Zanzibar in new business surge
TOURIST PARADISE: Zanzibar itself is too small due to a small population and low purchasing power of its residents, but opportunities exist wider afield for entreprenuers.
UNGUJA, Zanzibar – The
Zanzibar archipelago, that flourished for centuries as a major link for Indian
Ocean trading, is now witnessing a surge of new entrepreneurs who are
stimulating the economy.
Reinforcing and reflecting this spirit of growth will
be the new $230 million Maruhubi port that will be a gateway to trade.
Just like mainland Tanzania, despite steady economic
growth over previous decades, widespread poverty, income inequality,
infrastructure burdens and a growing population, that demands higher living
standards, impede Zanzibar’s development.
The World Bank together with other major global
finance bodies, however, recognizes that such islands face additional obstacles
to growth when compared to large economies.
Size is a major consideration as the economies of
small islands are considered to be more vulnerable to trade shocks, for example
dips in global tourism. This is especially apparent in islands like Zanzibar,
which have limited number of primary commodities.
The fall in volume and export prices for Zanzibar’s
crucial clove industry contributed to the decline of the island’s exports to
$186.2 million during the year ending October 2013.
This compares with the $202.5 million for the same
period in 2012 according to Bank of Tanzania figures.
Island economies more often experience restricted
competition. Only a few domestic firms can operate in some sectors. This can
lead to higher prices, lower quality and less innovation.
In the case of Zanzibar, however, mainland firms are
normally able to access the Zanzibar market. Sometimes island economies have
difficulties reaching economies of scale.
Enterprises with only a small domestic market to trade
in often have less to produce than they would wish unless they are able to
enter export markets.
In order for any large-scale operation to make sense
in Zanzibar, they will need access to mainland Tanzania and neighboring
countries as markets for the end products.
Zanzibar itself is too small due to small population
and low purchasing power of its residents. Additional obstacles any large-scale
operation will face in Zanzibar are limited capacity of the port and logistical
disadvantage it creates.
From micro-enterprises to large-scale companies,
however, inspiring innovation and enterprise are overcoming these challenges to
business.
New sources of income from the vital tourism market,
which represents 51% of GDP according to Zanzibar government figures, are being
exploited.
The Kisakasaka Women’s Group, working with the
Zanzibar Association of Tourism Investors (ZATI) and Voluntary Services
Overseas (a British NGO), are fattening mud crabs in pens close to the sea for
sale to hotels and restaurants.
The retail value of the crab rises up to tenfold after
six weeks of feeding.
Meanwhile, the all-women production team at Inaya
Zanzibar continues to develop luxury soaps and other products created using
oils, butters, herbs and flowers sourced all over the continent.
The company, founded in 2013, now offers guest amenity
products to the hospitality sector and has its products sold at over ten
locations.
Smaller entrepreneurs, however, are sometimes held
back by access to finance whilst improving labor skills and productivity
remains a major task for both the public and private sector alike.
These key drivers of competition, job creation and
commercial growth need all economic stakeholders to collectively support
programs to tackle these issues.
Without such reforms, entrepreneurs operating in the
informal sector are unlikely to join companies in the formal sector if they
consider the bureaucracy too burdensome.
Large-scale enterprises (numbering no more than 50
employees on average in Zanzibar) are also playing their part in boosting
fortunes in the archipelago.
Zanchick started operations in Zanzibar back in 2011,
and has established a multi-million dollar cold chain distribution network for
chicken, as well as, constructed new “state of the art” further processing
facility.
It is the main supplier and distributor of
high-quality, affordable poultry products on the island. Such investments,
however, cannot remain focused on local markets if they wish to increase output
and generate new business.
Capturing sales and contracts on the mainland (and
beyond) is critical to the growth of Zanzibar enterprises. Companies, however,
enjoy mixed fortunes.
Inaya Zanzibar is now successfully selling its
products to more than ten outlets on Zanzibar and the mainland. Other firms,
however are facing ‘red tape’ that can seriously hamper doing business with the
mainland.
Zanchick’s success story, for instance, is at risk of
faltering due to apparent mainland prohibitions on their sales of
poultry.
“Presently we have unsolicited requests from
(mainland) hotels and companies…This demand will grow as soon as we are in a
position to offer our products in the market freely,” explained Christopher
Kontonasios, Zanchick’s Chief Operations Manager, during an interview earlier
this month.
Addressing the human capital, bureaucracy and finance
challenges faced by ventures ranging from start-ups to established corporations
are therefore crucial to Zanzibar’s business future.
Reforms will be critical to creating a business
environment where enterprises can flourish in the isles, the mainland and even
further afield.
Successfully overcoming barriers to trade will be key
to determining the success of these entrepreneurs that are central to creating
a diverse and sustainable economy for Zanzibar.
By Francis Hunda,
Sunday, December 07th, 2014
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