THE ECONOMIC PROSPECTS OF ZANZIBAR

The islands of Zanzibar and Pemba, on account of their geographical location off-shore and their differences of history and ecology, their economic performance and their growth prospects, differ somewhat from those of the mainland. Zanzibar has a population many times as dense as the mainland outside Dar es Salaam, that in Pemba being 40% greater even than Unguja. Population growth is now believed to be running at about 3% overall, a rate of growth greater in Unguja than in Pemba. Today the islands are estimated to have a joint population of 680,000 and an average population density of 260 per square kilometre. Zanzibar does not suffer from the problems of sheer distance which seriously affect economic activity on the mainland. On the other hand, for historical reasons, the economy of Zanzibar depends substantially on a single export crop, cloves, the export of which is still responsible for 90% of Zanzibar’s foreign exchange earnings.

In the sixties the export of cloves, of which Pemba was the main source, earned Zanzibar a healthy foreign exchange balance. But times have changed. Zanzibar has lost its near monopoly advantage and in common with other tropical export crops the price of cloves in world markets has fallen drastically. The volume of export sales fell from 10,800 tonnes in 1973 to 3,510 in 1990. At the beginning of the eighties cloves were selling at $3,000 per tonne, but by the end of the decade the price had fallen to $2,000 per tonne.

This state of affairs has been reflected in the unfavourable balance of trade that has arisen since 1986 with a deficit of Shs. 859.17 million, rising to Shs. 4,037.98 million in 1990. The disastrous effect on the balance of payments has severely constricted the country’s ability to import food, medicines, raw materials, machinery and other necessary items and has only been mitigated by foreign import support estimated to amount to Shs 9,294 million over a period of 5 years, rising from Shs. 692. 4 million in 1986 to Shs 4,942.24 in 1990. No country, certainly not Zanzibar, welcomes this degree of economic dependency.

Zanzibar’s trade with the mainland of Tanzania has, on the other hand, been increasing in recent years. From a deficit of Shs 48 million in 1987, trade went into a surplus of Shs 689.7 million in 1990. This favourable trade relationship, if continued, will help to ease the liquidity problems that have encumbered the Zanzibar economy in recent years. Moreover, as the mainland economy develops, the range of products for which Zanzibar will be able to look to the mainland will gradually increase. The maintenance of the surplus is therefore crucial for Zanzibar . One way in which it can be maintained is through a reduction of food imports from mainland Tanzania by increasing local production. A policy along these lines is well in hand, but in view of rate of population increase, it is by no means easy to achieve results.

The rising population growth and falling gross domestic product during the eighties resulted in a marked fall in the standard of living in monetary terms. In 1976 the average GDP per head was in the region of Shs 2,240, falling to Shs 1,188 in 1989. Over the same period the contribution of agriculture to the GDP fell from Shs 572 million in 1976 to Shs 384 million in 1989. The inhabitants of Pemba are especially vulnerable. Near complete dependence on cloves exposes them to a real risk of hunger when the harvest is poor and the dominance of cloves in the economy of Pemba acts as a disincentive for private investment on the Island.

As in mainland Tanzania, the solution to the foreign exchange problem lies mainly in the Islands’ ability to diversify exports. This will call for unremitting effort over a substantial period of time. The present scope accorded to private enterprises will help to stimulate non-traditional exports by providing room for initiative, but it would be misleading to suggest that such enterprises can become a major factor in Zanzibar’s foreign trade in the short term. Meantime, the Zanzibar Government is pressing for increased food production within the short term. With the ultimate goal of self-sufficiency in food, the Government has launched a programme called “Mtakula”, which has already shown some results. The programme includes diversification into such products as cardamom, red pepper and other agricultural items for export. In the industrial field, current plans provide that any expansion and any new enterprises are designed to reduce reliance on imports. At the same time the Presidential Commission of Enquiry into the Monetary and Banking System of Tanzania has included within the scope of its recommendations the Zanzibar People’s Bank and measures to alter its status and its efficiency are under consideration.

The Plan for Economic Revival in Zanzibar of 1988 resembles in broad outline measures now being taken on the mainland. The budget for 1988/89 showed savings of 5.41. in comparison with the previous year; subsidies were removed from foodstuffs such as rice, sugar and wheat flour; there has been a reduction in government employment brought about by retirement and the control of new appointments; banking services are being extended by opening branches throughout Unguja and Pemba; new impetus is being given t o a law of 1986, which aims at stimulating the activities of domestic and foreign companies; and a study is being made of such matters as a free port , an export processing zone, off-shore investment and banking and ship registration. Following a relaxation of trade regulations, substantial benefits have been recorded, including a growth of activity year by year among individual traders.

Government plans give careful attention to measures designed to mitigate the adverse effects of structural adjustment and provision has been made for investment in the economic and social infrastructure. An interesting component of social policy is the attention that is given to widening the productive opportunities open to women and also the attempt made to harness for productive purposes the energies of young people. An independent foundation known as Mfuko wa Kujitegemea has been established under the Land Perpetual Succession Act to collect funds from all manner of voluntary sources for the purpose of providing soft loans for promotion of productive enterprises. Priority is given to unemployed men, women and young people, to the development of the informal sector and to assisting the handicapped and the underprivileged.
J. Roger Carter

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