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Home Tourism

Zanzibar open-door policy to tourism investment

The Exchange by The Exchange
September 28, 2021
in Africa, FDI, Investing, Tanzania, Tourism, Travel
Reading Time: 5 mins read
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Zanzibar

The Spice Islands of Zanzibar are world-renowned for their white sandy beaches and colourful coral reefs. If there is a five-star hotel investment, it will no doubt, be found on the island.

Now the Island’s President Mwinyi has announced plans to allow investment on more than 50 of the island’s surrounding islets.

Local media quotes the Zanzibar Investment Promotion Authority (ZIPA) Executive Director, Shariff Ali Shariff announcing the island government’s plans. The Executive Director said the island is open for business and is inviting investors for major works in the under-utilized ecotourism sector of the island.

The Zanzibar government has issued express interest to rent out the more than 50 islets surrounding the main archipelago to investors in the marine tourism sectors as well as the catering and hospitality sectors to invest in eco-friendly investment on the islets without compromising on the safety of the ecosystem.

What is envisioned is an investment that will bring foreign exchange to the island yet maintain the pristineness of the environment.

The investment process will be based on a tendering system that will allow the highest bidders to win the investment tenders. It is also expected that key environment conservation clauses will play a central role in the investment selection.

The Island is applying aggressive marketing and investment strategies to attract both domestic and foreign investors across a score of economic sectors. Other than the much-appraised tourism sector, the island is also looking to get investment in light industrial production as well as in the aquaculture sector, a sector that has enormous potential for the island yet remains largely under-utilized.

To tap into this and other high return sectors, the island is working hand-in-hand with several investment agencies along with their counterparts in neighbouring countries where they hope to adopt already tried and proven effective strategies to attract investors.

To date, Zanzibar has registered some 1,115 investment projects. According to island officials, of these, over 800 projects are already underway and represent a whopping US$7.6 billion. Notably, of these, more than half (58.1 per cent) are in the tourism sector.

Of the said projects, the government envisions creating close to 60,000 jobs over the course of their implementation.

Investing In Numbers: 6th Census

In this regard, President Dr. Mwinyi has reasserted the need for the island to conduct a national census promptly. The president made a public announcement placing the expected census to be carried out sometime late next year, tentatively in August 2022, explaining that the population census is key to the collection of vital statistics that the government needs if it is to conduct development plans effectively.

Underlining the president’s remarks, Zanzibar Census General Commissar, Anna Makinda said preparation works for the planned census are well underway. According to her, the 2022 census will use digital data entry and will not only account for people but also for buildings as well.

Also read: Zanzibar opens 10 of its smaller island to investors

Investment Outlook

Over the past 20 years, Zanzibar has enjoyed strong and positive growth of the private sector, and along with it, or in part because of it, the island has also enjoyed exceptional growth of foreign private capital (FPC).

“The statistics on FPC values speak for themselves, though concentrated in a few activities, in particular those related to tourism. These achievements have been accelerated by policy formulations and reviews, which have focused in reforming the economy and improving the business environment,” reads the Zanzibar Investment Report on Foreign Private Investments.

With record levels of FPC and a growing competitive investment environment now the island is working to put greater emphasis on diversification of the economy for more sustainable economic growth. These efforts are well stipulated in the Zanzibar Development Vision (2020), which is implemented by the Zanzibar Strategy for Growth and Reduction of Poverty (ZSGRP).

According to the report, foreign private investment (FPI) in Zanzibar increased by 7.9 per cent from 2016 with FDI accounting for more than 90.0 per cent of investment inflows and stock. The structure of FDI is such that financing mostly originates from loans, equity and investment fund share.

FDI inflow in Zanzibar was dominated mainly by accommodation and food services. FDI inflow to accommodation and food services amounted to US$66.4 million in 2017 compared to US$83.5 million in 2016 with the decrease largely associated with the payment of long-term and short-term loans.

FDI inflows continued to originate from a few countries. The top ten investing countries in Zanzibar accounted for 69.0 per cent of the investment stock (or US$544.0 million). Most of the inflow originated from the UK, Italy and Kenya. The three investors accounted for 70.9 per cent of the total investment stock in 2017.

The Organization for Economic Co-operation and Development (OECD) and Southern African Development Community (SADC) dominate the FDI profile. The inflow from the two regions amounted to US$75.4 billion in 2017. The UK dominated in respect to investment inflows and stock in the OECD grouping, while South Africa dominated in the SADC region.

As can be expected, accommodation and food services activity generated most of the employment, accounting for 72.0 per cent in 2017. FDI inflow to agriculture, finance and insurance generated the lowest employment levels, accounting for 0.7 and 0.6 per cent of the total share.

Generally speaking, the Tanzania Investment Centre set a target in 2016 of attracting $5bn in FDI inflows by 2020. UN Conference on Trade and Development (UNCTAD) data shows FDI inflows dropping from $1.5bn to just $864m in 2016, and only slightly recovering each year since to reach $1.1bn in 2019.

As for the Isle, President Dr. Mwinyi is vouching not only for foreign direct investment from abroad but also from the East African region.

Speaking during the CEO Evening Round Table Engagement dinner on EAC regional integration convened by the East African Business Council in June this year, Dr. Mwinyi said the island was open for investment in diverse sectors including deep-sea fishing, ports infrastructure, marine transport, petroleum and gas, and tourism.

“Zanzibar also requires heavy investment in modern agriculture, real estate and conference tourism. Investment in these sectors will spur business within the East African Community in addition to increasing national revenue and improving the lives of the people of Zanzibar,” the president said.

Now with the pandemic, reaching set targets for FDI is harder but the government has taken sound policy measures to cushion the economy and though slow, the country, the island of Zanzibar included, is enjoying steady economic recovery and growth.

A house must have a second door, a back door for business, says Mr Kakoko

Approved Project by Capital and Employment, 2020

Sectors  Approved Project  Approved Capital (TZS)  Approved Employment 
Agriculture and forestry 1 34,470 5
Fishing 1 705 19
Manufacturing 3 5,986 179
Electricity and gas 1 2,758 12
Construction 0 0 0
Wholesale and retail trade, vehicles and motorcycles 2 138,225 23
Transportation and storage 1 5,478 35
Accommodation and food services activities 17 238,792 704
Information and communications 0 0 0
Real estate activities 1 20,470 50
Administrative and support service activities 0 0 0
Education 1 689 7
Human health and social work activities 0 0 0
Arts, entertainment and recreation 2 1,953 24
Total  30  449,527  1,058 

Source: Zanzibar Statistical Abstract, 2020


The Exchange

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Via: The Exchange
Tags: FDIforeign direct investmentInvestingTanzaniaTourismTravelZanzibarZanzibar open door policy to tourism investmentZanzibar Strategy for Growth and Reduction of Povertyтанзанияتنزانياタンザニア坦桑尼亚
The Exchange

The Exchange

News analysis and comment from the The Exchange, a leading publication providing economic news and analysis on the capital markets of Africa, with a specific interest in Kenya, Uganda, Tanzania, Rwanda, Burundi, Ethiopia and Congo. We provide features in banking, capital markets, energy, mining, manufacturing and industrial development.

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