Dr Anna Spenceley Spenceley Tourism And Development cc (STAND) Sustainable Tourism Network Southern Africa AGM 6 May 2010, Durban, South Africa Increasing the local economic impact of tourism through supply and value chains

2 1.Ways the poor benefit from tourism 2.Tourism supply chains 3.Tourism value chains Presentation outline

3 1. Seven ways the poor benefit from tourism 1.Employment of the poor in tourism enterprises 2.Supply of goods and services to tourism enterprises by the poor or by enterprises employing the poor 3.Direct sales of goods and services to visitors by the poor (informal economy) 4.Establishment and running of tourism enterprises by the poor - e.g. micro, small and medium sized enterprises (MSMEs), or community based enterprises (formal economy) 5.Tax or levy on tourism income or profits with proceeds benefiting the poor 6.Voluntary giving/support by tourism enterprises and tourists 7.Investment in infrastructure stimulated by tourism also benefiting the poor in the locality, directly or through support to other sectors WTO, 2004

4 1.Employment of the poor in tourism enterprises 2.Supply of goods and services to tourism enterprises by the poor or by enterprises employing the poor 3.Direct sales of goods and services to visitors by the poor (informal economy) 4.Establishment and running of tourism enterprises by the poor - e.g. micro, small and medium sized enterprises (MSMEs), or community based enterprises (formal economy) 5.Tax or levy on tourism income or profits with proceeds benefiting the poor 6.Voluntary giving/support by tourism enterprises and tourists 7.Investment in infrastructure stimulated by tourism also benefiting the poor in the locality, directly or through support to other sectors WTO, Seven ways the poor benefit from tourism Supply and value chains address both of these

5 2. Tourism supply chains Andreas Springer-Heinze (2006-2) cited in Mitchell and Phuc, 2007 System of organizations (e.g. people, technology, activities, information and resources) involved in moving a product or service from supplier to customersuppliercustomer

6 Supply chain interventions Objective of interventions on tourism supply chain is to enhance the positive impacts of tourism on poor people by: –removing barriers that prevent poor people entering the industry –enhancing the terms on which they work –improving the knock-on affects that tourism operations have on surrounding communities Ashley, Mitchell and Spenceley, 2009

7 Traditional restaurant supply chain MEAL

8 Traditional restaurant supply chain MEAL Typical problems for small scale farmers: Poor linkages with end users: reliance on intermediaries Private sector not serving ‘traditional’ foods Transport, storage and processing difficulties Variable quality and quantity of stock Lack of information on products private sector want

9 Traditional restaurant supply chain MEAL Typical problems for small scale farmers: Poor linkages with end users: reliance on intermediaries Private sector not serving ‘traditional’ foods Transport, storage and processing difficulties Variable quality and quantity of stock Lack of information on products private sector want

10 Option to adapt the supply chain If the intermediaries are ‘unfair’ MEAL

11 Traditional restaurant supply chain MEAL Typical problems for small scale farmers: Poor linkages with end users: reliance on intermediaries Private sector not serving ‘traditional’ foods Transport, storage and processing difficulties Variable quality and quantity of stock Lack of information on products private sector want

12 Option to adapt the supply chain Restaurants serving more traditional meals buy more local, traditional produce TRADITIONAL MEAL

13 Options to adapt the supply chain MEAL Typical problems for small scale farmers: Poor linkages with end users: reliance on intermediaries Private sector not serving ‘traditional’ foods Transport, storage and processing difficulties Variable quality and quantity of stock Lack of information on products private sector want

14 Traditional restaurant supply chain MEAL Typical problems for small scale farmers: Poor linkages with end users: reliance on intermediaries Private sector not serving ‘traditional’ foods Transport, storage and processing difficulties Variable quality and quantity of stock Lack of information on products private sector want

15 Traditional restaurant supply chain MEAL Typical problems for small scale farmers: Poor linkages with end users: reliance on intermediaries Private sector not serving ‘traditional’ foods Transport, storage and processing difficulties Variable quality and quantity of stock Lack of information on products private sector want

16 Example analysis and intervention: Spier leisure, Western Cape Strategic shift away from philanthropy towards responsibilities as corporate citizen –Survey of existing suppliers in relation to corporate values (e.g. local, previously disadvantaged, environmentally aware) –Investigation of new suppliers Identification of opportunities for change –Stimulating change among existing suppliers –Development of new suppliers Monitoring and evaluation Ashley and Haysom, 2008

17 Survey of suppliers Broad-based black economic employment Employment equity Procurement practice Human resource practice Basic conditions of employment Labour law compliance Corporate social investment Health and safety Environmental action Number of employees Location Ashley and Haysom, 2008

18 Initial Laundry Company Enterprise Development Laundry Saving to Spier in Year 1 R 7.5/$1 Costs and savings to Spier in Year 1 Annual Spend by Spier R R R $ Set Up cost R Sundry costs R Total Year 1 Cost R R R $ Earnings into the community per year Jobs 2 7 Salary average p.p. p month R R2 000 Earnings into local community R R $ Community flow, US$ $5 440 $ $ Spier laundry development Ashley and Haysom, 2008 New alien vegetation clearing business, brick making business, staff restaurant business

19 2. Tourism value chains Foreign Investment Advisory Service, 2006 Products pass through all activities of the chain in order and at each activity the product gains some value. The chain of activities gives the products more added value than the sum of added values of all activities.

20 2. Tourism value chains Foreign Investment Advisory Service, 2006 Products pass through all activities of the chain in order and at each activity the product gains some value. The chain of activities gives the products more added value than the sum of added values of all activities.

21 4. Value chains Foreign Investment Advisory Service, 2006 Products pass through all activities of the chain in order and at each activity the product gains some value. The chain of activities gives the products more added value than the sum of added values of all activities. Increasing the amount and proportion of money that is earned locally

22 Foreign Investment Advisory Service, 2006

23 Foreign Investment Advisory Service, 2006 Increasing the amount and proportion of money that is earned locally

24 Comparing tourism revenue to the poor in different destinations ITC/ODI, 2009

25 Value chain analysis and development approach PhaseStepWhat to do? Phase 1: Diagnosis Step 1 Preparation Step 2 Map the big picture: enterprises and other actors in the tourism sector, links between them, demand and supply data, and the pertinent context Step 3 Map where the poor participate Step 4 Conduct fieldwork interviews in each node of the chain, with tourists and service providers Step 5 Track revenue flows and pro-poor income Estimate how expenditure flows through the chain and how much accrues to the poor. Consider their returns and factors that enable or inhibit earnings Phase 2: Opportunities Step 6 Identify where in the tourism value chain to seek change: which node or nodes? Step 7 Analyse blockages, options, and partners in the nodes selected, to generate a long list of possible interventions Step 8 Prioritise projects on the basis of their impact and feasibility Phase 3: PlanningStep 9 Project planning Ashley, Mitchell and Spenceley, 2009

26 Types of value chain interventions Greater volume: Sell more fruit/craft/beds to customers Upgrade processes: Better coordination and communication within, and between stakeholders (e.g. artisans, farmers) Upgrade products: better quality service, products related to market demand Add value: take on new functions and to increase revenues (e.g. processing, delivery) Reduce barriers to entry: improve access the poor have to markets (e.g. linkages between producers and buyers) Contracts: for members of associations; between producers and tourism enterprises Diversify markets: sales locally, nationally and export – and outside the tourism industry Adapted from ITC/ODI, 2009

27 1.Employment of the poor in tourism enterprises 2.Supply of goods and services to tourism enterprises by the poor or by enterprises employing the poor 3.Direct sales of goods and services to visitors by the poor (informal economy) 4.Establishment and running of tourism enterprises by the poor - e.g. micro, small and medium sized enterprises (MSMEs), or community based enterprises (formal economy) 5.Tax or levy on tourism income or profits with proceeds benefiting the poor 6.Voluntary giving/support by tourism enterprises and tourists 7.Investment in infrastructure stimulated by tourism also benefiting the poor in the locality, directly or through support to other sectors WTO, Seven ways the poor benefit from tourism

28 Thank you! Dr Anna Spenceley Spenceley Tourism And Development cc (STAND) (0)