KwaZulu-Natal industry stakeholders are currently in the dark regarding mechanisms for the collection of a 10% hospitality levy in KwaZulu-Natal, creating a war chest for the province to attract major events.
The impending levy was announced in the provincial legislature last Friday by MEC for Economic Development and Tourism, Mike Mabuyakhulu, during his budget speech. He said it would be imposed from April 1, 2015 and industry players and tourism think tanks would be consulted before the end of next month.
The province plans to make a bid for the 2022 Commonwealth Games and intends following public-private partnership models used by other destinations. Glasgow, Vienna, Sydney, Barcelona, Singapore, Toronto and San Francisco have all implemented bids in this fashion. A hospitality levy in all these case studies was involved, being a combination of direct contributions by industry players along with a service fee or levy charged onto the specified services.
Mabuyakhulu said currently the province was funding most bid initiatives directly through allocations shared between the province and municipalities, mostly, Ethekwini.
The news came as a surprise to the TBCSA, which has engaged with the CEOs of SA Tourism and KZN Tourism Authority and will send a formal letter to MEC Mabuyakhulu registering the industry’s concerns and encouraging further engagement.
The TBCSA will also send a formal letter of concern to Minister of Tourism, Derek Hanekom, indicating its concern with KZN’s plans and its implications for TOMSA and the general cost of doing business in the sector.
President of the Southern African Vehicle Rental & Leasing Association (SAVRALA), Marc Corcoran, stated the association was very surprised by this development and disappointed that no prior discussion had taken place with the formal tourism sector. A proponent of the Tourism Levy South Africa (TOMSA), Corcoran said the industry already contributed over R100m in TOMSA levies to SA Tourism, for international and domestic marketing, which included KZN.
He said: “Any additional tourism tax will undermine the TOMSA levy collection (and by implication SA Tourism funding), add an extra level of unnecessary administrative red tape and, more importantly, increase the cost of a tourism experience in KZN Province which may have various unintended consequences for the tourist volumes to the destination.
“South Africa has a successful history of hosting mega global events which, via various supply chains, benefits not just a province but the country overall in many economic sectors. SAVRALA is supportive of both national and provincial initiatives to help grow tourism in the country, we must just make sure we work together to achieve the optimal tourist experience without unnecessary, multiple levels of taxation and the accompanying business cost to administer.”
Member of Parliament James Vos, who holds the DA’s shadow tourism portfolio, has also taken up the cudgels. He has undertaken to raise the matter with Minister Hanekom as well as the Portfolio Committee on Tourism. He says the party takes the view that 10% “is simply too expensive and threatens tourism in the KwaZulu-Natal province which could have a serious effect on existing and prospective jobs within the tourism industry.”
Vos said it was the DA’s position that levies must be uniform and standardised across all provinces in order not to dissuade visitors from visiting certain more costly regions. It further supported the 1% TOMSA levy, and KwaZulu-Natal must use the funds raised from this existing system to develop tourism infrastructure.
“Government must also conduct a Regulatory Impact Assessment (RIA) before introducing levy increases in order to assess the effect they will have on jobs in the tourism industry. Tourism is a key job-creating industry in the country. This crucial sector of our economy must not be compromised by the proposal of harsh levy increases which affect the country’s desirability as a tourism destination,” stated Vos.
