Tourism development in Tanzania

ArmIs of%nsm Research,Vol. 17, pp. 133-149, 1990 Printed in the USA. All rights reserved.

TOURISM

Copyright

0160-7383/90 $3 00 + .oo 0 1990 Pergamon Press plc and J. Jafari

DEVELOPMENT TANZANIA

IN

Steve Curry Bradford University, UK

Abstract: The development of tourism in Tanzania up to the mid-1970s is assessed from the viewpoint of its economic consequences and whether it was compatible with socialist development in an underdeveloped country. The shift from regional to international tourism involved an expansion of investment and foreign exchange earnings, mainly through a program of state sector operations, domestically financed. However, government investments were met by accumulating losses and the increase in revenues by a declining terms of trade. The limitations of a high cost international tourism that excluded domestic tourism, and precluded foreign investment are shown. It is questioned whether the expansion of tourism in Tanzania was too extensive in the circumstances. Keywords: international tourism, government investment, socialist development, linkages, terms of trade. RCsume: Le dtveloppement du tourisme en Tanzanie. Le developpement du tourisme en Tanzanie jusqu’au milieu des anntes 70 est evalut du point du vue de ses consequences tconomiques et du degre de compatabiliti avec le developpement socialiste dans un pays en voie de dtveloppement. Le changement du tourisme regional au tourisme international a entraini une expansion d’investissements et de devises &rang&es, en grande partie par un programme d’optrations du secteur public, finance par le regime national. Les investissements du gouvernement ont pourtant et& affront& par des pertes cumulatives, et l’augmentation des revenus a tti contrebalancte par une baisse dans les termes d’tchanges. On demontre les limitations dune politique de tourisme international codteux qui exclut les investissements &rangers. On se demande si l’expansion du tourisme en Tanzanie a et6 trop grande pour les circonstances. Mots-cl&: tourisme international, investissement public, dtveloppement socialiste, liens, termes d’echange.

INTRODUCTION Encouraged by rapid rates of growth of international tourism, Tanzania invested heavily in the sector at the end of the 1960s. This investment was met by slower rates of growth in the 1970s. Moreover, a dispute between East African countries involving the break-up of comSteve Curry (Development and Project Planning Centre, Bradford University, Bradford BD7 lDP, UK) has conducted primary research in tourism in Jamaica, Tanzania and currently Turkey, with a focus on applied economics including costbenefit analysis, input-output analysis, and measuring the terms of trade. His broader interests relate to economic analysis of projects and the political economy of underdevelopment. 133

134

TOURISM

DEVELOPMENT

IN TANZANIA

mon market arrangements led to the closure of the border with Kenya in early 1977, cutting off the main influx of holiday tourists; hence, the priority given to tourism was short-lived. The main purpose of this article is to assess the consequences for the Tanzanian economy of this short experiment in tourism development, from its origins in the 1960s to the end of 1976 when it was temporarily halted. The government became the major investor in the tourism sector, in directly productive hotel investments as well as in economic infrastructure. A debate grew up around the expansion of tourism and the government’s role in it, as to its compatibility with socialist development. A second purpose of this article is to outline the main features of this debate in the Tanzanian context. EXPANSION

OF TOURISM

IN TANZANIA

Tanzania has a diverse resource base for international tourism, including beaches, game parks, mountains, and the historical associations of Dar es Salaam, the capital, and archeological sites. As tourism grew, three major types of tourism emerged: town tourism in the major urban areas but particularly in Dar es Salaam, comprising business and government officials as well as holiday tourists; wildlife tourism particularly in the Northern Wildlife Areas (NWA), with access through Kenya; and subsequently beach tourism on the coast near the capital. The most significant changes in the structure of tourism in Tanzania took place in the 1960s: Tanzanian tourism shifted from a regional to an international market. Between 1961 and 1969, tourist arrivals grew at 22.8% per annum; the number of holiday tourists grew as the number of in-transit tourists fell; and the most significant increases originated in Europe and North America, almost wholely at the expense of tourists from Southern Africa. These changes reflected changes in the political composition of Southern Africa in the independence period, as well as the rapid expansion of long-haul international tourism from the major industrialized countries. The consequence was that Tanzania invested in a growing but highly competitive international commodity whose fortunes were bound up with the growth of incomes in the capitalist world economy as a whole. As with international tourism in general, a slower rate of growth occurred in the 1970s. International bednights grew at only 6.9% from 1970-1976, and there was a fall in 1973. Moreover, there was an apparent decline in the average length of stay with bednights growing less rapidly than arrivals. Nevertheless, changes continued to take place with the opening up of beach tourism on the coast and a further increase in the proportion of holiday tourists. By 1974, arrivals were twice their 1969 level, and hotel bednights nearly doubled between 1969 and 1976 (Curry 1988:140-146). Until the border closure, the sector had grown in a manner that compared favorably with that of export sectors, at least as far as volume was concerned. The growth of tourism brought a growth in foreign exchange receipts; in 1976, receipts stood at 5.5 times their 1961 level. Foreign exchange receipts from tourism had grown slightly faster than export

STEVE CURRY

135

receipts, achieving their highest proportion of foreign exchange revenues (4.4%) in 1970. However, this growth of receipts appears less favorable when compared with imports. The growth of tourism in the 1960s had financed a growing level of imports. In the 197Os, the growth in import expenditures outstripped that of export and tourism receipts and tourism contributed only 2.2 % of import expenditures in 1974 (Curry 1988: 149-151). This proportion subsequently rose, not because of a sudden acceleration of tourism receipts, but because of severe import restrictions that had to be imposed. Nevertheless, tourism receipts had grown substantially over a 15-year period, faster than export receipts as a whole. While coffee, cotton, sisal, and cloves remained the main foreign exchange earners, tourism, along with tea and tobacco, had provided a new source of foreign currency earnings. Within the country, tourism was concentrated in two main areas. The first was in Dar es Salaam and on the nearby beaches, which retained approximately half of international standard hotel bednights as the sector expanded. The second was the NWA, an area of exclusively holiday tourism, encompassing just under a third of bednights and 90% of game park visits. The remaining bednights were scattered across a range of holiday and town investments. Investment in the sector was substantial. The three main forms of tourism involved a concentration of expenditure in hotels, partly because of the nature of town and game-viewing tourism and partly because of a lack of complementary entertainment facilities for the beach tourism. Between 1969 and 1976, the expansion of international hotel bed capacity, at 12.1% per annum, slightly exceeded that of tourist bednights. In consequence, visitor bed occupancies remained low, declining from the peak level of 32 % in 1969. Although in town hotels visitor occupancy was complemented by domestic tourism, bed occupancy as a whole reached a peak of only 45% in 1975, below the level at which most hotels might prove commercially profitable. Profitability was also constrained by the size of hotel: only 3 had more than 200 beds. The size of hotel was influenced by the need to distribute tourists fairly widely in game-viewing locations. Additionally, occupancy levels in the NWA were subject to seasonal fluctuations which were not as evident in Dar es Salaam and other towns (Curry 1988:182-187). TOURISM

AND DEVELOPMENT

POLICY

The expansion of tourism coincided with a change in development policy in Tanzania. The growth and change in the live years after independence eventually revealed some limitations. The tourism expansion took place as those limitations came to the fore. The economic growth of the early 1960s saw an expansion in several export sectors and a decline in agriculture as a proportion of total output. Despite a decline in the international terms of trade and an increase in imports, the trade balance remained positive. With gross fixed capital formation growing at 15.1% per annum, the trade surplus was being used to bring about some changes in economic structure. However, this process of growth and change also had its limitations:

136

TOURISM DEVELOPMENT

IN TANZANIA

the economy was becoming more import dependent; despite some expansion of industry, there was little extra employment creation in urban areas; industrial investment displayed very small domestic linkage effects; and there was a net outflow of private capital. This last feature proved important. Outflows consisted of disinvestment by settlers and companies, as well as current profits. From 1961-l 967, these exceeded the inflow of investment funds (Rweyemamu 1971). Tanzania was losing some of the funds built up through the trade surpluses. The process of growth and change brought about growing inequalities. The cooperatives became a means of access to agricultural inputs and consumption goods for the larger farmers who dominated them; and agricultural policies in general favored the growth of capitalist farmers and hired labor. In the urban areas, an educated and salaried minority took a growing share of incomes at the expense of wageworkers. Wage-workers themselves were becoming differentiated from the growing unemployed, living in insecurity and poverty. Moreover, the commercial/financial sector was still dominated by European and Asian owners more concerned with means of capital flight than transformation into productive capital. This combination of circumstances meant that the rate of accumulation suffered, and its forms were oriented toward the living standards and the lifestyles of a small proportion of the population. Growing inequalities were inconsistent with the ideology and purpose of the party, which were mass-based and focused on prolonging the attractions of the national movement formed at independence. Its main task was not to mobilize around a particular form of development, but to restrict the growth of inequalities in income and wealth. In practice, government policy reflected the economy’s dependence on international trade and investment rather than the aspirations of the independence movement. It was the perception of this contradiction that led to a change of direction in 1967. The Arusha Declaration was based on the two principal concerns indicated above, the growing inequalities between different groups and the influence of foreign capital on development (Nyerere 1968:23 l250). New policies were introduced under the slogan of “socialism and The objective of socialism was defined in a particular self-reliance.” way. It meant the restriction of direct exploitation of many by a few who owned the means of production. A program of socialist reform required greater control by the party over government policy, accompanied by a “leadership code” that prevented party members and government offcials from owning property and businesses and from employing others. Inequalities would be tackled directly, through restricting the growth of higher incomes and reducing the divergence between those employed as a result of their education and those who worked in factories or on the land. The objective of self-reliance was not specified in detail. The most immediate need was to reduce the outflow of funds. Banking, insurance, and export/import agencies were nationalized, followed by seven major industries (mostly producing consumption goods) and, in part, the sisal estates. The main element was the financial institutions. Their takeover stemmed the outflow of income and capital, and yet involved

STEVE CURRY

137

little compensation, as the institutions themselves had few capital assets other than offices. Nationalization was a component of self-reliance, not its main instrument and, in a country where 90% of the population lived in rural areas, self-reliance meant relying on local land and labor to produce for local demands as well as for export. The party shifted its attention to and a policy evolved that extended government rural development, control over rural production to match the extended control in the industrial and infrastructure sectors. Rural policies emphasized the importance of bringing households as production units closer together to benefit from government services and in order to simplify the distribution and collection of produce. However, the predominant production unit remained the household, where tasks were not very specialized and where productivity was limited by the skills and labor time of the family. Moreover, an emphasis on service provision, rather than the release of labor through cooperative forms, meant the objective of increased productivity was largely vitiated (Rweyemamu 1973:67; von Freyhold 1979). The extent to which policy changes from 1967 were the result primarily of a desire to achieve greater equality or an expression of frustration at the continued reliance on foreign capital and personnel in new investments is debatable. What did not change was the reliance on foreign markets to sell exports and as a source of equipment and materials, which was extended under the policies of “socialism and selfreliance.” In particular the growth of industry in the public sector did not reduce Tanzania’s dependence on foreign markets and products. (An industrial strategy based on the use of local resources to meet local needs was part of the draft third five-year plan of 1974-1979; however, this plan was overtaken by a foreign exchange crisis and was never implemented in its draft form.) The planned expansion of tourism was not prevented by the new policies. On the contrary, tourism became bound up with the growth of the parastatal sector. It was one of the newer forms of parastatal activity, relying largely on domestic funding and control. The expansion of tourism was prepared in the 1960s. An international conference in Arusha in 1961 on “The Conservation of Nature and Natural Resources in Modern African States” prompted a reconsideration of the scale of conservation activities. Tanzania was prompted to expand its national parks program. Simultaneously, a study claimed that a return on conservation could be taken from tourism to be developed with it: Americans and Europeans, through their expenditure as tourists, would contribute to the conservation of reproducible natural assets essential to the wildlife program. Moreover, the tourism expansion could be financed through private and foreign investment (Little 1962). A further report in 1964 foreshadowed much of the subsequent development. The primary prerequisite was an expansion in accommodation. Where accommodation expanded in national park areas, state ownership was recommended to coordinate the requirements of conservation with tourism. Because the expansion of the national park system was expensive, government ownership of hotels indirectly financed this

138

TOURISM DEVELOPMENT

IN TANZANIA

expansion, by retaining revenues within the state sector (Harris 1964). The government was recommended to establish a tourism corporation to provide uniform standards of service and price and to encourage investment. A government corporation could provide the channel through which external investors could help finance a tourism expansion. This was particularly needed because of the circuit nature of tourism. The recently created Tanzania National Tourist Board (TNTB) had made grants and loans on a small scale to productive enterprises, especially in the NWA. The circuit nature of tourism, with tourists staying perhaps only one night in any location before moving on in the process of game-viewing, required a coordinated set of investments if the sector was to expand. New hotels were needed to match the growing demand for business tourism and to remove an accommodation bottleneck in the NWA. An instrument for implementing a tourism expansion already existed in the National Development Corporation (NDC), a holding company established to promote industrial investments. The new policies following the Arusha declaration increased the local capacity to finance new investments. The NDC assumed that funds would be available from the government budget for a number of hotel investments that would be under full state sector ownership. It was the entry of state sector capital into directly productive tourism investments on a large scale that comprised the most significant feature of tourism policy. NDC proposals agreed in 1968 and implemented 1969-197 1 included two hotel circuits. Four hotels in the NWA would be financed partly through international loans and operated jointly through a holding company in Arusha. They would more than double capacity in the NWA circuits, and ensure a consistent standard of accommodation. Another four hotels in a Southern circuit around Dar es Salaam would be financed entirely from government resources and would combine beach, business, game-viewing, and deep-sea fishing activities. This hotel circuit, establishing a new form of international tourism for Tanzania, would compete with joint game, beach and town circuits in Kenya. In 1969 the TNTB was disbanded and the Tanzania Corporation (TTC) established to oversee the hotel construction program and to manage the state sector enterprises. The most strategic problem in the expansion of tourism, that of a combined expansion of accommodation capacity, was resolved through the state sector. Given the circuit nature of tourism in the NWA, and the need to combine tourism and conservation objectives, it is not surprising that the state sector took up a major productive role in that area. However, this productive role followed on from the self-reliance policies; although a few minor hotels were nationalized in 1968, the bulk of the tourism expansion was through new investments. With no prohibition on private sector and foreign investment, the expansion in private sector bed capacity matched that of the state sector while showing a difference in focus. While the state sector expanded into the more risky holiday investments as well as town hotels, a higher proportion of private sector bed capacity was in the less risky town hotels. In the Southern areas in particular, the new circuit was constructed through government funding not because the government was unwilling to see private sector

STEVE CURRY

139

investments but because they were not happening. The financial resources of the government sector provided a necesary guarantee for investments that were deemed marginal to the main expansion of tourism internationally. The overall consequence was that foreign involvement in the main circuit areas was restricted largely to loan financing and management contracts, while the state sector bore the risks of the equity investment. Once established, the TTC commissioned a Tourism Masterplan, delivered in 197 1, that claimed that “Tanzania can become a major world destination for international tourists. International tourism can in turn become one of Tanzania’s most profitable industries and its leading foreign exchange earner.” This Plan envisaged a rapid further expansion of both the game-viewing and beach tourism capacity, with the latter eventually exceeding the former. For regulatory purposes, it was envisaged that TTC would contribute 50 % of the additional investment. The key issues of policy associated with this future expansion were identified as “regional promotion . civil aviation policy . . and incentives for private investment.” The whole program would continue to require indirect budgetary support (Little 197 1). Although this further massive expansion of tourism did not occur, the TTC continued to grow, with selected hotel and related investments. The most important of these was a new tour company that took over trips into the main NWA attraction, Ngorongoro Crater, and which invested in a fleet of minibuses to cater for the expected influx of tourists through Kilimanjaro airport. At the same time, TTC set up subsidiaries to look after wildlife products, inbond shops, travel agencies, pleasure and fishing boats, and several other activities. The state sector provision of facilities became comprehensive. However, the expansion of tourism was not without controversy. REACTIONS

TO TOURISM

DEVELOPMENT

The form which the expansion of tourism took was consistent with the policy of self-reliance as far as it related to the parastatal sector. A largely new sector was established with considerable government funding, capturing, and retaining any profits that might be made. However, the expansion of tourism prompted adverse reactions from two directions. The first related to the effects on conservation policies in game areas; the second, more important and public, related to the connection with the overall policy of “socialism and self-reliance.” It was always acknowledged that tourism could add to the difficulties of conservation; negotiations with park authorities had taken place not only about the ownership of hotels in park areas but the extent of road building and freedom of maneuver of vehicles as well. The construction of the new hotel circuit highlighted the concentration of tourists in specific locations. (A compromise over the size of one hotel led to the construction of a second only 40 miles away, an uneconomic distance in the context of game-viewing tourism.) The issue of hotel siting recurred in subsequent plans. In Arusha National Park, the park authorities insisted on preserving Ngurdoto crater from human incursion and relocating a hotel some distance

140

TOURISM DEVELOPMENT

IN TANZANIA

away. In Ngorongoro Conservation Area, the Conservator allocated additional hotel sites, but on the far side of the crater, remote from existing communications and park headquarters, which would have meant considerable additional operational costs. In Kilimanjaro National Park, the national park authorities devised a plan to open up mountain viewing to all tourists. The plan involved four components: an all-weather road through the forest belt; reconstruction of climbing huts; a new hotel on the lower slopes; and a second road down the other side for a circular tour. Mountain viewing would encourage higher income tourists to lengthen their stay in Tanzania, generating more foreign exchange than from mountain climbers. However, the lower slopes were part of a forest reserve in which clearing and replanting was planned, conflicting with the channels of natural forest desired for tourism purposes. The Forest Commissioner closed five of the six rights of way through the forest reserve; a circular tour was no longer feasible. There were several other instances of conflict between conservation and tourism objectives. However, these were largely pursued through inter-Ministry consultations and did not often become public. Significantly, tourism did generate a broader debate about development priorities that was public and which forced the TTC to respond to several forms of criticism through the local press. This debate brought to the surface two different conceptions of the development program initiated by the Arusha Declaration. The first emphasized a rural based program of collective production; the second emphasized the state sector ownership and control of new industries, The origin of the debate was an article written by University students claiming that tourism would “reinforce the existing colonial and neo-colonial social, cultural and economic relationships” to the detriment of a self-reliant and socialist development (Shivji 1973: 1). Tourism would enhance “the dangers of commercialization of our culture which would make it incompatible with socialism.” The character of service employment in tourism generated a “flunkyism” among workers, denying the development of a self-reliant person. Self-reliance had to be established at the ideological and cultural level, to complement a withdrawal from production for the world market. It was also argued that standards and prices were too high; new hotels provided the occasion for “luxury” consumption, incompatible with the frugality of a socialist program. Natural resources were being brought into production in a way that increased economic dependence on the major capitalist countries, through the equipment and skills that were necessary to establish tourism as an international industry. Moreover, tourism would encourage petty capitalist forms of production in tour operation, transport, entertainment, and other ancillary activities; a petit bourgeosie, being the most attached to individual property, would prove a stumbling block on the road to socialism. Indirectly, beach tourism in particular would accomplish what the leadership code and the Arusha Declaration sought to avoid: the development of a capitalist class within Tanzania, unsupported and unregulated by the state. The Ministry of Tourism emphasized countervailing aspects of tour-

STEVE CURRY

141

ism development (Shivji 1973:75-89). First, there was a need to expand foreign exchange earnings; deleterious side-effects could be controlled by the separation of game park tourism from the population, and by “socialist discipline” with respect to beach tourism. After all, there really was not much “tourist life” in Tanzania; future game park expansions would use this theme of peace and isolation as a main attraction. Secondly, in the context of wildlife areas, the “first question” is “whether the country’s attractions should be enjoyed by foreigners free of charge or at a cost. The basic reason for establishing a tourist organization is to ensure that these attractions are enjoyed at a cost.” An economic contribution to development would be ensured through a regulated tourism carried out under the influence of the TTC, “our instrument for socialist construction in the tourism sector.” Justification was given in the Arusha Declaration for state sector involvement in the Tourism, through its foreign exchange major “means of production? earnings, was indirectly one of the major means of production (Shivji 1973:75-89). This conception of ownership and control was consistent with selfreliance in the form of internal financing of production, combined with political constraints on the development of private capital. It differed greatly from the disengagement from international capitalism through rural-based collective production, that was propagated by other factions both publicly and within the party in the early 1970s. However, the two elements in the debate represented exaggerated positions with respect to tourism and development in Tanzania. The claims that tourism would lead to further external dependence, and provide a form of luxury consumption, were not entirely credible. External dependence was a feature of the economy as a whole, reinforced by other sectors, not just tourism. Tourism may have provided the occasion for luxury consumption but did not provide the means for it. Further, luxury consumption resulted from internal differences in income and wealth, not from tourism. On the other hand, it was difficult to see the expansion of the parastatal sector as in itself “socialist.” Investments were decided on a caseby-case basis; the main criterion was expected profitability, the overall planning mechanism that should have provided clear long-term priorities was weak. The most that could be said for the expansion of tourism in the parastatal sector is that it conformed to the principle of selfreliance, with most of the tourism investment being financed through domestic resources. The dominance of the TTC in the tourism sector was reinforced in 1973 when two events came together to create considerable uncertainty for private sector investors. The first was the down-turn in international tourism at that time. The second and more significant was a change in priority for tourism domestically. An Economic Committee of the Cabinet announced that no new government funds would be made available for tourism projects. Existing investments should be consolidated by the completion of three major outstanding projects and, even for these, external financing was to be sought. While apparently leaving the sector open for private investment, this change of policy actual-

142

TOURISM

DEVELOPMENT

IN TANZANIA

ly left the TTC with control over the main tourism circuits as a result of its recently completed investments; any new private sector investments would find difficulty in competing. The change of policy from priority expansion to consolidation can be attributed to a number of factors. Basic infrastructure investments, with the opening of the international airport in the North, were now complete; a draft five-year plan was in preparation arguing a priority for basic industry developments to which tourism would be unconnected; the predictions of the Tourism Masterplan were not thought credible and tended to undermine the TTC’s case. Finally, the public debate about tourism had highlighted a lack of public support for beach tourism in particular and for tourism in general. Consolidation meant a halt to further state sector plans. However, tourism was left in a difficult position. There had been a substantial investment but it yet had to prove financially viable. It was possible that further investment was required in both game-park and beach areas to diversify the sector toward cheaper forms of accommodation. Such a diversification, which also would raise the rate of utilization of the economic infrastructure that had been created, may have been necessary to ensure profitability in the future. As it was, further investment was stalled by the government’s new attitude. Investment now had to shift in other directions. EXTENT

OF GOVERNMENT

INVESTMENT

IN TOURISM

It is difficult to obtain a complete estimate of investments made in a tourism expansion. In particular, tourism generates several small, but, subsidiary activities. In the Tanzanian case, an in total significant, estimate has been constructed for major investments over the period in hotels and invest1964 to 1976 (Table 1). Th’ 1s includes investments ment by government in economic infrastructure (airports, national parks, game areas, tourist roads) insofar as these could be attributed to aggregating, as they do, expenditourism. The figures are indicative, tures in current prices for each of several years over quite a long period. In these major tourism sector investments, government contributed 88% of the total. Paradoxically, the share of government investment grew after the policy of consolidation with the completion of the remaining investments. Allowing for the fact that investment in second-

Table 1. Tourism 196469

Sector %

Investment 1970.71

1964-1976 %

(shillings

1972-76

%

000) Totals

%

Government

19.208

28

80,339

41

70.508

41

170,055

39

Government hotels Private sector hotels Totals

34,478

50

85,572

44

94,564

55

214.614

49

15,353

22

30,380

15

6,484

4

62,217

12

non-productive

Source:

69.039

Curry (1988:212).

196.291

171.566

436,886

STEVE CURRY

143

ary activities was non-government, the actual share was probably between 80 % and 88 % of the total. The government committed to tourism investment amounts far greater than any commercial organization could have done. It was also able to sustain investments with an inadequate revenue through its powers of taxation and subsidy while continuing to spend on improvements in airports and game areas. The momentum of government expenditure on tourism was carried through 1976, until the border closure with Kenya. Government domination of sector investment can partly be explained by the circuit nature of investment and the demands of conservation. A threshold level of investment was required in both the North and the South to overcome an accommodation bottleneck and create a wider tourism circuit. In the game areas, this had to be matched with conservation objectives through government ownership. However, government domination was also partly inadvertent. Tourism was not identified as a sector of full state ownership, but there was little experience domestically of catering for international tourists, and the major foreign hotel companies were reluctant to commit resources to Tanzanian tourism. The large government share in tourism sector investment is partly explained by differences in hotel construction costs. The number of private sector beds matched that of the government sector, but at only one third of the cost. To some extent, this reflected differences in quality and service; the cost of locally funded private hotels was consistently low because of the restricted services such hotels were designed to provide; and the investment costs of tented camps in game park areas was consistently lower than the more formal structures in the state sector. In part, they reflected differences in location, construction costs in remote national park locations being higher than elsewhere for the same size of hotel. Nevertheless, the difference in investment cost was considerable; the greater risks of holiday investments were compounded in the state sector by the far greater costs of investment. The expansion of the hotel sector was the cornerstone of tourism in Tanzania. In the state sector, investments were controlled by the TTC which was conceived as a vehicle not just for expanding tourism but for channeling operating funds back into additional state sector investments. In 1969, the TTC took over assets worth 53 million (Tanzanian) shillings. A corporate structure was established in which the headquarters acted as a holding company for existing and new investments. The headquarters formally received and disbursed budget funds; it oversaw the construction process and established operating criteria; it regulated the management structure and personnel; and it formally controlled any accumulated profits from the individual enterprises. The number of operating units quickly grew to about 15 by 1976. Increasingly, finance was provided in the form of direct investment by government rather than by loans; initial direct investments of 53 million had grown to 120 million by 1976, while loans declined to 27 million. These investments were met by accumulating losses, even as tourism expanded. In the NWA, operating results reflected the loan funding of investments requiring fixed financial outflows and the number and size of hotels. Moreover, operating costs had risen rapidly

144

TOURISM DEVELOPMENT

IN TANZANIA

while prices were held down by competitive pressures. By 1976, before the border closure with Kenya, TTC was faced with substantial liabilities as a result of the NWA circuit. The situation was even worse for the Southern hotels. The underlying factor here was the underutilization of capacity at the game park and deep-sea fishing hotels. Moreover, the city center hotel, although full, operated at cost levels considerably above those elsewhere, restricting the positive contribution it made. Other TlC investments showed mixed results and were unable to compensate for these losses in the major hotel investments. In 1976, an exceptional provision for loss of 37 million was made, reducing the book value of TTC assets accordingly. This loss provision was equivalent to the equity holdings in the two hotel circuits plus that in the tour company. It was acknowledged that there was no prospect of recouping these funds. The write-offs amounted to 25% of TTC assets and represented the burden placed on the economy as a whole up to 1976 to finance directly productive tourism investments (Curry 1988: 190203). The expenditures on directly productive investments had been preceded by many years of indirectly productive expenditures from the government attributable to tourism. Although tourism did generate a government revenue, the net expenditures were substantial. The continuing themes of government recurrent expenditure in support of tourism were transport, conservation, and tourism promotion. These expenditures increased over time with tourism expenditures remaining roughly between 0.3 % and 0.4 % of government expenditures as a whole. Government development expenditures on tourism were more lumpy. From 1961 on, the government invested in tourism every year, on airports, game areas and hotels, more than matching the growth of government investment as a whole. As a proportion, tourism investments were 11% and 6.5% of total investments in 1969/70 and 1970/ 7 1, respectively, showing the priority given to tourism at that time. Within a growing total of expenditure on tourism, establishing and operating non-directly productive activities remained a larger share than directly productive activities, and held out no prospect of generating a matching revenue. The opportunities for deriving a revenue directly from tourism were few, and were taken up rather late. Game licenses, airport charges, and tour operators licenses represented only small amounts; even a hotel levy at first generated little revenue. It was not until a change in basis of the hotel levy in 1972 that tourism revenues began to rise at the same rate as tourism recurrent expenditures. However, this did not compensate for the considerable investment expenditures in infrastructure and directly productive units. Net expenditures on non-directly productive tourism-related activities amounted to 179 million between 1952 and 1976 (Curry 1988:203210). If the value of directly productive assets written off is added at 37 million, total net expenditure on tourism by government up to 1976 was 216 million. This figure aggregates current expenditures over many years; it aggregates net infrastructure expenditures with losses in directly productive activities. However, it does show a continuing and

145

STEVE CURRY

accumulating net expenditure by government in support of tourism, justified only by the greater inflow of foreign exchange it brought in. This inflow has been estimated as 180 million for 1976. Remembering the current price basis of the net expenditure figure, government’s contribution to tourism, or the contribution of other sectors through government, was probably twice or more of the annual foreign exchange generated at the end of the whole process. ECONOMIC

EFFECTIVENESS

OF TOURISM

EXPANSION

The government’s role in the tourism expansion was extensive. This could be justified only if tourism yielded substantial extra income and foreign exchange in a manner compatible with conservation objectives. The overall consequences of the “tourism experiment” for conservation have not been investigated; but the economic consequence of tourism have been identified at the sector, project, and national levels. At the sector level, international tourism in Tanzania showed a high income generation and a high retention of foreign exchange by international standards (Curry 1986). An income multiplier value including direct and indirect effects of 0.849 is much higher than for other developing countries and equivalent to values for some developed countries. (This value incorporates the import restrictions in force in 1976, but is nevertheless very high.) Tourism also showed stronger linkage effects than other export sectors. This generation of demand for inputs included those for tourism and for the supplying sectors, and was quite spread out in the economy as a whole. However, greater linkages in terms of output was associated with lower income generation and lower levels of foreign exchange retention; they were created at the cost of additional indirect imports. This trade-off between output and income, or foreign exchange, was highlighted through different types of tourists: beach tourists, with highest linkage effects, showing the lowest income generation and foreign exchange retention. Altogether, differences in expenditure level prove more significant than differences in linkages. Business and NWA tourists had expenditure levels per head considerably above beach and other holiday tourists, as well as a greater multiplier effect. Concentrating investments on the NWA and town hotels may have been a better strategy than expanding into the Southern circuit. The Southern circuit was constructed to create a diverse tourism within Tanzania so that gameviewing in the NWA need not continue to be related to town and beach tourism in Kenya. This national approach to investment increased the inflow of foreign currency and linkages within the economy, but also increased the costs of tourism development. Given the difficulties of internal road and air transport in Tanzania, the beach tourism in the Southern circuit never became systematically linked to the game-viewing tourism in the NWA. This conclusion is reinforced by investment indicators at the project level. A hotel accounts survey for 1976 showed that town hotels generated more foreign exchange and value added than holiday hotels on half the number of beds (Curry 1985). G reater operating costs were more

146

TOURISM

DEVELOPMENT

IN TANZANIA

than compensated by greater occupancies, revenues, and profits. Town hotel investments in Tanzania lagged behind demand, while holiday hotel investments outside the NWA preceded demand. Among holiday hotels, those in the NWA were exceptional. Nearly all their revenue was in foreign exchange and they generated value added and profits at close to the sector average. Other holiday hotels were much worse in operating performance, and needed to be sustained by financial transfers. These broad observations for the hotel sub-sector as a whole are confirmed by economic rates of return at opportunity cost prices for specific hotel investments (Curry 1987). T wo selected wildlife and three selected town hotels showed acceptable rates of return; those for two selected beach hotels were negative, implying a loss of value added and foreign exchange to the economy. Moreover, the selections were made to incorporate hotels with better returns in each type of location. Other hotels, and particularly other holiday hotels, would have shown much worse rates of return. As TTC was a major investor in other holiday hotels, these results reflect badly on the extensive investments undertaken in the state more than the private sector. For three main reasons, returns to TTC hotels were lower than to non-TTC hotels despite higher occupancy levels. First, TTC hotels constituted a different technology and much higher investment costs. Second, non-TTC hotels benefited more from an inflow of foreign investment funds that set off much of the initial costs. Third, the greater investment costs in the state sector were partly the result of the larger number and smaller size of hotels required to accommodate conservation objectives. These rates of return reinforce the point that tourism investment was too extensive. A more diverse tourism investment program was in part self-defeating. It would have been better to restrict expansion to town hotels and those in the NWA in order to establish a more productive sector. It was the government’s need to expand foreign exchange earnings, and to do so through the state sector in conformity with the selfreliance objective, that led it into unsatisfactory investments in holiday areas. If foreign exchange generation was the principal objective of tourism it can be asked whether tourism allowed a substantial expansion, growth in import capacity, the main mechanism through which it would contribute to development as a whole. The import capacity of tourism was affected by relative price changes (Curry 1982). As prices in general, and operating costs in particular, rose in the 197Os, hotels also increased their prices. However, these price rises were off-set by for the currencies of the new changes in exchange rates, especially destination countries, so that prices in foreign currency did not rise as fast. There was a decline in the terms of trade for tourism in the 197Os, after the major expansion of the sector. The price of tourism in Tanzania, measured in foreign currency, rose more slowly than the prices of goods the country imported. For all tourism, foreign currency earnings increased by 259 % from 1969-1976, but the import capacity, the volume of imports these earnings could purchase, rose by only 78%. For the NWA, the sub-sector most closely linked to international holiday

STEVE CURRY

147

tourism, earnings increased by 180% in the same period and the impact capacity by only 39 % . These conclusions result partly from deficiencies in the price-setting mechanism in Tanzania; tourism prices were fixed in local currency without regard to the foreign currency price. Prices were raised least, that is, relative prices fell most, in the NWA and town areas where tourism expanded most rapidly. The declining terms of trade for these sub-sectors wiped out much of the additional benefits generated through higher expenditure and foreign exchange retention. Other holiday areas presented a problem. Demand was inadequate where net foreign exchange earnings were least, largely for non-price reasons. An attempt was made to compensate for lower demand by raising prices more. Hence relative prices and the terms of trade fell less in other holiday areas, but there was no substantial increase in the import capacity because of the deficient demand. CONCLUSIONS For a while in the 196Os, tourism became a major element of development strategy in Tanzania. The main investments in international holiday tourism were prompted by two concepts. First, investment had to be organized in a tourism circuit; a coordinated set of investments had to be undertaken simultaneously. Second, direct access tourism should be encouraged. However, both increased the required infrastructure and directly productive investments. The state was the only agency with the authority and financial resources to implement direct access tourism circuits. The state played a major financial and productive role in tourism, in the face of disparate and small individual capitals. The state sector corporation was drawn into an extensive investment program including new beach and other holiday projects. This embodied a national concept of tourism development in which direct access tourists would visit game park, mountain, and beach areas without leaving the country. This more extensive concept of a solely national tourism was expensive, and the sector required a transfer of financial surplus from other sectors. The more extensive investment program increased the costs of achieving the growth in foreign exchange earnings that did occur. Moreover, the value of these earnings was reduced by a rapid rise in import prices. The declining terms of trade for tourism meant that the economy’s import capacity did not expand substantially as a result of the tourism expansion. These conclusions on the economic consequences of tourism are independent of the debate about its appropriateness in the context of Tanzania’s development strategy. The use of the state sector to create a new type of international production could be justified under the policy of self-reliance. If profits were made, they would accumulate for domestic reinvestment. Any net surplus that accumulated would be in the form of foreign exchange. However, tourism found less justification under a policy of socialist development, as interpreted in Tanzania. The concept of public sector

148

TOURISM

DEVELOPMENT

IN TANZANIA

corporate investment was, in the view of some, an inadequate expression of what a socialist strategy must contain, especially as regards the rural areas. An alternative conception of rural-based collective production would have meant the resources devoted to tourism being directed elsewhere. The debate on tourism and socialist development came too late; it occurred as a response to the major investment programs that were being implemented. However, it was one of the factors that led to the revised priorities in the mid-1970s. Tourism investment had been enough. The consolidation of these investments would satisfy the TTC’s corporate objectives and the national objectives of foreign exchange and incomes. The expansion of tourism in Tanzania also draws attention to issues of tourism planning more generally. First, international tourism could not be integrated with domestic tourism except in the business and government sector. This meant that the local population was unable to make use of the considerable investment resources put into tourism. Second, the state sector financing of major investments enabled a coordinated program to be implemented for achieving foreign exchange and conservation objectives. However, it indicated a shortage of willing private, especially foreign, investors that could have enhanced the production and marketing process in an international industry. Third, the state sector program involved a high investment cost. This weakness increased the resource use in a sector subject to considerable international competition, and enhanced the risk of losses. It is not inevitable that a tourism expansion in a country professing a policy of “socialism and self-reliance” should exclude domestic tourism, or preclude foreign investment, or be established at high cost. It is more likely in an underdeveloped country where substantial concentrations of capital apart from the state sector did not exist. Tourism development will inevitably raise some doubts in these circumstances, which would be overcome only by greater economic benefits than tourism in Tanzania was able to show. 00 REFERENCES Curry, S. R. 1982 The Terms of Trade and Real Import Capacity of the Tourism Sector in Tanzania. Journal of Development Studies 18 (4):479-496. 1985 The Hotel Sector in Tanzania. A Comparison of Operating Performance. Tourism Management 6(2):95-105. 1986 The Economic Impact of the Tourist Industry in the United Republic of Tanzania: An Input-Output Analysis. Industry and Development 19:55-75. 1987 Hotel Investments in Tanzania: An Evaluation Using Accounting Prices. Project Appraisal 2(4):221-230. 1988 Tourism and Underdevelopment in Tanzania. Ph.D. dissertation, Bradford University. Harris: Harris, Kerr, Forster 1964 Recomendations for Implementation of a Tourism Development Programme. Rockefeller Fund, for Ministry of Finance, Dar es Salaam. Little: Arthur D. Little, Inc. 1962 Tanganyika Tourism: A Stimulus for Wildlife Conservation. New York: Arthur D. Little. 1971 Tourism in Tanzania: A Master Plan for TTC. New York: Arthur D. Little.

STEVE

CURRY

149

Nyerere, J. 1968 Freedom and Socialism. London: Oxford Unversity Press. Rweyemamu, J. 1971 The Political Economy of Foreign Investments in the Underdeveloped Countries. African Review l(1). 1973 Underdevelopment and Industrialization in Tanzania: A Study of Perverse Capitalist Industrial Development. Oxford: Oxford University Press. Shivji, I. 1973 Tourism and Socialist Development. Dar es Salaam: Tanzania Publishing House. Von Freyhold 1979 Ujamaa villages in Tanzania: Analysis of a social experiment. London: Heinemann Educational. Submitted 23 April 1989 Revised version submitted Accepted August 1989 Refereed anonymously

8 August

1989