Zanzibar Poverty Assessment: More Diversification in Tourism Will Help Accelerate Poverty Reduction

DAR ES SALAAM, November 9, 2022 – Zanzibar recorded impressive economic growth between 2009 and 2019, with real GDP per capita growing at an average rate of 3% a year, from $712 in 2009 to $950 in 2019, a total increase of 33%. Living conditions also improved, with substantial increases in secondary school enrolment and access to electricity, but only half the increase in growth domestic product (GDP) per capita translated into increased household consumption and better welfare.

The new World Bank Poverty Assessment for Zanzibar shows that, while the poverty rate dropped by 9 percentage points, this was low, relative to economic growth. And, although not untypical for Sub-Saharan Africa, the “poverty elasticity of growth,’ which is the extent to which economic growth leads to poverty reduction, was about one third of the average for the rest of the world.

Based on the Zanzibar poverty line for poverty, poverty fell from 34.9% in 2009 to 30.4% in 2015 and 25.7% in 2019. The difference in the poverty rate between rural and urban areas widened, with poverty seeing relatively more decline in urban areas, where poverty levels were already lower. This divergence was driven by large welfare differences between the islands of Unguja and Pemba.

The dramatic increase in access to electricity was one of drivers of poverty reduction. The proportion of households with access to the main grid grew from 38% to 57% between 2009 and 2019 with another 6% having access to solar power (mostly in rural areas). The proportion of households relying on a paraffin or kerosene lamps for their lighting halved.

The report shows that recent education reforms, including the abolition of school fees, had a highly positive impact on enrollment: average levels of education in the working age population rose by 0.6 “successfully completed” school years. The report shows that increasing returns on secondary and tertiary education played a role in poverty reduction.

Zanzibar’s economy is dominated by the services sector, led by tourism activities. Tourism contributes an estimated 27% to its GDP and about 80% of its foreign exchange earnings. The numbers of jobs directly or indirectly linked to the tourism sector are estimated at 60,000 out of a total of 600,000 people who appear to be employed on the islands (this difficult to measure from available data).

However, this latest Zanzibar Poverty Assessment shows the shift of people out of low-productivity agriculture into services barely contributed to poverty reduction, which suggests the work they found was of insufficient productivity to raise them above the poverty line. This happened at a time when the tourism sector was growing fast, implying that the impact of the tourism sector on the population’s welfare has not been large.

Following the onset of the COVID-19 pandemic, and a subsequent decline in tourism activity, GDP per capita fell by 1.6 percent in 2020. Tourism receipts dropped by 38% compared to 2021 and urban poverty likely increased a little.

“Notably, even before the pandemic, Zanzibar’s tourism sector faced several challenges common to many small island economies, including weak linkages within the local economy, inadequate institutional and technical capabilities to make the tourism sector more inclusive, and a shortage of trained and specialized personnel,” said Rob Swinkels, World Bank Senior Economist, and author of the report. “To harness tourism as a platform for inclusive development, proper strategies and long-term plans are needed that focus on diversifying tourism products.”

To accelerate poverty reduction, the authors recommend a series of policy measures:

1. Make tourism more inclusive by

• Diversifying tourism products, such as natural, cultural, and historic ones, and include community involvement. This requires systemic changes in thinking and planning.
• Further strengthen backward linkages to the local economy, as over 80% of the requirements for tourism are sourced outside Zanzibar. To meet the food needs of tourist hotels, smallholders need to club together more and contract farming could help. A network of privately managed collection, treatment, and distribution centers could be put in place.
• Strengthening comprehensive visitor data and research.

2. Boost value addition of local produce and increase job creation by

• Improving the business operating and regulatory environment for small and medium sized enterprises, as many are essential for aggregating and processing local produce, such as seaweed, salt, and other marine products, which can be important sources of income for poor women.
• Better financial services for startups, as well as strengthening copyright protection, business skills, and standards of quality could incentivize innovation and job creation.
• Strengthening public-private dialogue to speed up the reforms needed.

3. Target efforts to increase employment for women and youth by

• Better internship programs and links to Zanzibar’s main engines of growth.
• Developing community-based tourism products that are more culturally appropriate for Zanzibar, enabling women and men to equally participate in the tourist economy.
• Changing gender values and norms regarding unpaid domestic work and changing the availability of affordable daycare centers.

4.  Improve educational outcomes for the poor by

• Improving the internal distribution of public education services.
• Placing greater focus on reaching the most marginalized children with more targeted support to help them enroll and complete their education successfully.

5. Increase public spending on health care, especially in rural and remote areas to reach more of the poor, and better track who benefits from public spending on health.

6.  Build resilience against income shocks through safety nets and financial services and better track their coverage through household surveys.