Africa’s tourism: A global destination for investment and entrepreneurship

A woman walks down a hill to Port Louis June 6, 2008. REUTERS/Ed Harris (MAURITIUS) - GM1E4661HGX01
Editor's note:

This blog post builds on the Brookings report entitled “Africa’s tourism potential: Trends, drivers, opportunities, and strategies.”

Tourism is one of the primary drivers of economic growth and job creation in emerging economies throughout the world. Africa’s unique history and natural wonders are gaining attention amid the local and global increase in cultural, heritage, and development tourism. Based on analyses of various countries’ governance and business environments, it is clear that numerous African countries present tremendous promise to become or remain vibrant hosts for tourists, investors, and entrepreneurs, which can drive employment for low-skilled workers and economic inclusion for women and youth.

International tourists traveling to emerging countries often inject similar amounts of wealth into national economies as private and public sector investments and development assistance from foreign governments. In 2015, foreign direct investment to the African continent totaled $54 billion and official development assistance totaled $51.04 billion, while tourism generated $39.2 billion and created 9.1 million direct jobs within the sector. Clearly, the tourism industry has an increasingly important role in the global economy by contributing to GDP, service exports, and employment.

How well are African countries capitalizing on this opportunity offered by tourism? A recent World Bank study classified African countries into four performance categories: “pre-emergent,” “potential,” “emerging,” and “consolidating” tourism destinations. The performance of countries was based on indicators such as the ease of doing business; the competitiveness in terms of tourism regulation, infrastructure, and resources; the tourism receipts per long-haul arrivals; the international arrival per head of population; and the forecast of growth in tourism arrivals. The pre-emerging countries, such as Somalia and Sudan, have faced significant security and governance challenges as well as low government commitments to the tourism sector. The potential countries, such as Madagascar, Ethiopia, and Gabon, have shown relative interest and initiative in the sector, but are still facing governance challenges and market limitations. The emerging countries, such as Rwanda and the Seychelles, are prioritizing and scaling up tourism and relatively competitive. Finally, the consolidating countries, such as Morocco, South Africa, and Mauritius, are among the top performers with a relatively mature tourism sector.

Fifteen years ago, the African Union and the New Partnership for Africa’s Development (renamed African Union Development Agency) adopted the Tourism Action Plan to bring visibility to tourism on the continent. This came about after a 300-percent increase in international arrivals in the 1990s, reaching 26.2 million arrivals in 2000. Tourism has since become integral to economic development policies. Several countries recently increased their efforts to advance their travel and tourism industries, including the Gambia, Kenya, South Africa, and Tanzania, to accommodate the nearly 62 million annual visitors to the continent. South Africa and Kenya receive the largest amounts of tourism-focused investment at $6.1 billion and $404 million respectively.

Generally, investments have been focused on countries with well-developed infrastructure, easily navigable travel policies, and business-friendly environments. There is great potential to increase tourism-related investment to the continent, particularly after the 15 member states of the Economic Community of West African States, often referred to as ECOWAS, introduced a visa policy allowing for free movement among its member states. Continent-wide efforts to increase integration and free movement, such as the impending implementation of the African Continental Free Trade Area, will create a more stable business environment for investors and entrepreneurs to capitalize on the continent’s tourism potential. Potential investors in other countries’ tourism sectors will face challenges in infrastructure development and government support. Though, there will be high rewards for those who make well-informed choices and take the necessary risks to partner with policymakers and industry leaders in potentially high-rewarding countries.

While motivations for travel may change periodically, the tourism industry has always been a major economic contributor of jobs and opportunity. Tourism accounts for 10 percent of the world’s jobs and GDP, and generally provides high levels of employment for women and young people. As Africa’s emerging economies begin to shift away from relying on commodities and agriculture and toward boosting their service industries, the tourism industry has become a major focus of national development strategies.

Morocco, as an example, has enthusiastically used the tourism industry as a development tool, hoping to increase the annual number of visitors received and to strengthen the country’s economic growth. Since the Moroccan government began strategically prioritizing tourism, the country has become the “new star of emerging markets among overseas property developers.” Morocco, South Africa, Egypt, and Kenya—as some of Africa’s most popular destinations based on number of arrivals and the value of tourism receipts—are tourism success stories with the countries earning billions of dollars each year. Namibia, Cape Verde, Botswana, and Tunisia all rank close to Kenya in the World Economic Forum’s Travel and Tourism Competitiveness Index Ranking (2017), representing the breadth of growth potential across the continent.

The tourism industry offers many opportunities to invest in Africa’s rich local communities, generate economic activity, and create employment opportunities for women and young people. By 2030, consumer spending in hospitality and recreation in Africa is projected to reach about $261.77 billion. In order to capitalize on the tourism potential, policy and business leaders should work hand-in-hand to prioritize investments to accommodate entrepreneurial innovations to attract more travelers to their countries. Policymakers should improve governance with a better-coordinated effort across agencies to simplify the regulation and remove the barriers to tourism development, attract investors, and promote touristic destinations.

Policymakers should also unlock the competitiveness and ease of doing business in the sector with the development of infrastructure, including for road, air, and water transport, as well as the simplification of visa requirements and administrative processes. The private sector should develop and promote memorable touristic products with sustainable competitive advantages, and a quality that meets or exceeds the global standards. Investors and entrepreneurs should ultimately be economic development agents, sourcing local goods and services and fostering inclusion of women and youth and environmental sustainability, while ensuring their profitability in a fast-growing sector.