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  • Writer's pictureZanzibar Luxury Properties

Zanzibar's Economy and Investment Horizons

Zanzibar, a captivating semi-autonomous archipelago nestled off the Tanzanian coast, boasts a thriving economy propelled by agriculture, tourism, and trade.        

This haven of historical significance, cultural richness, and pristine beaches has emerged as a premier tourist destination, significantly shaping its economic landscape.


The Economic Pulse of Zanzibar

Tanzania, within which Zanzibar operates, stands as one of the 20 fastest-growing economies globally. With a remarkable GDP growth rate of approximately 7% over the past decade, this momentum is expected to persist, according to forecasts by the IMF and World Bank*.





Why Invest in Zanzibar


The official website of the Zanzibar Investment Promotion Authority (ZIPA)** serves as the gateway to information about investment opportunities, but here's a glimpse of why Zanzibar is an attractive investment destination:


  • Peace and Tranquillity: Zanzibar provides a secure environment fostered by peaceful coexistence amongst people, enhancing overall security mechanisms;

  • Economic and Political Stability: The government's unwavering commitment to a robust economy ensures political stability;

  • Strategic Location: Zanzibar's historical role as a trading post and its proximity to mainland Africa makes it an ideal hub for trade;

  • Market Potential: Access to a market of over 300 million people, coupled with memberships in key economic communities, opens doors to vast opportunities;

  • Abundant Resources: The archipelago's diverse resources, both on land and sea, present attractive investment avenues;

  • Exotic Leisure and Business Destination: Zanzibar's allure as a captivating yet business-friendly destination enhances its investment appeal;

  • Investment Guarantees and Incentives: Robust legal protections and lucrative incentives, both within and outside free economic zones, ensure a favorable investment climate;

  • Dynamic Workforce: Zanzibar offers a young and dynamic workforce, complemented by facilitation services from ZIPA;



The Key investment opportunities abound in the following sectors:


Tourism

As the largest service industry in Zanzibar, contributing a substantial 15% to the national GDP, the opportunities within this field are incredibly diverse.

From upscale hotels and renowned hotel chains to the burgeoning sectors of health tourism, specialty cuisine restaurants, amusement centers, recreational hubs, and sports tourism, the landscape is rich with possibilities.

The spectrum of opportunities within this thriving sector is as diverse as the experiences it offers


Agriculture

In a noteworthy trend, the contribution to Zanzibar's overall GDP is on the rise, with the sector's contribution reaching an impressive 28% in 2020.

The success story can be attributed to the region's abundant fertile land and favourable tropical weather.

Exciting investment prospects lie within sectors such as spice processing, fruit farming, hydroponics, and strategic investments in mechanization and irrigation of agriculture through Public-Private Partnerships (PPPs).

Additionally, there are opportunities for enhancing livestock infrastructure and more.


Real Estate Development

The demand for real estate in Zanzibar is experiencing a notable upswing, encompassing residential, industrial, and commercial sectors.

A 2017 Africa Report by Knight Frank underscores Tanzania and Zanzibar as standout performers, maintaining a remarkable GDP growth of over 5% for the past five years***. This growth is mirrored in increased private consumption and investment. With its strategically positioned island location, coupled with the allowance for non-national investors to acquire leasehold rights in Zanzibar, the demand has surged exponentially, unveiling a myriad of opportunities in the real estate sector.


Manufacturing

The Revolutionary Government of Zanzibar (RGZ) is actively fostering the growth of light manufacturing by introducing enticing incentives for industrial projects. Purposefully established Free Economic Zones serve as magnets for private investment, complemented by a robust Business Environment Improvement Programme that lays a solid roadmap.

In a strategic move, Zanzibar enacted the Public-Private Partnership (PPP) Act in 2015, creating a comprehensive framework to attract private capital for the development, operation, and maintenance of essential infrastructure and services.

Manufacturing in Zanzibar encompasses a diverse range of activities, spanning from food processing, agro processing, and textile production to construction and pharmaceuticals. The multifaceted approach reflects the island's commitment to fostering innovation and economic diversification within the manufacturing sector.


Blue Economy

The 8th Government of Zanzibar has officially declared a strategic emphasis on the Blue Economy sector, envisioning it as a catalyst for economic growth, social inclusion, and the improvement of livelihoods for the people of Zanzibar. This commitment is underscored by a simultaneous dedication to preserving the environmental sustainability of the oceans and coastal areas.

This dynamic sector comprises a spectrum of components, encompassing established traditional ocean industries such as fisheries, tourism, and maritime transport. Additionally, there is a forward-looking approach with the inclusion of emerging activities like offshore renewable energy, aquaculture, seaweed extractive practices, and more.

Investment opportunities within the Blue Economy are expansive.

From fisheries, which currently provide a source of income for 20% of the population, to deep-sea fishing, fisheries infrastructure development, and related activities, including engine repair and maintenance workshops. Moreover, the sector presents opportunities in the burgeoning field of seaweed farming, reflecting a commitment to both economic prosperity and sustainable marine practice


Energy

Zanzibar currently relies on the mainland for its energy needs, with records indicating that 95% of its capacity is reached during peak demand.

The recent developments in the Fumba Free Economic Zones, encompassing projects like the Fumba satellite city, the creation of an industrial park, and a surge in tourism investments, underscore the urgent need for the island to establish its own power generation capabilities.

A 2017 EU study identified solar and wind energy as potential sources for Zanzibar's energy needs. The island holds significant untapped potential for harnessing these renewable resources. Moreover, Zanzibar boasts promising prospects in the exploration of oil and natural gas, further highlighting the island's diverse and robust energy landscape


Public-Private Partnerships 

The Revolutionary Government of Zanzibar extends a compelling invitation for investors to engage in collaborative ventures with public institutions through Public-Private Partnerships (PPPs).


PPP investment avenue not only offers attractive opportunities for investors but also aligns with Zanzibar's commitment to fostering sustainable development and economic growth through strategic partnerships.


Several noteworthy projects under the PPP initiative include:


  • Construction of an Exhibition and Convention Centre: A visionary project aimed at creating a hub for diverse events and exhibitions, contributing to the growth of Zanzibar's business and cultural landscape;

  • Ecotourism initiatives related to Botanical Gardens and City Parks: Transformative projects centred around enhancing the natural beauty of Masingini, Ngezi, and Jozani, promoting sustainable tourism and preserving biodiversity;

  • Development and Renovation of Historical Buildings and Sites: An effort to preserve Zanzibar's rich cultural heritage by revitalising historical landmarks, ensuring they continue to stand as testaments to the island's storied past;

  • Investment in the Mechanization and Irrigation of Agriculture: A project aimed at modernising agriculture through mechanisation and efficient irrigation techniques, bolstering the sector's productivity;

  • Improvement of Livestock Infrastructure and Small Stock Keeper Project: A comprehensive initiative to enhance livestock infrastructure and support small-scale stockkeepers, contributing to the sustainable development of Zanzibar's agricultural landscape through PPP collaboration.


Free Economic Zones

Free Economic Zones (FEZs) are strategically designated geographical areas characterised by highly attractive and incentivized economic regulations such as simplified customs, tax reliefs, and administrative procedures.

These zones serve a specific purpose – to magnetise investments, particularly foreign direct investment (FDI). 


Notable zones are: Fumba Zone, Micheweni Free Economic Zone, Amaan Industrial Park, Maruhubi Free Port Zone, and Airport Free Port Zone.

For detailed insights, the official ZIPA website is a comprehensive resource guiding prospective investors towards Zanzibar's promising economic landscape.


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