ECO 463 PROJECT: DEVELOPMENT OF TOURISM SECTOR SHOULD BE CONSIDERED AS ONE OF THE BEST ENGINES OF ECONOMIC DIVERSIFICATION IN BOTSWANA
NAMES: Tashatha Patella
EMAIL: [email protected]: Kgomotso Jason Chengeta
EMAIL: [email protected]
This paper examines tourism as one of the major contributors to diversifying the economy of Botswana which has been largely led by the export of minerals. The government of Botswana is faced with the challenge of diversifying the economy and tourism has been proposed as one of the key clusters to lead the needed diversification. Our main discussions is how tourism can contribute to sustainable employment creation, foreign direct investment, improved infrastructure and foreign exchange. In conclusion the study acknowledges that the government of Botswana should consider tourism as one of the best sectors to diversify its economy.
Carlsen and Butler believe key to tourism growth this through establishing a product base and strategic positioning with the global outside market. The very idea of diversification requires the use of assets of diversification in which some are existing while others are still unexploited resources which maybe already under strain. But despite all this it has been noted that due to exposure to external markets diversification is normally associated with profit maximization CITATION Chi17 l 1033 (Chiutsi, Musikavanhu, & Nare, 2017).
Tourism is popularly known for supporting employment, foreign exchange, foreign direct investments and direct contribution towards the gross domestic product of a country. And therefore, tourism can be a major tool to be used to diversify the economy of Botswana. Tourism is distinct from other sectors which Botswana has been largely dependent on for many years such as, mining and agricultural sectors in that it can sustain the gross domestic product of the country over periods of crisis such as drought and decrease in global demand for minerals CITATION Wei18 l 1033 (Weidenfield, 2018). This feature is one of many that prove that tourism is a capable sector to be a source of diversification to the economy of Botswana. The objective of this paper is to discuss how development of the tourism sector can be one of the best engines to diversify the economy of Botswana.
The first chapter focusses on tourism’s contribution towards sustainable employment creation and infrastructure development. The second chapter discusses the significance of tourism to the gross domestic product of the economy. And finally, the third chapter addresses how tourism is an alternative source of income and foreign exchange to the country.
TOURISM AS A CONTRIBUTOR TO SUSTAINABLE EMPLOYMENT
In 2016 the tourism sector indirectly contributed an estimated total of about 68500 jobs and directly contributed about 25000 jobs. In comparison with 2017 its indirect contribution increased to 76000 and direct contribution to 26000. The rate is expected to grow at a 2.6% per annum from the year 2018, the total indirect contribution is expected to be 102000 by the year 2028 CITATION WTT18 l 1033 (WTTC, 2018). This indeed shows that the tourism sector is an increasing source of sustainable employment creation in the country.
Source: CITATION Sai17 l 2057 (Saidi, 2017) The above pie chart indicates that in the year 2015 there was an estimated worldwide total of arrivals of 1.186 billion in which America had a share of 198 million, Europe 608 million, Asia and Australia 279 million, middle east 53 million and Africa 53 million as well. Botswana also has its fair share in these worldwide arrivals, in 2010 the country experienced a high number of tourist arrival of about 2200000 people visiting the north eastern part of the country. Between 2010 and 2011 aircraft movement at the Maun airport increased from 74453 to 82799 CITATION Sta15 l 1033 (Statistics Botswana, 2015). Moving forward to 2015 which recorded the highest increase in tourist arrivals of 2501616. CITATION Sta16 l 2057 (Statistics Botswana, 2016). This indicates an increase of about 301616 over 5 years. With the increased numbers of tourists comes the increased demand for more accommodation, transport facilities, food and entertainment. This results in an increase in employment creation in a lot of branches of tourism. Firstly, the local airlines benefit with the increased air traffic as more pilots and flight attendants are being hired and more airport personnel are needed to ensure that passengers receive world class service in and out of the country. Hotels and lodges also create a large amount of employment as more chefs, waiters and cleaners were needed. The large number of tourists also means that there is a need for manufactured goods such as soap, linen and towels in these hotels and lodges. An increase in production leads to an improved level of income and reduced levels of unemployment. Furthermore, tourism has indirectly created employment for the locals. Craftsmen and women have access to a different and larger market as tourists are always interested in buying souvenirs. Tourists are not the only market for the local craftsmen, hotels and lodges all over the north eastern side of the country buy their craft to decorate their lounges to give them a more cultural look CITATION Tlh14 l 1033 (Motswagole, 2014).
The growth of the tourism sector has not only created employment but has also largely encouraged the development of infrastructure. In response the above-mentioned increase in air traffic the government decided to refurbish the Maun and the Kasane airport to have the capacity to accommodate large aircrafts and attract tourists from Europe and the Asia PacificCITATION Mod15 l 1033 (Nkwe, 2015). The construction of these airports not only brought improved infrastructure to the country but it also meant that there was employment creation as these projects were also labor intensive. This shows that tourism supports and sustains the development of infrastructure and employment creation.
CONTRIBUTION OF TOURISM TO THE GROSS DOMESTIC PRODUCT
World wide tourism contributes 10% of the world GDP, employs 1 out of 11 people and it sits 7% of the world’s export CITATION Sai17 l 2057 (Saidi, 2017). Tourism is an intensely competitive industry worldwide because most countries have realized that it is a source of alternative income and economic growth apart from everything else the country might be economically dependent on. The industry was worth US$1.26 trillion in 2015 and the average tourism arrivals was US$1.186 billion CITATION Sai17 l 2057 (Saidi, 2017).
The chart below shows that Europe is a world leader at international tourism receipts of US$451 billion and Africa standing at US$33 billion in 2015. Tourism in Botswana contributed about US$ 1.6238 billion. And is expected to rise at 5.5% per annum to contribute US$2.9413 billion in 2017. CITATION TRA17 l 2057 (TOURISM, 2017). This indicated that the tourism sector is boosting the economy of Botswana which stands at a GDP of US$17.4billion (SOURCE) which is a contribution of about 9.5% of the total GDP.
Source: CITATION Sai17 l 2057 (Saidi, 2017) In this section of the paper we would now point out the contribution of travel and tourism to the GDP of Botswana in which we acknowledge the steady growth of 5.5% per annum over the past years. Contribution to GDP is categorized as direct, indirect and induced. Direct contribution includes commodities such as accommodation, transport, entertainment and attractions. The industries that benefit are accommodation services, food and beverage services, retail trade, transport services, cultural, sports and recreational services. Indirect plays a role in tourism and travel investment spending, government collective spending and purchases from suppliers. Induced tourism comes from the basic need of humans such as food and beverages, clothing, household goods and health care. CITATION TRA17 l 2057 (TOURISM, 2017) The contribution towards GDP since 1995 which we use as our base year was 7.7%, four years later we see it at 8% in 1999 and later in 2003 it was at 10.7%. CITATION kno l 1033 (knoema, n.d.). In 2014 the direct contribution of travel and tourism to the country’s GDP was BWP 6154 million. Attributes to the statistics are dues to the economic generating industries such as hotels, travel agents, airlines, commuter services and communication network provision. With the contribution of these industries Botswana is expected to see a growth of 5.2% by the year 2025. The contribution reflects internal spending on travel and tourism which is in spending by residents and nonresidents for business and leisure purposes. CITATION Kga15 l 2057 (Kgamanyane, 2015).
Source: CITATION STA17 l 2057 (STATISTICS BOTSWANA, 2017) The above table shows the direct and indirect contribution of tourism to the GDP of Botswana over the past 5 years. There is a steady growth from the direct contribution but the most impressive grown is from the indirect contribution. The indirect contribution represents all the other industries that tourism supports such as aviation, manufacturing and the purchase of tourists from local market CITATION STA17 l 2057 (STATISTICS BOTSWANA, 2017).
ALTERNATIVE SOURCE OF INCOME AND FOREIGN EXCHANGE
Visitor export which is the amount of money that tourists spend whilst in Botswana has also seen an increase from a total of visitor contribution of P6.22 billion in 2016 and P7.12 billion in 2017. By the year 2018 it is expected that visitor export will increase to P11.79 billion at a growth rate of 4.5% per annum. CITATION WTT18 l 1033 (WTTC, 2018).This rapid continued increase in contribution towards the economy of Botswana proves that the tourism sector is highly capable in being the engine of economic diversification. The sector is not as risky as the export of minerals as the market for tourism is more stable since Botswana has been a politically stable country since it gained its independence in 1966.
CONTRIBUTION TO FOREIGN DIRECT INVESTMENTS
Global statistics show that foreign direct investment dropped by an estimated 8% with an approximated US$ 1.26 trillion in 2014. The fall was triggered by economic fragility, policy uncertainty and political risk. Closer analysis of the year 2014 according to UNCTAD indicated that foreign direct investment inflow of Africa alone had increased substantially by 4% to US$57 billon resulting from regional market-seeking, international market seeking and infrastructure investment. Part of this rise contributed by the Eastern and Southern African bloc with Southern African doubling its inflows of US$6.7 in 2012 to $13.2 billon in 2013. Mozambique and South Africa are the two main results of this inflows with both country’s main attractions being that of infrastructure with investments in the gas sector in Mozambique CITATION Mak15 l 1033 (Makoni, 2015). The following graph will show case the different averages of foreign direct investments of some Southern African countries.
TABLE SHOWING AVERAGE FDI INFLOWS OF SELECTED COUTRIES (CURRRENT US$) FROM 2010 TO 2013
Counrty 2010 2011 2012 2013
Mozambique 1,258,161,877 3,645,044,843 5,635,092,659 6,697,422,432
South africa 3,693,271,715 4,139,289,123 4,626,029,122 8,118,153,643
botswana 136,063,065 1,092,802,291 147,058,313 188,606,246
Source: CITATION Mak15 l 1033 (Makoni, 2015)
Due to the external economic shocks that were experienced during the global financial crisis of 2008 which resulted in Botswana’s main export being diamonds experiencing a demand decrease, ultimately leading to the temporary closure of diamond mines and job losses, but this in hindsight presents an opportunity. With the increase in foreign direct investment across Southern African, Botswana is presented with the opportunity of marketing herself and successfully attracting foreign investment through tourism and covering up for the sustained financial crises similar to that of the year 2014 where South Africa and Mozambique profited from foreign direct investment CITATION Mak15 l 1033 (Makoni, 2015).
The solution to the problem of diversifying the economy of Botswana away from the export of minerals has been shown in this paper to be the tourism sector. The tourism sector has proven itself over the years to support employment, infrastructure development, increases sources of foreign exchange to the country and has the potential to attract foreign direct investment. With that the government of Botswana should adopt and develop the tourism sector as it has shown to have the capabilities to diversify the economy beyond the mining sector.References
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