Zanzibar can record fast growth by diversifying tourism - WB report

A new report released yesterday shows that despite substantial improvements in living conditions and a drop in poverty between 2009 and 2019, poverty reduction in Zanzibar has been slow relative to its economic growth.

The World Bank Group report, Towards a More Inclusive Zanzibar Economy: Zanzibar Poverty Assessment 2022 released yesterday shows while Zanzibar’s gross domestic product (GDP) per capita grew at 2.9 per cent per year during 2009 to 2019, consumption per adult equivalent grew by only 1.7 per cent per year over the same period. The ‘growth elasticity of poverty’, which reflects the extent to which economic growth leads to poverty reduction, was low, although similar to the average of sub-Saharan Africa and somewhat higher than mainland Tanzania.

Despite the relatively high GDP growth, the creation of wage jobs between 2014 and 2019 was limited and unemployment went up from 17 to 19 per cent, while inactivity increased, according to the labour force surveys conducted in those years.

Also, despite poverty declining by nine percentage points between 2009 and 2019, falling from 34.9 to 25.6 percent, the high population growth has resulted in the number of poor people remaining high in Zanzibar. With a population growth above three per cent per year, according to the preliminary results of the 2022 Population and Housing Census, Zanzibar has one of the highest population growth rates in the world and the number of poor people in Zanzibar barely changed between 2009 and 2019.

Moreover, the difference in the poverty rate between urban and rural areas increased, driven by large welfare gaps between Zanzibar’s main islands of Pemba and Unguja. The report calls for urgently taking advantage of opportunities for more inclusive growth through higher local content tourism, diversification of tourism products, and leveraging the ‘blue economy’ for improving household incomes more broadly.

The Poverty Assessment launched yesterday shows fast improvement in various non-monetary poverty indicators (living conditions). Between 2009 and 2019, gross enrollment in secondary education (forms 5 and 6), for example, increased from 51 to 66 percent. The proportion of households with access to the electricity grid network grew from 38 to 57 percent, with another six percent having access to solar power.

“This shows that the significant increase in investments in basic social services in all districts in Zanzibar as part of the implementation of its Development Vision 2050 has led to important gains in human capital,” said Preeti Arora, Acting World Bank Country Director. “However, as only half of economic growth per head translated into improved welfare, there are important opportunities for making Zanzibar’s GDP growth result into better welfare for its population.”

Tourism contributes an estimated 27 per cent to Zanzibar’s GDP, around 80 per cent of its foreign exchange earnings, and an estimated 60,000 jobs. With the COVID-19 crisis, GDP growth in Zanzibar slowed to an estimated 1.3 per cent in 2020, driven by a decline in tourism activity. GDP per capita fell by 1.6 per cent. Most severely hit was the accommodation and food services sub-sector which decreased by 13 per cent. Urban poverty may have increased by almost 2 percentage points in 2020, according to simulations.

The authors of the report recommend a series of policy measures to accelerate poverty reduction including making tourism more inclusive by promoting the establishment of locally owned small accommodation establishments, diversifying to small-group rural destinations and activities including historical and cultural tourism and marine tourism, and promoting investment in Pemba.

 “There is also scope to further strengthen backward linkages of tourism to the local economy, as over 80 per cent of the requirements in the tourism sector are sourced from outside Zanzibar,” said Rob Swinkels, World Bank Senior Economist and author. “In addition, in order to meet the food needs of the tourist industry hotels and ensure a year-round supply, irrigation and better aggregation arrangements from smallholders, including contract farming, could help.”

Further, the currently high unemployment rates among women and youth could be addressed through better skills training and internship programmes. Improving the business operating and regulatory environment of Small and Medium Enterprises, especially those that source inputs from low-income communities such as seaweed, fish, and other marine products, will be essential for local value addition, job creation, and poverty reduction.

The World Bank regularly conducts Poverty Assessments to examine the progress of countries towards the achievement of key development goals, with a focus on reducing poverty and improving a wide range of other social indicators. The Poverty Assessment was conducted in partnership with the Office of the Chief Government Statistician (OCGS) and is based on the OCGS Household Budget Surveys. The previous World Bank Poverty Assessment for Zanzibar was published in 2017.