ZimParks walks financial tightrope as tourism battles to recover

Source: ZimParks walks financial tightrope as tourism battles to recover – NewsDay Zimbabwe

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.

Without implementing the appropriate exchange rate, ZimParks revenues could have actually been less while its expenditures could be higher in 2020.

The auditor general made suggestions on how ZimParks could improve its revenue collection.

“It (ZimParks) could not differentiate between the domestic and International clients for billing purposes. In addition, the system could not allow the allocation of the rates of conservation fees which are dependent on the different activities intended by the client,” the Auditor General’s 2020 report read.

“The fee per room, per night, per person needs to be identified to facilitate the total bill in case of group bookings. Domestic and International clients are charged different rates therefore it is necessary for the system to indicate the type of client billed. There was no adequate segregation of duties within the booking system, so the supervisor could create, void, and complete a booking.”

The Auditor General said invoices were not being generated sequentially to allow sequence tests to be performed in order to confirm whether all invoices were captured in the revenue system.

“This test was necessary given the fact that the Authority was partially automated. Manual receipts were captured in the system at the reporting stage,” the Auditor General’s 2020 report continued.

“Therefore, I could not trace receipts to the schedule or tariffs and verify whether all manual receipts were subsequently captured in the system to determine completeness, accuracy and classification of revenue.”

In response, ZimParks has rolled out a revenue receipting Point of Sale System (ZimParks-ICE POS) starting with Victoria Falls on pilot test bases.

The idea is to ensure that all transactions should obtain a cluster-based system reference for completeness purposes.

“However, due to the limited revenue inflows owing to the COVID-19 impacts, the implementation process is being delayed by the significant investment costs associated with networking, back power, infrastructure and manpower restructuring that comes along with the introduction of any new revenue collection system,” read ZimParks response to the Auditor General.

This is why ZimParks’ has aggressively been pushing for the sale of its ivory stockpile and its six to seven tonnes of rhino horn to realise millions of dollars in revenue which is banned.

Under the Convention on International Trade in Endangered Species of Wild Fauna and Flora, Cites, enforced on July 1, 1975 to protect endangered wildlife animals, the sale of wildlife products from endangered species is prohibited.

Ivory sales, in particular, were banned in 1989.

The last time Cites was successfully pressured by African and Asian countries into allowing the sale of ivory, in particular, was in 1999 and 2008.

This is why in a recent declaration endorsed by the Zimbabwe government and those of Botswana, Namibia, Tanzania, and Zambia, challenged Cites as all of these countries have significant elephant populations beyond their individual capacity.

In Zimbabwe, elephants were part of the wildlife animals that killed 68 people last year, up from 60 in 2020.

The authority also reported that for 2022, up to April, at least 32 people had been killed.

However, Cites is unlikely to give in as it is now putting pressure on top ivory source markets of Vietnam, China and Japan to phase out legal purchases of ivory.

Namibia is reportedly now selling elephants to countries in the gulf region, violating Cites, according to a recent broadcast dated June 3 from the French state-owned international news television network, France 24.

The governments of Botswana and Zimbabwe have also threatened to do likewise.