development at the GTA. “All activity that is tourism based will need to be brought under an umbrella of legality to maintain standards and sustain the growth of the sector.”

The new rules might require some adaptation from the GTA, as “gathering the new levy from operators will lead to increased costs and demand manpower capacity,” said Debrah. The GTA is considering outsourcing the collection of the tax. Other challenges might arise from the fact that many hotels and restaurants, the bulk of levy-paying tourism operators, are small, family-owned enterprises with rudimentary accounting systems. Over half of the country’s 2400 licensed hotels are in the budget segment. Other details will need to be smoothed out. The government expects the new levy to be fully operational by the end of summer 2012. However, most large hotels in Accra have contractual agreements with airlines to accommodate crews, some of which have been signed for a duration of two or three years. This could make it difficult for some hotels to immediately transfer the 1% fee on to these customers.

Legislation will bring more protection for both operators and clients. Under the regulation for the now-extinct Ghana Tourism Board, there was no specified ruling managing the financial relationship between hotels and patrons. Under the Tourism Act, hotel customers with outstanding debts might have their assets seized. A customer protection clause has also been added, making it an offence for tourism providers to engage in deceptive advertising of services.

COORDINATION: The creation of the GTA should allow for better coordination among different government bodies that affect the development of tourism activities but are not directly linked to the industry. For example, although the Ghana Tourism Board had a role in the conservation of cultural and historical sites, there was not a strong connection between it and the agencies overseeing important resources for attracting visitors and holidaymakers. The GTA is expected to be able to develop a common strategy in conjunction with other entities, such as the Forestry Commission or the Museum and Monuments Board.

Both the private and public sectors are eager for a successful transition to the new regime. Through its revenue-generating programmes, the GTA should be able to channel funding to the sector and firmly entrench tourism in Ghana’s future economic development.