NAIROBI, Kenya
The Cabinet Secretary for East African Affairs, Commerce and Tourism Phyllis Kandie says the newly introduced VAT regime will negatively affect tourism, further complicating the problem of low tourist volumes since the beginning of the year.
“We are alive to the fact that the effect of the new VAT will greatly impact on the tourism industry because of increased prices of goods and this might scare away both domestic and international tourists. We are engaging with the private sector to find ways of reducing the impact of the new price changes especially on the tourism sector,” she said.
The VAT Act 2013, which took effect on 2nd September, has seen an increase in the price of commodities by as high as 20% with milk being the hardest hit consumer product. A half a litre of milk now goes for between Sh.55 and Sh.60 from Sh45 previously.
Mrs. Kandie when she released the results of the performance of the tourism sector during the financial year 2012/2013 and the 2013 half year. The report shows a growth in domestic tourism from 34% to 41% in the past three years. This could be attributed to the favourable political climate and a steady economy.
However, the financial year 2012/2013 recorded a decline in international arrivals by 8.8% from the previous 1,167,741 visitors to 1,280,314 in the same period in 2011/2012 financial year. Tourist arrivals through the Jomo Kenyatta International Airport (JKIA) declined by 8.1% while arrivals through the International Airport Mombasa saw a 13% decline.
Uganda remained the highest source market for Kenya regionally with 56,844 tourists, followed by South Africa and Tanzania respectively. From the emerging markets, china contributed 38,482 tourists while UAE grew by 53% to record 44,526 arrivals. There was a 7.4% drop in revenues with Sh.96.24 billion being recorded in the financial year 2012/2013, compared to Sh. 103.91 billion in the previous year.
The report shows the total international arrivals for the first half of 2013 stood at 495,978 compared to 564,261 in the same period in 2012, showing a 12.1% decline. The ministry projects to hit the 2 million mark in tourist arrivals by 2014 but the effects of VAT might derail these efforts as the country struggles to bridge the budget deficit and a ballooning public wage bill.
