Kenya hoteliers lay off workers over tax

By Benard Sanga

KENYA: Investors in the tourism sector have now opted to cut down their infrastructure development budgets and lay off employees in the face of the new VAT law and diminishing international arrivals.

Some tour operators have also cut back advertising budgets as the ripple effects of the levy takes toll on the sector, which is currently ranked as the leading foreign exchange earner.

According to some stakeholders interviewed by The Standard, they will take the drastic measures depending on the extent of cancellation of bookings by local tourists who currently constitute the bulk of their customers.

“Hotels that were keen on expansion have put it on hold. And as you know, our sector is labour intensive and the workforce is dependent on visitors. It is likely that some hoteliers have reduced the number of employees the same as some tour operators,” said Kenya Association of Hotelkeepers and Caterers (KAHC) Coast Branch Executive Officer Sam Ikwaye.

The VAT Act 2013 took effect on September 2, increasing the prices of some commodities by up to 20 per cent. Tourism players say the move would erode local tourists’ purchasing power and reduce the numbers that visit Mombasa.

Total collapse

“Our business is facing the prospect of total collapse with the new VAT legislation and our focus now is on survival. There is no budget for advertising, our passenger numbers in 2013 are lower by 35 per cent compared to the same period last year. In 2012 they were lower by 20 per cent compared to 2011,” said Mohammed Harunany, the managing director of Mombasa Air Safaris in an email.

According to Mr Salim Jiva, the manager of Farways Safaricentre, his company has already laid-off several employees and he may trim them further if the number of tourists cancelling their plans to travel continues to increase.