Zanzibar Targets 7.5pc Economic Growth in 2026

Zanzibar is targeting a robust 7.5% economic growth in 2026, building on strong performance in 2025, driven primarily by a surge in tourism, enhanced domestic revenue collection, and sustained infrastructure investments. This ambitious target is underpinned by a progressive legal and regulatory framework designed to attract and protect investments, streamline business operations, and foster public-private partnerships. Key legislative instruments, such as the Zanzibar Investment Act, 2023, the Zanzibar Tourism Act, 2009, and the Public Private Partnerships Act, 2015, provide the legal scaffolding for these economic pillars, aiming to create a predictable and attractive environment for both local and foreign investors while ensuring sustainable development.

The semi-autonomous archipelago of Zanzibar is poised for significant economic expansion, with projections indicating a 7.5% growth rate in 2026. This ambitious target reflects the Revolutionary Government of Zanzibar's commitment to leveraging its strategic assets and ongoing reforms to bolster its economy. The anticipated growth is primarily fueled by a revitalized tourism sector, improved domestic revenue generation, and substantial investments in critical infrastructure, all of which are crucial for achieving the broader objectives outlined in the Zanzibar Development Plan (ZADEP) 2021-2026.

This article delves into the legal and regulatory landscape underpinning Zanzibar's economic aspirations. For legal practitioners, understanding these frameworks is paramount, as they dictate the operational environment for businesses, investment modalities, and the mechanisms for dispute resolution. The government's proactive stance in enacting and refining laws related to investment, tourism, and public-private partnerships signals a deliberate effort to create a predictable and attractive jurisdiction for economic activity.

The thesis of this article is that Zanzibar's pursuit of accelerated economic growth is firmly rooted in a dynamic legal and policy environment. By examining the key statutes and policies, we aim to provide a comprehensive overview of the opportunities and legal considerations for attorneys advising clients interested in contributing to, or benefiting from, Zanzibar's economic trajectory.

Zanzibar operates under a unique constitutional arrangement within the United Republic of Tanzania, granting it significant autonomy over many domestic affairs, including economic policy and legislation. The Constitution of Zanzibar, 1984, as amended, establishes the framework for its governance and economic objectives. Historically, Zanzibar's economy has relied heavily on agriculture (particularly cloves) and, increasingly, tourism. Recognizing the need for diversification and sustainable growth, the government has progressively reformed its legal and institutional structures to attract private sector investment.

A cornerstone of this reform agenda is the Zanzibar Investment Policy, which specifies the legal and regulatory framework for investment, including investors' rights, obligations, and incentives. This policy is operationalized through legislation such as the Zanzibar Investment Act, 2023 (Act No. 10 of 2023), which repealed and replaced earlier investment laws from 2004 and 2018. The 2023 Act aims to be clearer, less ambiguous, and more concise, confirming the state's role in supporting private-sector-led development and granting more autonomy and power to the Zanzibar Investment Promotion Authority (ZIPA).

Furthermore, the land tenure system in Zanzibar is distinct. All land is state-owned and held in trust by the government. Neither locals nor foreigners can own land outright in perpetuity (freehold). Instead, land is leased from the government on long-term contracts, typically up to 99 years for foreign investors, often through a registered right of occupancy. This leasehold system, governed by the Land Tenure Act, 1992, and further clarified by the Condominium Act, 2015, provides a secure, transferable interest for investors, particularly in the burgeoning real estate and tourism sectors.

The projected economic growth is strategically anchored in three key pillars: tourism, domestic revenue, and infrastructure investment, each supported by specific legal frameworks. The tourism sector, a primary driver of Zanzibar's economy, is regulated by the Zanzibar Tourism Act, 2009 (Act No. 6 of 2009), which repealed the earlier Promotion of Tourism Act, 1991. This Act establishes the Zanzibar Commission for Tourism (ZCT), responsible for licensing tourism businesses, promoting the destination, and setting standards. Recent policy changes, such as extending the validity period of tourism licenses from a calendar year to 12 months, aim to promote ease of doing business and accommodate the evolving needs of tourism operators.

Domestic revenue generation is critical for funding public services and infrastructure. The Zanzibar Revenue Authority (ZRA), established by the Zanzibar Revenue Authority Act, No. 11 of 2022, is the central body for assessing and collecting specified non-union revenues. The tax regime encompasses business income tax, Value Added Tax (VAT), and property tax, among others, governed by statutes such as the Tax Administration and Procedures Act No. 7 of 2009, the Value Added Tax Act No. 4 of 1998, and the Property Tax Act No. 14 of 2008. The government also offers tax incentives to approved investors through ZIPA, including exemptions from import duties and VAT relief for locally purchased materials, subject to a 5% service charge to ZIPA.

Infrastructure investments are facilitated by the Public Private Partnerships Act No. 8 of 2015, which regulates concessions and greenfield projects, encouraging cooperation between public authorities and private partners. This Act, alongside the Zanzibar Public-Private Partnership Policy, aims to enhance public service provision and mobilize resources for infrastructure development, recognizing the private sector's role in financing and operating projects. Furthermore, the Finance (Public Revenue Management) Act, 2015, introduced an 'infrastructure tax' to specifically fund infrastructure services, demonstrating a dedicated revenue stream for these critical projects.

The Zanzibar Investment Act, 2023, is particularly significant for attracting foreign direct investment (FDI). It establishes ZIPA as the primary agency for promoting and facilitating investments, offering a 'one-stop-shop' for services like investment certificates, tax registration, and land access. The Act provides explicit protection against expropriation (Section 35), guarantees the right to international arbitration, and introduces a Real Estate Buyer Incentive Scheme, allowing foreign investors acquiring property above USD 100,000 in ZIPA-approved projects to qualify for residence permits. This integration of property ownership and immigration incentives makes Zanzibar an attractive entry point for foreign investment, though it is crucial for foreign buyers to understand that land ownership is leasehold, not freehold.

Zanzibar's ambitious 7.5% economic growth target for 2026 is underpinned by a robust and evolving legal and regulatory framework. The synergy between the Zanzibar Investment Act, 2023, the Zanzibar Tourism Act, 2009, the Public Private Partnerships Act, 2015, and various revenue laws creates a structured environment designed to attract investment and foster sustainable development. For legal practitioners, a thorough understanding of these statutes, particularly concerning investment incentives, land tenure, and operational licensing, is essential for advising clients navigating Zanzibar's burgeoning economy.

Practitioners should pay close attention to the ongoing administrative reforms by bodies like ZIPA and ZCT, which aim to streamline processes and enhance the ease of doing business. The government's commitment to protecting investor rights, including through international arbitration mechanisms, provides a degree of certainty for foreign capital. As Zanzibar continues its economic transformation, monitoring legislative amendments, policy shifts, and the implementation of strategic development plans like ZADEP 2021-2026 will be crucial for identifying new opportunities and mitigating potential legal challenges in this dynamic jurisdiction.