Luxury tourism's dark side: how foreign-owned resorts drain profits from Africa

Luxury tourism is often painted as a win‑win for destinations that boast pristine beaches, wildlife and rich culture. In Tanzania, however, a growing body of evidence suggests that the glamour of the sector masks a darker reality: a handful of foreign‑owned resorts are siphoning the bulk of tourist spending out of the country, leaving local communities with only a fraction of the economic benefits. A recent investigation published by The Citizen (June 2024) pulls back the curtain on this issue and calls for a fundamental shift toward locally‑owned and community‑focused hospitality.

The Numbers That Matter

According to the article, Tanzania’s tourism revenue in 2023 was estimated at US$5.3 billion, a record high thanks to record‑setting arrivals on Zanzibar’s beaches and the “Safari Season” on the mainland. Yet, when the revenue is broken down by ownership, the picture changes dramatically. Foreign‑owned resorts – primarily in Zanzibar and Pemba – captured approximately 70 % of the high‑end tourist spend, a figure that translates into US$3.7 billion funneled directly to foreign parent companies. Meanwhile, the domestic hospitality sector, which includes smaller guesthouses, local tour operators and home‑based accommodations, accounted for a modest 30 % of total tourist spending.

The article cites a report by the Tanzania Tourism Development Authority (TTDA), which tracks profit repatriation for all tourism operators. The data shows that of the US$3.7 billion spent by luxury travelers, about 55 % is repatriated to headquarters overseas. This leaves only US$1.7 billion of profit that circulates within the country’s economy.

What Happens to the “Profit” Inside Tanzania?

When a foreign‑owned resort reports profit to a parent company abroad, the money does not stay in the local economy in a meaningful way. The article explains that:

Low wages and limited training – Staff at most international resorts earn wages comparable to other private‑sector jobs in Tanzania but receive few opportunities for skill development. This results in a workforce that is not fully equipped to command higher salaries or to move into management positions.
Limited local supply chain engagement – Luxury resorts frequently import food, equipment, and even construction materials from outside the country. The TTDA survey found that only 12 % of goods purchased by these resorts were sourced locally.
Taxation loopholes – The article points out that many foreign‑owned businesses benefit from a complex tax regime that allows them to minimize local tax liabilities through transfer pricing and the use of offshore subsidiaries. As a result, the government’s revenue from the tourism sector has stagnated at 6 % of total tax receipts – a figure that could be considerably higher if profits were retained locally.
Neglect of community development – In contrast to locally‑owned businesses that often reinvest in community projects, foreign operators rarely contribute to local infrastructure, education or health initiatives. The article cites a 2023 interview with a former resort manager who admitted that “community engagement is not a priority for the corporate group.”

Voices from the Ground

The article features comments from a range of stakeholders:

Mr. James Mwanga, former Deputy Minister of Tourism, stresses that “the sector’s growth is a blessing, but the loss of wealth through repatriated profits is a hidden drain on Tanzania’s development.”
Ms. Amina Hassan, a Zanzibar‑based small‑business owner, who runs a local spice shop, said: “Tourists stay at luxury resorts and spend most of their money there. We only see a handful of them visiting our markets.”
Mr. Daniel N’Dongo, a tourism analyst for the African Tourism Association, highlighted the need for a “tourism equity tax” that would compel foreign operators to retain a larger share of profits within the country.

Recommendations for a More Equitable Future

The article concludes by outlining a series of policy recommendations that could help shift the balance toward local ownership and economic retention:

Reform the tax regime – Introduce a progressive tourism tax that requires a minimum percentage of profits to be retained locally. Coupled with tax incentives for locally‑owned enterprises, this could level the playing field.
Enhance financing options for local investors – Establish a Tourism Development Fund that provides low‑interest loans to Tanzanian entrepreneurs wishing to build boutique hotels, eco‑lodges, or community‑based tourism projects.
Mandate local sourcing – Require that at least 40 % of supplies and services used by resorts come from within Tanzania. This would stimulate local agriculture, manufacturing and hospitality training.
Strengthen labor regulations – Ensure that all resort employees receive at least the national minimum wage and have access to training and career advancement opportunities.
Promote community‑based tourism – Support the growth of homestays, cultural tours and other small‑scale ventures that can deliver higher profit margins to local communities.

The Road Ahead

Tanzania’s tourism sector is at a crossroads. The influx of foreign capital has undeniably elevated the global profile of the country’s beaches and wildlife. Yet, if the lion’s share of luxury tourists’ money is leaving the economy, the sector’s long‑term sustainability and inclusive growth are at risk. The The Citizen investigation underscores that a re‑balancing of the sector is not just desirable – it’s imperative.

The government, private sector, and civil society must collaborate on reforms that ensure that Tanzania’s natural and cultural treasures continue to flourish while also delivering tangible benefits to the people who call the country home. Only then can the “golden beaches” of Zanzibar and the “wildlife wonders” of the mainland become engines of prosperity for all Tanzanians.

Read the Full The Citizen Article at:
[ https://www.thecitizen.co.tz/tanzania/news/africa/luxury-tourism-s-dark-side-how-foreign-owned-resorts-drain-profits-from-africa-5165042 ]

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