12
May
11

Serengeti highway – a road to 50 000 lost jobs, or more?


I’ve built a simple tourism-sector economic modelling tool for Tanzania to review any possible impact that a commercial road through the Serengeti might have on the nation’s economy.

Based on certain key assumptions, carefully measured, it shows that the following economic effects are ‘possible’ over the 5-year period, 2012-2016:

  • 32 589 jobs (direct and indirect) will be lost in the “Northern Safari Sector”;
  • 20 738 jobs (direct and indirect) will be lost in the national economy, outside this sector;
  • More than US $ 600m will be lost in total period GDP;
  • More than US $ 400m will be lost in total period foreign exchange earnings;
  • Approximately US $ 50m will be lost in total period national tax revenue collections; and
  • Almost US $ 9m will be lost in total period national park fees in the “Northern Sector”

For any nation, this is serious collateral damage and must be diligently reviewed.

I don’t make these forecasts lightly, but with very careful consideration.

I am not an economist, but I did – as a layman – do some economic forecasting of SA’s economy and employment sector for the Buy South African campaign in the mid-1990’s.  A fair portion of my projected outcomes has proved reasonably correct more than 10 years later, so I think I can pass for some form of opinion-maker in this field.


SOCIO-ECONOMIC DEVELOPMENT

There are many complex issues surrounding the proposed development of a commercial road through the Serengeti.  I’ve raised some of these before, but I haven’t yet dealt with the simple fact of eco-tourism in Tanzanian economic terms.

As my primary interest is human socio-economic development within Africa – within a responsible framework, considering environmental and human rights – I’ve created this dynamic economic modelling tool so that one might reasonably predict possible changes in employment, GDP revenues, tax and national park incomes, based on variables in tourism revenues.

No matter the multitude of issues involved in human development, everything boils down to basic economics and affordability.


STATE REVENUES – TAXATION and NATIONAL PARK FEES  

The income generator for the government of Tanzania is its tax base and other related revenue sources.  In terms of the “Northern Safari Sector”, this would also include park fees for the 3 main attractions in the region, namely Serengeti NP, Lake Manyara NP and Tarangire NP.


TAXATION:

There is no empyrical data available regarding taxation revenues for the Tanzanian national fiscus, based solely on the tourism sector’s GDP.

The WTTC (World Travel & Tourism Council) produce detailed annual reports on countries and regions in partnership with a research unit from Oxford University, and in collaboration with nations and their respective government departments.

The 2010 WTTC Report for Tanzania projects that the country’s tourism sector will grow by an average of 5.9% per annum between 2011 and 2020 and that employment will rise at 2.2% p.a. over this period.

It places the nation’s tourism GDP at US $ 1,759 bn for 2010 for direct and indirect sources.

Trying to establish the tax-base contribution from this is difficult and requires a significant in-depth study and much research.  However, it is not unreasonable to consider, given the VAT rate, the corporate tax rate and the standard citizen income taxation rates, coupled with fuel levies for aviation and road transport, that not less than 8% of total GDP will accrue to the Tanzanian treasury.

My own assessment is that the correct contributory percentage should be around 12% and possibly as high as 15/16%.  Hence, I’ll stick with my conservative guesstimate of a mere 8%.

This, of course, would mean that not less than US $ 140m from the 2010 tourism sector’s almost US $ 1.8bn GDP revenues would derive to the benefit of the state as taxation income.  Given the WTTC’s projection of tourism growth in Tanzania, the result could mean that between 2012 and 2016, tax revenues for the nation, in the order of US $ 900m, will accrue.

Now, in any African nation’s books, this is a significant contributor to human socio-economic development and this country’s rich natural treasures clearly add value to the collective peoples of the land.


NATIONAL PARK FEES:

In a 2008 case study by Mitchell (et al) for TANAPA (Tanzania National Parks Authority), tourism and its associated revenues were reviewed.  TANAPA, allowing for US $ exchange rates prevailing at that time, reported earnings from their 3 ‘northern sector’ parks in 2006/7 as being a little more than US $ 25m for that financial year.

Allowing for annual growth in tourist arrivals in the region, this would mean TANAPA earnings from these 3 parks (of which the Serengeti NP generates roughly 70% of the northern sector’s total) should be in the order of US $ 150m for the 5 year period 2012-2016.

It is interesting to note that in 2006/7, almost one-third of TANAPA’s total revenues were generated by the Serengeti National Park and almost 50% of their national total derive from the northern sector’s 3 parks.

Again, this is not an insignificant contribution to state coffers for the protection and management of such a rich natural heritage.


“BRAND ALIENATION” – HOW SERIOUS THE THREAT ?

Anyone who has studied consumer behaviour and spending patterns internationally, will understand the principles of brand management and protection.

So how does “branding” involve the Serengeti?

Simple.  The Serengeti (and I must include the Maasai Mara, too) enjoys iconic status in the wildlife biosphere sector of our planet’s nature.  The fact that the Serengeti is one of the most famed locations for wildlife photography and filming in the world, the fact that millions of people have flown across oceans for the past 30-40 years to simply wonder in awe at its natural majesty, and the fact UNESCO and humanity regard it as one of the earth’s greatest treasures, all add up to create massive “brand status value” for this unique, pristine wilderness.

It is to large mammal habitation and migration on planet earth what Google is to internet search engines worldwide, what FIFA is to football, what Michael Jackson is to pop music, and more.

It is as iconic in its own brand-value sphere as Coca Cola is to soft drinks globally.

Any respected, international-brand guru will tell you that when a brand’s image is tarnished, for any reason whatsoever, its income generating capability is affected.  Supporters vote with their feet and exit the brand’s market space.  Simple and true. Proven over and over and over again.

I quoted the iconic Coke.  On 23 April 1985, for the first time ever in 99 years, the executive of Coca Cola tampered with its global brand image and taste when they launched New Coke.

There was a global outcry and a massive backlash.  At enormous loss to the company and with a hastily ramped-up, expensive, mega-marketing campaign worldwide, Coke Classic (“old” Coke, re-branded again) was launched on 10 July 1985, less than 3 months after the ill-fated change.  The lesson to any product or service provider offering a globally significant branding experience is – do NOT tamper, in any way, with the brand’s underlying ethos and the source of its revenues.

This process of changing the status (like Coke did) is called “brand alienation”, because it alienates the major fans.

Now, in Tanzanian economic terms, my modelling tool attempts to measure the consequences of such alienation should the Serengeti’s iconic wilderness status be affected in any way.

I do NOT wish to get involved in specifics, but rather demonstrate variables.  To generate outcome projections, one needs to create some very critical assumptions.  The first is a simple scenario.

Will a new commercial road affect the natural ungulate migration in any way whatsoever?  I will assume YES, because there is researched evidence of such an outcome.  I’m not saying 1% of the wildlife will die, or 99% will die.  What I am saying is very simply that the migration behavioural pattern will be altered and that it will be NEGATIVELY altered. I’m NOT applying a quantitative value to that outcome.

Now, in this day of instant messaging and social networking and global campaigning, there is no doubt whatsoever in my mind, whether the average Tanzanian or their government likes it or not, there will be some Serengeti-fan anger.  I’m not talking tourism boycotts, although a few off-beat souls will scream out globally for such, but I am talking about very negative sentiment being spread.

There is no doubt in my mind whatsoever, especially given international Afro-pessimism (that we South Africans witnessed so strongly in the run up to the FIFA 2010 World Cup), that eco-tourists globally, who are by nature “earth-sensitive”, will be appalled that any nation’s 21st century government can engage in a human behaviour that knowingly undermines an environmental treasure.

What will the result of this be?  Undoubtedly negative publicity will lead to “brand alienation”.   It costs an international Serengeti tourist thousands of dollars to simply travel to experience the unique wilderness. What consumer, in any market, will spend their personal and hard-earned money, to support and promote an experience that is seen to be destructive on the environment and humanity’s future security?

I might be exaggerating matters, but there WILL be an economic fall-out effect.  The question is – HOW MUCH?


THE 7.5% ‘SANDBERG’ GUESSTIMATE FACTOR 

I decided that I would randomly ask 30 people that I know, who support tourism in Africa, AND have been to the Serengeti, AND who are not African, what they believed would be the potential loss of tourist revenues for Tanzania, ASSUMING a commercial road through the park were to be built in 2012.

The average guesstimate for a tourism decline over FIVE YEARS (2012-2016) amongst my small survey sample group was 19,2%.   The lowest projection was 10% and the highest projection was “more than 50%”.  Most people were in the band 15-25%.

I then took the lowest of the main band – i.e. 15% – and halved it, to be very conservative.

Thus, my calculations on job, GDP, forex earnings and tax/park revenue losses are based on a 7.5%brand alienation” factor.

I have split this is follows:

2012 – decrease 2.5%
2013 – decrease rises to total 4.5% (i.e. only 2% for that year compared to 2.5% previously)
2014 – decrease rises to total 6.0% (i.e. yearly decline now 1.5% compared to previous 2 years)
2015 – decrease rises to total 7.0% (i.e. only 1.0% decline for that year) and
2016 – decrease rises to total 7.5% (i.e. only 0.5% decline for that year).

And so, based on this 7,5% ‘brand alienation‘ factor, I return to my opening statement:

Based on certain key assumptions, carefully measured, it shows that the following economic effects are ‘possible’ over the 5-year period, 2012-2016:

  • 32 589 jobs (direct and indirect) will be lost in the “Northern Safari Sector”;
  • 20 738 jobs (direct and indirect) will be lost in the national economy, outside this sector;
  • More than US $ 600m will be lost in total period GDP;
  • More than US $ 400m will be lost in total period foreign exchange earnings;
  • Approximately US $ 50m will be lost in total period national tax revenue collections; and
  • Almost US $ 9m will be lost in total period national park fees in the “Northern Sector”.

    As I said at the start – to any nation, especially a “developing” one such as Tanzania, these are very serious economic consequences.

VARIABLE ANNUAL CHANGES IN “BRAND ALIENATION”

ONE PERCENT PER ANNUM – over 5 years

Total projected loss of direct and indirect jobs in Tanzania – 35 552
Total projected loss in national tax revenues for the 5 year period – US $ 27 659 594
Total projected loss in TANAPA park-fee earnings for the 5 year period – US $ 4 785 829

FIVE PERCENT PER ANNUM – over 5 years

Total projected loss of direct and indirect jobs in Tanzania – 177 758
Total projected loss in national tax revenues for the 5 year period – US $ 138 297 968
Total projected loss in TANAPA park-fee earnings for the 5 year period – US $ 23 929 146

TO CONCLUDE… 

The one thing I am certain of is that Tanzania WILL attract negative tourist sentiment and therefore “brand alienationIF the planned commercial road goes ahead.

How much economic damage will result is dependent upon 3 factors:

(a) How the government deals with the issue transparently, amongst all stake-holders;

(b) How the government deals with UNESCO in terms of the World Heritage Site status; and

(c) How much environmental damage results from affected wildlife migration and behavioural patterns.

YOU decide if there will be a decline in “Northern Sector” tourism, and – if so – to what level.  Should you have a different take on projected tourism revenue changes per annum over 5 years, feel free to mail me with your thoughts.  I’ll input the figures and mail you the related projections.  Then YOU can see for yourself whether the outcome of such a road will actually benefit the region and the country as a whole, or whether it will make the challenge of meeting the Millenium Development Goals even more difficult.

To round off, on a very personal level – I tend to think the nett result of this commercial road development will result in job losses and tax revenue declines somewhere between my 7.5% overall factor projection and the 5% per annum drop-off.   This could mean potential direct and indirect job losses in the order of about 80-90 thousand over 5 years, and THAT is NOT what Tanzania (or any African country) needs at this stage in a globalization!

Whichever way you look at it, some very, very serious reviews need to be made by the people of Tanzania and their government.

I pray I am utterly wrong!

Brian Sandberg

Durban.  South Africa
12 May 2011

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2 Responses to “Serengeti highway – a road to 50 000 lost jobs, or more?”


  1. 1 Xavier Surinyach Mateu
    May 12, 2011 at 6:27 pm

    Congratulations Brian.

  2. May 12, 2011 at 8:59 pm

    BRILLIANT EFFORT BRIAN – NOT ROCKET SCIENCE LETS SEE WHAT PRESIDENT KIKWETE’S ECONOMIC ADVISERS AND POLICY MAKERS HAVE TO SAY IN RESPONSE.


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