Threats to job creation: Tourism and COVID-19

Empty swings on a beach in Mauritius
Editor's note:

Below is a Viewpoint from Chapter 1 of the Foresight Africa 2021 report, which explores top priorities for the region in the coming year. This year’s issue focuses on strategies for Africa to confront the twin health and economic crises created by the COVID-19 pandemic and emerge stronger than ever. Read the full chapter on the great reset.

Foresight Africa 2021Sub-Saharan Africa’s services-led economic growth has been under increasing strain due to COVID-19. Beyond the threats to health and livelihoods the pandemic has thrown a wrench into some of the most promising sectors for economic growth in the region—including its “industries without smokestacks” (IWOSS).

For the past few years, as part of a project on creating jobs for the region’s burgeoning youth population, the Brookings Africa Growth Initiative has been examining how services subsectors that mimic traditional manufacturing—in that they are tradable, have high value-added per worker, have the capacity for learning and productivity growth—can absorb large numbers of low- to moderately skilled labor.

One of the key industries without smokestacks is tourism. Its decline in the face of this unprecedented global pandemic may tell a cautionary tale for tourism-dependent economies in Africa and elsewhere. Indeed, under COVID-19, the economic outlook is particularly uncertain for African countries with contact-intensive sectors such as tourism, hospitality, entertainment, and transportation.

Tourism is an important driver of economic growth around the world. In 2014, the industry provided an estimated 277 million jobs and accounted for about 9.8 percent of global GDP. Blessed with beaches, cultural sites, and abundant wildlife, prior to the pandemic, Africa had the second-fasting growing tourism sector in the world. In fact, tourism represents about 8.5 percent of Africa’s GDP and employs around 24 million people.

Value-added growth decomposition for tourism in Africa, 1995-2017 (Foreisght Africa)

With the COVID-19 pandemic, the number of international tourist arrivals has decreased sharply. From April to June 2020, the number of international tourists arriving in Africa fell by 98 percent, compared to that same period the year before. While some countries have had a partial resumption of passenger traffic, demand is not expected to reach its pre-COVID levels before 2023. Moreover, the pandemic has severely affected sectors where women’s employment is disproportionately high, such as hotels and restaurants.

As a result, tourism-dependent economies are estimated by the African Development Bank to experience sharp declines in growth in 2020. Mauritius (-14.9 percent), Seychelles (-12 percent), and Cabo Verde (-6.6 percent) will be especially hard hit but are expected to recover in 2021. Exchange rate volatility is particularly severe in those economies too.

The pandemic will have far-reaching implications for productive employment, especially for low-skilled youth, in such roles as cooks, waitrons, and front office staff.

Between 2010 and 2018, the average share of employment in travel and tourism in total employment in Ethiopia was 8.4 percent. Kenya’s tourism sector—pre-pandemic— employed about 1 million workers, accounting for 9.2 percent of total workers. In Rwanda, tourism employs more than 3 percent of the labor force, including low-skilled workers. Ten million tourists visited South Africa in 2017—by far the most in sub-Saharan Africa. In 2018, there were an estimated 849,000 formal private sector jobs in tourism there, representing 5 percent of total employment. In Uganda, tourism firms employ a high share of youth in their total work force (47.5 percent).

What is needed to put Africa’s tourism-dependent economies back on their feet? The global recovery of travel and tourism will depend on progress in the development of COVID-19 vaccines and on their widespread availability—an area where global public action can play a role. More than half of all advanced market commitments for COVID-19 vaccines have been made by high-income countries. Addressing the challenge of universal accessibility for low-income countries will require collaboration among governments, the private sector, and global health agencies. The COVAX initiative, a cost-sharing global alliance of more than 170 countries for COVID-19 treatment, is a welcome development. (For more on vaccine distribution in sub-Saharan Africa, see Uwagbale Edward-Ekpu’s Viewpoint).

Governments of tourism-dependent economies can also take policy actions to reduce the impact of unexpected shocks, such as COVID-19. Policymakers can implement sound macroeconomic management using appropriate monetary, fiscal, and financial policies. Where volatility is a concern, countries should allow exchange rates to adjust in an orderly manner. Africa’s tourism sector can weather this shock. The continent will continue to offer beaches, culture, and wildlife. With appropriate vaccines and policies, tourism will continue to create productive jobs.