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africa tourism

Does the digital economy provide tourism opportunities for local communities in Africa?

Hermione Nevill's picture
tribe-traditional
The authentic travel experience should be a boon for Africa, but its missing the mark.

Since 2016, tourism market trends have shifted away from “get-a-way” travel to traveling for ‘authentic’ experiences.  This transformation is driven by the world’s largest consumer group—millennials—and amplified by digital platforms and social media but is also echoed across other segments. Destinations and entrepreneurs are catching on and developing ‘off-the-beaten-path’ products that provide travelers greater interaction with local people.

African countries, with their abundant wealth of natural and cultural assets, are perfectly positioned to capitalize on this shift, just as the rise of digital platforms are reducing market access barriers for such products. However, in our new World Bank Group report, we found that while demand for experiencing ‘life like a local’ in Africa is set to outpace growth of arrivals, there are still many supply-side challenges that need to be addressed.
  • Standards: Africa’s market share lags other regions, and many products are not of sufficient standard. 
  • Exclusion and the digital divide: Marginalized groups, often best placed to deliver the product, are at risk of further exclusion. 
  • Community Impact: Bringing tourism into communities also brings other risks which need to be managed. 

Tourism ecosystems: A way to think about challenges and solutions to tourism development

Shaun Mann's picture

Ecosystem: A complex of living organisms, their physical environment, and all their interrelationships in a particular unit of space.
Tourism: A social, cultural and economic phenomenon that entails the movement of people to countries or places outside their usual environment for personal, business or professional purposes.

I was part of a tourism ecosystem, once, when I built and operated a small lodge on the banks of the Nile in Uganda. While I was living in a tent in the bush building the lodge, life was simple: My little ecosystem was the land around the lodge and the tribulations of fending off monkeys and snakes by day and leopards, hippos, elephants and mosquitoes at night. The sun and rain beat down hard, and tools and workers broke down regularly. The generator was a particular pain in the neck.

Apart from supplies coming in, I was not really connected to the outside world. Money ran out for awhile and I had to rush to Kampala and persuade the bank give me a bigger overdraft (at 26 percent interest – thieves!).
 
Once the lodge was finished, I had to join another ecosystem: the world of registering the company, getting licenses, drawing up employment contracts, getting a bank overdraft, getting a tax ID number – all the elements of the enabling environment for me to do business. Then I had to join another one: I needed bums on beds, and I had to link my wonderful product to local markets; I had to develop promotional materials and packages; I had to interact and contract with tour operators and local travel agents to supply me business; I needed market access. 



Nile Safari Camp: home for two years

Then, guess what? My business plan wasn’t panning out. I didn’t get the occupancies or the rates that I projected from the local market. I had to step into yet another ecosystem: the world of international long-haul travel. I needed more and better-paying customers. I had to understand how the big international tour operators sold their product, what they were looking for in new product and how they contracted. I had to join another ecosystem to make that happen. Turns out my little product wasn’t enough to attract international customers on its own, I had to team up with other lodges and offer a fuller package; we had to cluster our products. I had to diversify and innovate and find ways to add value to my accommodation offer – birdwatching, fishing, guided walks, weddings and honeymoons, meetings and workshops. . . . Well, there are whole ecosystems around each of those market segments. You need to understand them before you can do business with them.        

Financing community-based tourism: 9 ways to get taken seriously

Hermione Nevill's picture



Reducing risk is the only way for community joint-ventures to get serious with commercial banks. Without commercial finance, this niche tourism sector might never deliver on its potential. Photo: World Wildlife Fund
 
Over the last 20 years, joint-ventures between local communities and the private sector have grown up as a feature of the sustainable tourism development agenda. Typically, the community provides the land, the heritage or the wildlife asset base while the private sector brings the capital, management know-how and business networks. When they work well, these partnerships contribute substantially to local economic and social development, as well as providing professional, unique and authentic tourism experiences for visitors.
 
Lena Florry is an Area Manager for Wilderness Safaris, the private-sector partner in a community joint venture (CJV) lodge in Namibia. ”What we have here at Damaraland really changes our lives,” she says. “Previously, in our village, I was herding goats. Now we have good jobs and a much better life.” Crucially, Lena is also a member of the local community and takes personal pleasure in sharing the model’s success story with the camp’s US$500-a-night paying guests.
 
Typical benefits include income for communities through lease or contract agreements, employment and supply-chain opportunities, skills and knowledge transfer from the private sector, and usually a kind of joint “tourism asset protection” like wildlife preservation or heritage protection. In Namibia, for example, community conservation generated about US$7 million in returns for local communities in 2013, and the elephant population doubled in 20 years.
 
While much emphasis has been placed on the development impacts of this model, the actual health of the businesses has often been overlooked. As long as the ventures continue to deliver a development dividend – such as contributions to a community fund, or increased biodiversity – all is believed well. For the venture’s supporters, it may then come as a surprise when applications for commercial finance are rejected.
 
“We would like to finance the sector,” says Christo Viljoen at First National Bank (FNB) Namibia. “But our biggest challenge is to determine the financial viability of the community joint-ventures. We find the risks involved are not properly addressed in the business plans.”
 
Banks report that risks typically have to do with corporate governance, low-quality financial data, collateral, the level of experience of the sponsor, and a host of structural problems in the CJV business – not least, the balance between the development dividend versus the profitability of the business. All these factors help to undermine a firm’s viability. A business that cannot demonstrate financial viability – and, thus, show how it will pay back a loan – cannot be financed.
 
This presents a very real problem.  Without the means to make necessary investments in the business (such as refurbishment or expansion), the quality of the tourism product deteriorates, occupancies and rates decline, and funds for the community and for wildlife protection drop.
 
In an effort to help the various stakeholders increase the financial viability of CJVs, reduce risk and increase loans, the World Bank Group and the World Wildlife Fund released “nine tips” at the recent tourism trade show ITB Berlin 2015. Dr. Hannah Messerli of the World Bank’s Trade and Competitiveness Global Practice said, “We believe that destinations that address these issues are more likely to provide comfort to the banks in lending.”