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ZimParks walks financial tightrope as tourism battles to recover

BY TATIRA ZWINOIRA

THE Zimbabwe Parks and Wildlife Management Authority (ZimParks) is navigating through some of its toughest times in decades. The agency, which is tasked with a difficult task of overseeing the southern African country’s rich wildlife endowment, says it is walking a financial tightrope this year.

In its 2022 budget, the authority projected incomes to come in at US$22,8 million, giving it impetus to carry out its crucial interventions across wildlife estates.

The authority based its projections on faster tourism industry recovery as pandemic fears fizzle out.

However, the scenario is completely the opposite. Along the way, subdued tourism receipts have continued, even as the authority says the outlook is positive going by the trend so far.

The tourism sector generates the bulk of ZimParks’ income, while it earns donations from non-governmental organisations that came in at US$1,75 million in 2021 and is expected at US$1,33 million this year.

According to Precious Mhaka, chief finance officer at the agency, management has reviewed forecasts down to US$16 million after taking into account actual developments on the ground.

This is about US$6,76 million below budget and the slower than expected revenues are likely to hold back the execution of crucial developments.

In terms of expenditure, Mhaka says ZimParks is expecting expenses of US$14 385 303, which will translate to about US$2 million surplus.

ZimParks management has acted after the slower than expected tourism recovery, rolling out a cost-cutting regime to tame runaway expenses.

Cost cutting measures are generally painful, but downward reviews of nearly 18% compared to last year, are seen helping the authority make a surplus, and stirring the ship past the rough waters as tourism gains traction, albeit at a much slower pace than initially projected.

If all ends up as planned, the projected surplus would represent a significant positive trajectory for an authority that reported a deficit in 2021, when income of US$14,1 million, was almost US$3 million lower than US$16,91 million in expenses.

In 2020, ZimParks experienced revenues of US$10,42 million against expenses of US$13,71 million for another deficit of US$3,28 million.

The last time the company had a surplus was pre COVID-19, in 2019, when the company recorded revenues of US$12,01 million against expenses of about US$8 million giving a surplus of just over US$4 million.

The global spread of COVID-19 from 2020 has significantly affected ZimParks’ ability to continue because the authority only relies on tourism revenue.

“Our revenues are not only affected by COVID-19, but by the price fluctuation that was taking place,” Mhaka said during a tour of the authority’s ivory stockpiles by Harare based diplomats.

The country holds 130 tonnes of ivory in its vaults. When the pandemic spread across the globe in 2020, terrified governments responded by applying swift curbs to global travel, ordering millions of travel loving people to stay indoors as efforts to prevent contagion went into full gear. The results of the drastic actions were catastrophic.

Over US$3 trillion was wiped out of international tourism markets, driving many operators into bankruptcy, or near bankruptcy.

The Zimbabwe Tourism Authority (ZTA) said arrivals plummeted by a staggering 90% in the first year of the calamity alone, responding to the grounding of global airlines and tight intercity curbs rolled out by Harare, whose pandemic management strategies have been ranked among the region’s best.

Last year was no different as it saw new variants of COVID-19 emerge leading to more travel restrictions not only locally, but internationally as well.

Before the global spread of COVID-19, in 2019, Zimbabwe’s tourism receipts were US$1,24 billion and after the pandemic spread globally the following year the southern African nation earned US$359 million.

Last year, tourism receipts only rebounded to US$397 million a year, an 11% uptick from 2020 as recovery from the pandemic continues, according to the ZTA.

“For 2022, as we speak right now, we have actually collected about an equivalent of US$3 million from January to April, and we are riding on a loss, a deficit, of about US$826 000. Meaning to say, we are actually in a dire situation as the authority. If there are issues of funding, this is actually one other area that is important that we are supposed to look at,” Mhaka said.

“On average, the authority requires about US$1,5 million (per month) to function very well in terms of revenue, but as we speak right now, we are managing to generate US$800 000 so there is that deficit of about US$700 000 which is accumulating every month”.

In a normal year, the 2022 expenses would be the budget. But, due to the authority having debtors, higher staff costs and experiencing exchange losses its expenditure does not cover all their obligations.

Thus, the authority has had to prioritise essential expenses, hence, the higher budgeted figure compared to the expenses expected for the year.

“The Authority had outstanding debtors amounting to US$8 351 601 of which US$6 860 778 (82%) was owing for over 365 days. Some of these outstanding balances were lease rentals dating back to 2010,” reads the Auditor-General’s report on ZimParks financials for 2019.

“However, there was no evidence that management had invoked the termination clause of the lease agreements. Furthermore, some operators had either expired or unsigned lease agreements.” Lease agreements and rentals is a major revenue source for ZimParks.

Other revenue generators include boating facilities, accommodation units, annual registration fees, permits, servicing facilities, law enforcement through tickets and fines, hunting, selling park products, training facilities, investment, and trading facilities.

However, ZimParks earns a huge chunk of its revenue through conservation fees from land and water bodies under the authority, charges that fund the authority’s ability to conserve its land and water properties.

Mhaka said in terms of expenses, the authority needs money for anti-poaching and law enforcement, park management expenses, scientific research and international relations, training, development, tourism, commercial activities, general administration costs, and staff costs.

“The staff costs actually do take much of our expenditures in the organisation,” he said.

ZimParks requires an average of US$178 000, monthly, to pay its workers that are slightly above 2 000 and around 700 to 900 contract workers with the authority needing an additional 1 000 staffers.

“When things actually staggered, as you can see conservation fees in 2019 were about US$6,2 million, they came down to US$1,6 million (2020). Look at our expenses now, they actually started to balloon.

“Our expenses went as far as US$13,7 million in 2020 (revenues US$10,42 million) and we actually had a loss/deficit of about US$3,28 million,” Mhaka said.

“But, still, under that circumstance, we managed to score some successes meaning we had so many austerity measures that the authority had to employ at that time. In 2021, again, the same scenario. Our expenditure went as far as US$16,91 million and as we proceeded the biggest cost was staff costs.”

ZimParks low revenues were alluded to by the Auditor-General, in her report on state entities and parastatals for 2020.

In the report, ZimParks transactions and balances in 2020 were not converted to local currency using an appropriate exchange rate that reflects the economic substance of its value as provided by International Accounting Standard 21, “The Effects of Changes in Foreign Exchange Rates”.

“Subsequent to February 22, 2019 the Authority applied interbank exchange rates which came into existence, through Exchange Control Directive RU 28 of 2019 issued by the RBZ and was initially pegged at a rate of 2,5. This was after a period of foreign currency scarcity and constrained exchangeability of bond notes, coins and electronic money to other foreign currencies,” reads the 2020 report.

“No assessment was carried out to show appropriateness of the interbank rate to the existing economic environment.

“The interbank rate and the exchange rate of 1:1 applied on comparative amounts does not represent the price that can be received for foreign currency as many were unable to access foreign currency through the interbank market,” it added.

●Read full article on www.newsday.co.zw ● This article was taken from the Weekly Digest, an AMH digital publication

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2022-06-27T07:00:00.0000000Z

2022-06-27T07:00:00.0000000Z

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