Zanzibar At A Glance for Investors
The archipelago of Zanzibar is an integral part of the United Republic of Tanzania. It lies 25–50 kilometres off the coast of the Tanzania mainland and consists of two large islands, Unguja and Pemba, along with more than 50 other islets.
Zanzibar is a semi-autonomous part of the United Republic of Tanzania, with its own Government, and executive, legislative, and judiciary system, known as the Revolutionary Government of Zanzibar (RGoZ), which is fully responsible for all non-union matters.
The current President of Zanzibar, his Excellency, Dr Hussein Ali Mwinyi, was sworn in on 2nd November 2020.
Zanzibar practices multiparty democracy, and its constitution of 1984 calls for the inclusion of the opposition party in the government to form a Government of National Unity.
Zanzibar is inhabited by the Swahili, Arab, and Indian populations. As opposed to mainland Tanzania where about 2/3 of the population is Christian, Islam is a prominent religion in Zanzibar.
According to Tanzania’s latest national census, the population of Zanzibar was 1,889,773 in 2022.
Zanzibar has a fairly young population with approximately 35% of the total population in the age group of 15-34 years in 2021.
The economy of Zanzibar is highly dependent on tourism and services in general (tourism, trade, transportation and storage, and other private and public services) which contributed to 51.7% of the GDP in 2021.
Industries (manufacturing, construction, and mining); and agriculture (including forestry, crops, livestock, and fishing) accounted for 20.1%, and 18.4%, respectively.
The Gross Domestic Product (GDP) of Zanzibar in 2021 (at 2015 constant prices) was about USD 1.4 billion.
Zanzibar’s real GDP in USD (at 2015 constant prices) grew by 5.1% in 2021, following a significant slowdown to 1.3% in 2020 due to the impact of the COVID-19 pandemic on the tourism-dominated services sector which accounts for nearly 50% of Zanzibar’s GDP.
The annual inflation rate in Zanizbar was 1.7% in 2021.
Investing in Zanzibar
Zanzibar has witnessed strong growth in foreign and domestic investment over the last 25 years.
The high inflow of tourists makes it a suitable destination for investments across several sectors such as tourism, fisheries (blue economy) and aquaculture, trade activities, real estate development, agriculture, manufacturing and others.
Zanzibar enjoys a strategic location in the Indian Ocean with close proximity to regional trading blocks of which Tanzania is part such as the Southern African Development Community (SADC), the East African Community (EAC), and AfricanContinental Free Trade Area (AfCFTA).
The Zanzibar Investment Promotion Authority (ZIPA) is the main Government Institution responsible for promoting and facilitating investments in Zanzibar.
Investments in Zanzibar are safeguarded by the constitution and by international conventions, namely the World Bank’s Multinational Investment Guarantee Agency (MIGA) and the International Centre for the Settlement of Investment Disputes (ICSID).
Tax & Other Incentives to Investors in Zanzibar
Zanzibar offers both fiscal and non-fiscal incentives for investments.
The tax incentives available to investors include exemption from payment of import duty, excise duty, value-added tax, and other similar taxes on capital goods, 5 years of corporate tax exemption, 50% exemption of the prevailing rate for Corporate Income Tax, 50% exemption of Profit Tax for repatriated Profit, 50% exemption for Accelerated Depreciation for 5 years, and 50% exemption of Income Tax on Interest on Capital borrowed from Foreign Banks.
To obtain these incentives, investors must meet certain conditions such as investing not less than 75% of the capital specified in the feasibility study/Business Plan and starting business operations.
Summary of the Investment Incentives Available in Zanzibar
Strategic Investment Status
Investors can be granted Strategic Investment Status, which gives them additional benefits, incentives, and allowances, namely:
- exemption from all duties and taxes on importation and local purchases of construction goods and materials during the project construction;
- exemption of income tax on interest on capital borrowed from foreign banks;
- five years grace period on payment of Land Lease;
- 100% foreign ownership is allowed;
- engagement of foreign contractors is allowed; and
- five years grace period on payment of land lease for a marina in tourism investment;
- starting period of the land lease agreement is thirty-three years; and
- starting period of the marina lease agreement is thirty-three years.
Strategic investors must meet the following conditions:
• Investing assets equivalent to USD 100 Million in Unguja and USD 10 Million in Pemba; or
• Employing at least 1,000 people; or
• Investing assets equivalent to USD 50 Million in the innovative investment or in the disadvantageous areas in any of the following priority sectors:
i. Industrial manufacturing or Assembling,
ii. Upmarket Tourism,
iii. Agriculture and Fisheries,
iv. Real-estate Development,
v. Energy Infrastructure Development and vi. Information and Communication Technology.
Last Updated: 12th March 2023