Zanzibar, mainly Pemba Island, was once the world’s leading clove producer, but annual clove sales have plummeted by 80% since the 1970s. Explanations given for this are a fast-moving global market, international competition and a hangover from Tanzania’s failed experiment with socialism in the 1960s and 1970s, when the government controlled clove prices and exports. Zanzibar now ranks a distant third with Indonesia supplying 75% of the world’s cloves compared to Zanzibar’s 7%
Zanzibar exports spices, seaweed and fine raffia. It also has a large fishing and dugout canoe production. Tourism is a major foreign currency earner.
Zanzibar’s economy is based primarily on the production of cloves (90% grown on the island of Pemba), the principal foreign exchange earner. Exports have suffered with the downturn in the clove market. Tourism is a promising sector with a number of new hotels and resorts having been built in recent years.
The Government of Zanzibar legalized foreign exchange bureaus on the islands before mainland Tanzania moved to do so. The effect was to increase the availability of consumer commodities. The government has also established a free port area, which provides the following benefits: contribution to economic diversification by providing a window for free trade as well as stimulating the establishment of support services; administration of a regime that imports, exports, and warehouses general merchandise; adequate storage facilities and other infrastructure to cater for effective operation of trade; and creation of an efficient management system for effective re-exportation of goods.
The island’s manufacturing sector is limited mainly to import substitution industries, such as cigarettes, shoes, and processed agricultural products. In 1992, the government designated two export-producing zones and encouraged the development of offshore financial services. Zanzibar still imports much of its staple requirements, petroleum products, and manufactured articles.
During May and June 2008, Zanzibar suffered a major failure of its electricity system, which left the island without electricity for nearly a month. Another blackout happened from December 2009 to March 2010, due to a problem with the submarine cables and the local plant. This led to a serious and ongoing shock to the island’s fragile economy, which is heavily dependent on foreign tourism. In 2000, the annual income per capita was US$220.
There is also a possibility of oil availability in Zanzibar on the island of Pemba, and efforts have been made by the Tanzanian Government and Zanzibar revolutionary Government to exploit what could be one of the most significant discoveries in recent memory. Oil would help boost the economy of Zanzibar, but there have been disagreements about dividends between the Tanzanian mainland and Zanzibar, the latter claiming the oil should be excluded in Union matters. A Norwegian consultant has been sent to Zanzibar to investigate its oil potential.
The energy sector in Zanzibar consists of unreliable electric power, petroleum and petroleum products; it is also supplemented by firewood and its related products. Coal and gas are rarely used for either domestic and industrial purposes. Zanzibar gets 70 percent of its electric power needs from mainland Tanzania through a submarine cable, and the rest (for Pemba) is thermally generated. The Revolutionary Government of Zanzibar and the government of the Kingdom of Norway signed an agreement in August, 2008 whereby Norway agreed to provide funds for the Tanga-Pemba Sub Sea Cable Project, which will enable Pemba Island to receive electricity from the National Grid from the Tanga Region; the laying of a 40 megawatts marine cable started in December 2009. Between 70 and 75% of the electricity generated is used domestically while less than 20 percent is used industrially. Fuel wood, charcoal and kerosene are widely used as sources of energy for cooking and lighting for most rural and urban areas. The consumption capacity of petroleum, gas, oil, kerosene and IDO is increasing annually, going from a total of 5,650 tons consumed in 1997 to more than 7,500 tons in 1999. Zanzibar suffered its second major blackout on December 10 to March 23rd,2010, 2009, and the Tanzanian island’s energy ministry says it is unclear when the problem will be fixed. The first major blackout, which left the islanders powerless and entirely dependent on alternative methods of electricity generation (mainly diesel generators), was from May 21 to June 19, 2008. The mainland, where the fault originated, managed to be restored at the same time.