Enterprising Zanzibar: Harnessing the Power of Entrepreneurship and Small Business for Economic Growth

Entrepreneurship and small businesses are critical to the success of economies worldwide, as they address local needs, create job opportunities, and foster economic inclusivity and resilience.

The World Economic Forum aptly notes, “Entrepreneurship and innovation are the engines of economic growth, and SMEs are the heart of that engine.” This sentiment emphasizes the crucial role small businesses play in driving economic dynamism and innovation.

According to the World Bank, small and medium-sized enterprises (SMEs) represent approximately 90% of businesses and account for over 50% of total employment globally. In developing economies, SMEs play an even more vital role, providing up to 60% of total employment and contributing around 40% of GDP.

SMEs are essential for job creation and income generation, especially in areas facing high employment rates. For example, in sub-Saharan Africa, SMEs provide more than 80% of jobs, often serving as the primary source of livelihood for many families. The International Labor Organization reports that these enterprises offer opportunities to marginalized groups, including women, youth, and people with disabilities, promoting greater economic inclusivity and reducing income inequality.

In the broader African context, entrepreneurship is recognized as a key driver of economic transformation. The African Union emphasizes the role of SMEs in its Agenda 2063 framework, which aims for inclusive growth and sustainable development across the continent.

SMEs account for approximately 80% of jobs in Africa and this makes SMEs a significant mechanism for socio-economic growth. According to a brief published by the Center for Strategic and International Studies in, Supporting Small and Medium Enterprises in Sub-Saharan Africa through Blended Finance, Sub-Saharan Africa has an approximately 44 million SMEs.

According to the African Development Bank, SMEs contribute approximately 45% of total employment and over 33% of GDP in Africa. The contribution of SMEs to Africa’s GDP is expected to increase to 40%.

The entrepreneurial landscape in Africa is rapidly evolving, with a growing number of young entrepreneurs entering the market. The African Development Bank estimates that Africa will have the world’s largest workforce by 2035, presenting an unprecedented opportunity for entrepreneurship to drive economic growth. Initiatives such as the African Continental Free Trade Area (AfCFTA), are expected to enhance market access for SMEs, fostering cross-border trade and collaboration.

In Tanzania, the role of small and medium-sized enterprises (SMEs) is pivotal to the country’s economic landscape. It is estimated that Tanzania’s SME sector consists of more than 3 million enterprises which contribute to 27% of overall GDP.

These enterprises contribute significantly to local economies, with many operating in sectors such as agriculture, manufacturing, and services. For example, the agricultural sector, which employs a large portion of the population, relies heavily on SMEs for processing and distribution, thereby enhancing food security and supporting livelihoods.

Zanzibar, as an island economy, presents unique opportunities for entrepreneurship and small businesses, which can play a transformative role in driving economic growth, enhancing livelihoods, and fostering sustainable development. Tourism is a key pillar of Zanzibar’s economy and a vibrant sector offers vast potential for small businesses to thrive with business enterprises such as those adding value to the locally available raw materials.

Zanzibar, as an island economy, presents unique opportunities for entrepreneurship and small businesses, which can play a transformative role in driving economic growth, enhancing livelihoods, and fostering sustainable development.

While there are no clear data on entrepreneurship and small businesses in Zanzibar, observations show that a majority of Zanzibaris engage in entrepreneurship and small businesses, especially among youth and women.

Local entrepreneurs can leverage the island’s rich natural resources through value addition to locally available raw materials—such as spices and seaweed—to produce high-quality products for both local and international markets. For example, Inaya Zanzibar, which produces and sells locally made high-quality cosmetics, illustrates how small businesses can thrive by tapping into the island’s unique offerings.

Beyond cosmetics, other entrepreneurs and small business owners in Zanzibar can explore various avenues for growth. The culinary sector, for instance, holds significant potential. By creating unique food products or establishing eateries that highlight local cuisine, entrepreneurs can attract both tourists and locals, fostering a vibrant food culture.

Moreover, the artisan sector, focusing on crafts and traditional goods, can be developed to appeal to a growing market for authentic, handcrafted items that showcase the rich cultural heritage of Zanzibar.

Digital technology as a new frontier presents an opportunity for innovative youth to create small business enterprises that cater to the increasing demand for online services and products.

To harness the power of entrepreneurship and small businesses in Zanzibar, a number of initiatives need to be put in place to reap the benefits that these sectors can bring to the economy.

Creating a supportive regulatory environment is vital; streamlining the business registration process and reducing bureaucratic hurdles will encourage more individuals to formalize their businesses. This includes providing support for entrepreneurs and small businesses operating in the informal sector, which often struggle to access resources and opportunities.

Increasing access to capital and loans is crucial, with an emphasis on reducing stringent requirements that often hinder small businesses from obtaining financing. This can involve establishing microfinance institutions or facilitating partnerships with banks to create tailored loan products for small enterprises.

Creating tax incentives or havens for small entrepreneurs and businesses will enable them to start, operate, and thrive. Such measures can help alleviate financial burdens during the early stages of business development, allowing entrepreneurs to focus on growth and sustainability.

Enhancing access to training and capacity-building programs is essential. Workshops on business management, marketing, and financial literacy can equip entrepreneurs with the skills they need to succeed. Collaborating with educational institutions to develop tailored training programs can help build a more skilled workforce that meets the needs of local businesses.

To reap the benefits of entrepreneurship and small businesses for the economy, Zanzibar should prioritize the development of a robust support system that encompasses streamlined regulations for fostering a conducive environment for entrepreneurship and small business development.

This can also be complemented by providing access to affordable financing options to help entrepreneurs and small business owners navigate the challenges of starting and growing a business.

Overall, provision of necessary support on business development and access to resources can lead to increased businesses that contribute to economic growth, job creation, and innovation in Zanzibar, issues that are vital in enhancing the local economic development.

Mustafa Shariff

International Development. (Private Sector Development, Innovation & Enterprenuership, Governance & Leadership).