Kelechi Deca - Afrikan Heroes

How Covid-19 Impacts Africa’s Tourism Industry

June 17, 2020

Matthew Weihs, Managing Director of Bench Events

By Kelechi Deca

Prior to the outbreak of the Covid-19 pandemic, many African countries looked towards using the tourism sector to launch their economic diversification programmes because there is no African country that does not boast of either beautiful virgin scenery or wildlife. Most especially the seasonal those that have remained stuck in the mono-economy quagmire of over-reliance on commodities. Enduring the debilitating effects of seasonal price fluctuations occasioned by external market factors. To these countries, tourism offers the lowest cost-effective hanging fruits with its ancillary labour intensive capabilities which raises hopes of lifting the unemployment market. These dreams however, were cut short, no thanks to the nouvel coronavirus pandemic.

One sector that took the biggest blow from the Covid-19 pandemic is the tourism sector. And within that sector, the hospitality subsector was hardest hit. Tourism is such an important industry in Africa, because of the direct and indirect jobs that it creates and sustains, as well as its strong foreign currency earnings. Before the pandemic, African hotel development returned to growth at the start of 2020, with more than 78,000 rooms in 408 hotels in the pipeline, according to the 12th annual survey by W Hospitality Group, acknowledged as the industry’s most authoritative source. However, the COVID-19 outbreak is now shattering the dreams of Africa’s hotel industry.

W Hospitality Group’s Managing Director, Trevor Ward, said: “The growth of the chains’ presence in Africa has been a very positive story since we started this analysis in 2009. It is quite clear from the numbers that the chains, the developers, the investors – and all of us at W Hospitality Group! – continue to believe in the opportunities that Africa presents in the hotel and tourism industry. However, our industry has been devastated by the impact of COVID-19, possibly more so than most other economic sectors, mainly because of the almost total shutdown of borders and of the aviation sector – no flights means no guests.”

“With that background, we see a slowdown in pipeline growth in 2020, as we all get to grips with the new reality. With so many of the players locked down, fewer deals will be signed, and it is inevitable that some of the planned openings in 2020 will be delayed, due to closed or slower-paced construction sites, restrictions on funding and a lack of market demand. According to our latest data, there are 90 hotels with 17,000 rooms scheduled to open in 2020, but we estimate that at least half of these will be delayed, bringing the actualisation rate down to no more than 40%.”

This year’s African Hotel Chain Development Pipeline survey covers 35 international and regional hotel contributors across the 54 countries in north and sub-Saharan Africa, and in the Indian Ocean islands. It reveals a 3.6% increase on the 2019 pipeline. Most encouraging was a record 68 chain hotels opening last year, fully 75% of those which were scheduled to open, with 11,000 rooms. That performance was substantially up from the 39% of those scheduled to open in 2018 actually doing so. Accor performed particularly well; it opened 18 hotels last year with almost 3,500 rooms in its various brands, ranging from Ibis to Fairmont.

The findings of the 2020 Pipeline report, together with a mid-year update, will be discussed in depth at Bench Events’ new virtual conference, Africa Tomorrow (www.Africa-Tomorrow.com), to be held on 21st July. This event is complementary to the Africa Hotel Investment Forum (AHIF), the leading hospitality investment conference in Africa, which has in previous years connected business leaders to serious investors, driving funds into tourism projects, infrastructure and hotel development across the continent.

Marriott, the world’s largest hotel chain, has the largest pipeline in Africa, 22 per cent more hotels and 6 per cent more rooms than second-placed Accor, but Accor has been catching up fast, signing 25 new deals last year, compared to Marriott’s 17 new projects. If Accor can open its hotels in 2020 at the same rate that it did in 2019, it is likely the company will overtake Marriott and position itself as the largest operator in Africa.

Trevor Ward said: “We have to wait and see what will happen in the second half of 2020, and in 2021, as we emerge from lockdown and other restrictions. Tourism is such an important industry in Africa, because of the direct and indirect jobs that it creates and sustains, as well as its strong foreign currency earnings. We are anxious to see hotels reopen and get back to contributing to the African growth story.”

Matthew Weihs, Managing Director of Bench Events, which is staging Africa Tomorrow, said: “Right now, we are facing the biggest recession in history. For those seeking to operate hotels, it is a dreadful time. However, for the savvy investors, this is actually a moment of opportunity because hotels are a long-term investment and one of the secrets of success is to spend money during the bottom of the economic cycle in order to capitalise on the upturn as soon as it comes. That’s one reason why I expect the networking sessions in Africa Tomorrow will be very busy and fruitful.”

There is renewed optimism that if the world is able to get a handle on the pandemic before the end of the 3^rd quarter of 2020, there is a slim chance of recovering from the negative impacts on the tourism industry especially in Africa as many foreign tourists would like to escape their countries in Europe and North America for a breath of fresh air, preferably Africa. But this too depends on Africa’s ability to stem its rising Covid-19 cases and bring it to a halt within the same period.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

How Nigerian Economy Can Survive Covid-19 Induced Depression By Kelechi Deca

May 1, 2020

In the letter of intent submitted by the Nigerian government to the International Monetary Fund (IMF) requesting for assistance to tackle the impacts of the Covid-19 pandemic on its economy. The government highlighted three key decisions it would undertake as part of efforts to kickstart the much-clamoured need for economic reforms.

First was the removal of petroleum subsidy which the Group Managing Director of the Nigeria National Petroleum Corporation (NNPC) announced a week ago. Second is the reduction of federal government workforce through the implementation of the Orosanye Report which will see to the collapsing of agencies, especially those whose mandates overlap. Third, which many say will be harder, is the floating of the exchange rate of the naira, which may lead to the abolishment of the multiple exchange rates.

These formed the basis of engagement with the IMF because the global lender has been pressuring the Nigerian government on these issues for over a decade running. Interestingly, the government chose to embark of the much needed reforms on a bended knee.

One organization that has been at the forefront of bringing the need for economic reforms to the attention of the government and stakeholders is the Nigerian Natural Resources Charter (NNRC). The NNRC, a not for profit policy institute that champions the need to ensure that Nigeria’s natural resource wealth is utilised in ways that it will be for general good of the citizenry has urged the Nigerian government to act quickly on a number of reform items, long on the drawing board, if the country “is to minimize the effects of the inevitable recession contributed by falling oil prices, depreciating revenues, and rising debt ratio,” that are aggravated by the rampaging global pandemic known as the Novel Coronavirus Disease 2019 (COVID-19 for short).

Drawing on the the gaps identified in its recently published 2019 Benchmarking Exercise Report (BER), the Charter acknowledges the government’s recent steps; “to deregulate the downstream sector, re-open bid rounds of marginal fields, cut the 2020 budget, contemplate privatization of the refineries and others”.

But “to optimize the opportunities from oil and gas exploitation to withstand the prevailing COVID-19 shocks and its after effects”, the Charter urges, “Nigeria must consider the following policy options to stabilize the sector, maintain revenue flows, attract investment and drive growth. To achieve this, the group calls for the maintainpeace and stability in the Niger Delta to sustain revenue flows from oil production. Sustaining benefit transfer schemes by NDDC, MNDA and other interventions will support the government’s stabilization efforts.

It also demands for improved coordination between federal and Niger Delta state governments on the response to the COVID-19 pandemic including the design and implementation of stimulus plans and liberalize the downstream sector to allow market forces determine pump prices for petroleum and other products. This will ensure the availability of revenues necessary for more critical areas of the economy. Equally important on its menu is the need to improve the efficiency of the downstream oil sector by reviewing its policies, regulations and operational guidelines to ensure profitability, improved private sector participation and improved employment, especially at a time job losses have become the order of the day.

And to ensure that Nigeria doesn’t find itself in a situation where it would be going cap in hand from one multilateral organization to another begging for funds to mend its leaky roof in the next rainy day, the NNRC calls for the adoption and constitutionalization of a savings mechanism with clear and transparent operational rules. This, it emphasises, could be by retaining the more effective sovereign wealth fund (SWF) in the NSIA and transferring funds from the Excess Crude Account, the stabilization fund and other similar funds to the SWF. This will help fortify the Nigerian economy from oil price volatilities and other economic shocks.

To aid the economic diversification dream, it calls for the ramping up of, and prioritizing domestic gas-based industrialization projects, to diversify Nigeria’s energy supply, increase local employment and reduce domestic demand and Nigeria’s reliance on oil and to support a major and urgent shift to gas in terms of investment focus. Gas supply to domestic market for power, industrial & manufacturing feedstock and enabler to economic development. Emphatic shift to the gas value chain offers Nigeria the leverage for socio-economic development in the medium to long term.

Nigeria, according to experts, will not have full benefits of its natural resource wealth, especially oil and gas if the Petroleum Industry Bill (PIB) is not passed and signed into law. The Bill which unfortunately, has become a contentious issue between government and stakeholders going to two decades holds the key to Nigeria’s economic growth. To this end, the need to fast-track the passage of the Bill to bring about the fiscal, governance and regulatory clarity required to monetize Nigeria’s 200 Trillion cubic feet of gas reserves cannot be overstated.

A speedy passage of the Petroleum Industry Bill will provide a clearer strategic direction to the entire industry, re-engender trust, thereby increasing investments which will in turn increase national revenues required for development. It will also help for the review of the existing fiscal framework to ensure competitiveness and support Nigeria’s ability to attract investments into the upstream sector, effectively shoring up Nigeria’s diminished reserves.

The PIB will institutionalize cost management strategies within the sector with the overall objective of reducing the high unit production cost of crude thereby improving governments revenue from the sector. And immediately privatize refineries as stated by NNPC to improve Nigeria’s access to finished products in country, reducing potential for over reliance on external support for products, to preserve Nigeria’s sovereignty. The need for immediate sell off of unviable government owned oil assets to raise revenue and boost efficiency in the short to medium term is of utmost importance.

“Adopting these reforms will improve Nigeria’s competitiveness, revenue inflows and improve her ability to survive and subsequently recover from the effects of COVID-19 on the global economy”, so says the NNRC Program Coordinator, Tengi George-Ikoli, asking that the government be consultative in its approach to reforms, transparent and inclusive to increase likelihood of acceptance and implementation.

“Prioritizing these reforms are necessary while Nigeria considers other medium to long term reform plans simultaneously. The NNRC’s 2019 Benchmarking Exercise Report (BER) outlines other sector gaps to be focused on in the medium to long term to improve Nigeria’s oil sector performance”, she added.

Kelechi Deca