Zanzibar to benefit from projected 6.8% economic growth

• Zanzibar’s economy is structured into three main sectors: tourism, trade, transportation and storage
• The Zanzibar government just recently received US$15 million in advance leasing fees for the ten islets
• Zanzibar’s economy is expected to grow by 6.8 per cent this year, up from 5.1 per cent in 2021

Defying the Covid-19 pandemic jitters, Zanzibar’s economy is expected to grow by 6.8 per cent this year, up from 5.1 per cent in 2021.

This is according to the Island’s second Vice President Hemed Suleiman Abdulla who noted in his budget speech on Wednesday, April 27 that the enhanced growth rate in the archipelago is due to a global decline in Covid-19 infections.

Zanzibar’s economy is structured into three main sectors: tourism, trade, transportation and storage, and other commercial and public services; manufacturing, construction, and mining; and agriculture which includes fishing, livestock, forestry and crop production.

Export earnings in the Islands increased 138 per cent from Tsh65.7 billion (US$28,134,317) in 2020 to Tsh155.6 billion (US$66,631,654) in 2021. This was partly due to increased shipments of clove and seaweed.

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In addition, the recent leasing of islets to the world’s wealthiest has also contributed to the growth. The Zanzibar government just recently received US$15 million in advance leasing fees for the ten islets.

Special Economic Zones in Tanzania

Tanzania’s Export Processing Zones Authority (EPZA) is in charge of the export processing zones (EPZ) and the special economic zones (SEZ).

The Ministry of Industry, Trade and Investment operates the EPZA. It is the EPZA’s responsibility to steer and implement government policy on the promotion of SEZ in Tanzania. EPZA was established in 2003.

Among EPZA’s other responsibilities include the construction of EPZ and SEZ infrastructure and providing business services to SEZ and EPZ investors. The EPZA also issues EPZ and SEZ permits.

Except for areas that are heavily regulated, such as food and medicines, investors who get EPZ or SEZ permits are not required to seek any extra licences. Zanzibar developed its Free Economic Zones (FEZ) to expressly attract foreign direct investment (FDI), with a particular focus on labour-intensive projects and the expansion of exports. Companies who locate their operations in FEZ-designated zones benefit from streamlined administrative procedures including customs at lower operating costs. In the current state of affairs, Zanzibar has five free economic zones.

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On a global scale, investments are protected by the constitution as well as international treaties such as the Multinational Investment Guarantee Agency (MIGA) of the World Bank and the International Centre for the Settlement of Investment Disputes (ICSID), which are both based in Geneva.

Tourism in Zanzibar

In 2021, Zanzibar received roughly 394,200 tourists. As a result of the Covid-19 epidemic, the semi-autonomous territory of Tanzania continues to report a decline in the number of tourists visiting the region. A total of 260,600 people visited the archipelago in 2020. Before 2019, the number of visitors increased to 538,300 in 2018 but this growth was halted by the pandemic.

Agriculture in Zanzibar

Agriculture has long been a significant element of the Zanzibar economy, dating back hundreds of years. The sector provides a source of income for more than 70% of the island’s population, besides tourism and trade, which are also important. Clove production and marketing have been the economic lifeblood of Zanzibar for hundreds of years now.

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Clove is currently the most important cash and export crop in Zanzibar, and as such, it is the main cash crop in the archipelago agriculture sector, with seaweeds, chillies copra, and coconuts.

Unfortunately, Zanzibar has been struggling to resurrect its spice business, which has resulted in significant swings in the amount of spice produced.

In order to support the sector, the Tanzania Trade Development Authority (TanTrade) and the business sector, represented by the Tanzania Spices Association, developed the Tanzania Spices brand to be known worldwide (TASPA)
Having the Tanzania Spices label on products is a huge step forward in terms of marketability, quality assurance, and long-term viability for the Tanzanian spice business.

Local producers are able to grow, promote, and sell their products on a more level playing field as a result of the Tanzania Spices trademark. As a result, they get a competitive advantage in the highly competitive international spice industry.

Because of the improved reputation for quality, prices have climbed, value has been added, and the market for derived products such as essential oils has expanded. Increased demand, supply, and production will have positive spillover effects on local employment, the home market, and people’s daily lives.

Blue Economy in Zanzibar

After a difficult period of economic losses due to COVID-19, the country’s administration wishes to see the country’s seafood industry rebound as the main driver of its economy.

Fisheries and seaweed farming, have been highlighted as other main industrial players, in addition to coastal tourism, with fisheries, and seaweed farming expected to fuel the archipelago’s new push for export riches. Officials have also emphasized the importance of gaining additional benefits from the seas as they seek to exploit the limitless resources found in water basins.

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If reports from the archipelago are to be true, the island of Zanzibar intends to boost production and boost exports from its fortunate seas.

The fishing sector contributed 4.8 per cent of GDP to Zanzibar in 2019, up 0.4 per cent from the previous year.

In the same year, 36,728 tons of fish were harvested, valued at 196.65 billion Tanzanian shillings ($83.7 million), compared to 38,107 tons in 2020. This demonstrates Zanzibar’s improvement, which is projected to continue.

The country wants to achieve its targets through effective marketing and enhanced production, according to Zanzibar’s Unguja North regional commissioner Ayoub Mahmoud.

“Zanzibar will be soon a centre for worldwide fish commerce, resulting in more jobs, a better trade balance, and improved food security,” he said.

Farming of seaweed

After tourism and clove production, seaweed is the country’s third-largest source of revenue, accounting for roughly 90% of all marine exports. It generates a significant amount of foreign cash and employs approximately 25,000 people.

According to a 2018 UN Food and Agriculture report, seaweed farming brought in $8 million per year to Zanzibar during its peak years. Production reached 15,000 metric tons at its height.

Official GDP data for Zanzibar shows growth in the first half of 2021, albeit at different rates in different industries. The services sector, which accounts for about half of Zanzibar’s GDP, grew by 9.4% in the first half of 2021, while agriculture grew at a slower rate of 7.1 per cent and the industrial sector shrank by 8.7%. The tourism industry in Zanzibar supports an estimated 60,000 employees, either directly or indirectly.

Tourist arrivals grew to 252,937 between January and September 2021, albeit still significantly behind the 376,732 recorded over the same period in 2019. Nonetheless, growing visitor arrivals aided the establishment of lodging and culinary services, while governmental administration also helped to expand services.

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The world bank predicts If pandemic circumstances ease and the external environment improves, growth is projected to pick up in the next two years.

Zanzibar’s economic prognosis has improved, but its recovery is still dependent on external factors and local health policies. The direction of future expansion will be primarily determined by the pandemic’s progression and the rate of vaccination, both internationally and domestically. Downside risks have been mitigated by continued vaccine advances, greater regional trade and collaboration, and policy initiatives to strengthen the economic environment.

Nonetheless, new coronavirus strains and the crisis in Ukraine all pose risks to the predicted recovery.