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

By Landry Signé

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 US$54 billion and official development assistance totaled US$51.04 billion, while tourism generated US$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 gross domestic product (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 4 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 (AU) 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 US$6.1 billion and US$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 (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.

Landry Signé is a David M. Rubenstein Fellow – Global Economy and Development, Africa Growth Initiative. This article is republished from The Brookings Institution blog under a Creative Commons license.