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Financing tourism Concessions Nkwichi Lodge Malcolm Turner


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This presentation by Malcolm Turner was delivered at the 'Concessioning tourism opportunities in conservation areas and maximising rural development' workshop, held in Maputo between 19-22 March 2012 (Day 2, Session 5, Financing tourism concessions)

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Financing tourism Concessions Nkwichi Lodge Malcolm Turner

  1. 1. 4/4/2012 Financing tourism concessions - Financing for the private sector working in Mozambique • Business Planning • Capital Investment • Revenue Generation • Lessons learned Further Financing Business planning Bank loans Initial Financing • Mozambique banks: high interest rates. • UK banks: require high guarantees for loans • Private initiatives covering start-up costs. Other loans • Nkwichi’s case: Private individuals with a • IFC : Encouraging development of SME, especially in tourism passion for tourism and development funded sector. Loans available with part of the loan agreement for technical assistance. the initial stages.  Case of Nkwichi: Bad timing of the loan due to financial crisis: approval put on hold. IFC passed loan onto Business Partners International (BPI). Technical assistance partly difficult due to distance. • Smaller donor agencies  In Lichinga, an organisation called AMODER, normally funding agricultural projects. Started process with Nkwichi but rates of interest were similar to banksGovernment funding • Arco Norte Tourism Development Company (ANTDC).• Centre for Promotion of Investment (CPI). Provides fiscal incentives for eligible projects to promote investment. Mozambique Government adopted the Integrated Resort System (IRS) in 2009 - framework for attracting tourism investment in integrated - First 5 years of tax benefits to new businesses destination development. - Exemptions to import duties - To provide a clear structure, which will allow the market to identify  Nkwichi did not utilise these incentives. A complicated process with development opportunities as they arise, and for attracting lots of paperwork - time spent did not seem to justify it. investments.  Also, tourism establishments can take time to make profit so tax - Some funding provided for tourism schemes i.e. regeneration of incentives don’t make a big difference. Ibo Island.• PACDE (Unidade de Implementação do Projecto de Apoio a Competitividade): Support the growth of smaller businesses in Mozambique – designed to expand access to IFC’s Business Edge and SME Toolkit, an online, interactive program to help smaller businesses.  Started in 2010 : seems well-suited to tourism establishments. Probability/availability for foreign investors? 1
  2. 2. 4/4/2012 Business partnerships & Private funding Related Finance • Fundacao Malonda, body that facilitates investment in Niassa • Community shares, as at Covane and those in Maputo Special Province. Reserve. World Bank and ASL funded.  Nkwichi: Malonda previously provided direct investment. • Community Development funding can be easier to obtain, as part of Nkwichi negotiated with them over 4 years but in the end a any tourism project which has working for the benefit of the solution couldn’t be reached to satisfy both sides. Still give communities as one of its primary goals. technical assistance however.  Nkwichi: Manda Wilderness received funding from Irish Aid, Ford • Individual Investors: found through business/social networks. Foundation and Swedish Cooperative Centre for development projects.  At Nkwichi, other investors were actively sought through individual networks – all shared the original investors passion for the project.Foreign Exchange and Investments Capital InvestmentLegislation • Transport/Communications. In many proposed areas, a large part of Execution of shareholders and third party loans agreements between investment can go into infrastructure – cars, boats, grading roads, resident companies and foreign entities is subject to the prior airstrips, V-Sat systems, etc. authorization from Central Bank: the contract and parties will be given a reference and each time a transfer is received, such import must also be registered; repayments will only be authorised if, amongst other  Nkwichi: As an eco-lodge, only local materials used so capital formal requirements, import registrations and tax clearance certificates investment is lower. Depreciation can be higher however are presented. although this also means sustaining and supporting local Any payments for the provision of services by non resident entities, is markets in building materials. subject to a registration procedure with commercial banks (that shall  Difficulty in getting ‘eco’ solutions to the lodge i.e. solar energy follow up directly with Central Bank); a contract stipulating several systems for running operations. payments will have to be subject to the opinion of the tax department (for calculating withholding tax due) over and above the procedure regarding the tax clearance certificate. • Importing. Materials difficult to find in Mozambique: consideration Central Bank requires specific forms to be used for each request. of technology when investing capital. The only feature of the foreign recipients of the payments that is - Government help with import duties? relevant in terms of foreign exchange controls is the possible application of a double taxation agreement. USAID/SPEED logo Technoserve logoRevenue Generation ChallengesInternal • Infrastructure. Many tourism sites, especially in the north, are• Accommodation. Brings in the largest portion of revenue (80%). extremely remote and so transport and communication• Activities, Food & Beverage, Curios. All bring in supplementary infrastructure needs built up – meaning large investment amounts. income. The latter also brings extra income to the local area, if  Nkwichi has no roads and no cell phone reception. sourced locally.  Opening of airstrip in Cobue not an easy process.• Transfers. Again, bring complementary income but also cover depreciation costs of necessary access – costs associated with • Bureaucracy/Lack of administrative knowledge. In many cases, operating in remote areas especially in financial matters, red tape act as a barrier to investment.External  Labour Law is complicated and little understood – it’s easy to• Guiding and Transfers outsourced to local businesses. be penalised.• Business linkages. Building packages and itineraries with other • Government Coordination. Lack of communication between properties enhances tourism options, improving the standing of the different agencies and departments in Government. destination, bringing more guests in and more revenue,  In 2010 tourist visa prices raised to cover new costs of the bio- metric system – Little notice given. 2
  3. 3. 4/4/2012Lessons• Agencies who can help with investment process.  Technoserve. Have provided a lot of support and technical assistance over the years – from helping with business plans and proposals, introducing new investors and facilitating negotiations with communities and government.• Combining with other tourism properties in Mozambique. An obvious way to share logistical and financial experience, this also opens up marketing opportunities to increase guest numbers.  Nkwichi is part of the Mozambique Collection, a group of five, like-minded properties.• Taking a holistic approach to tourism that ties in with conservation and community development. Projects that build up the infrastructure of the area help all sides.  Funding was obtained to improve one of the main roads in the area when the project first started, improving access for both lodge and community. 3