Silicon Zanzibar? Tourist islands want techies to stay 

The tropical archipelago of Zanzibar is best known for its white sandy beaches, towering coconut trees and historic capital, Stone Town, which collectively draw half a million tourists annually.

The semi-autonomous islands off the coast of Tanzania also have a proud history as an Indian Ocean trading hub for spices and other commodities between Africa, Asia and the Middle East.

Generally discussion of Zanzibar stops there.

However, if government officials, developers and a global team of experts get their way, the islands of 1.9m inhabitants could soon be known for something else: pulling in startups and skilled foreign workers as an African tech hub. The ambitious plan has been dubbed “Silicon Zanzibar” and dozens of companies have already made serious enquiries about establishing a presence there, according to those behind the project.

At its heart will be Fumba Town, a futuristic city stretching 1.5km along the coast of Unguja, Zanzibar’s largest island, and containing 5,000 residential units. Among its buildings will be a timber skyscraper called the “Burj Zanzibar”, the world’s tallest eco building at 28 floors that its builders say will offer a blueprint for eco-friendly construction not just for Africa but the whole world.

Wasoko launches innovation hub

Meanwhile Wasoko, a fast-growing African e-commerce company, is launching an innovation hub that intends to draw hundreds of engineers, designers and product managers from Africa and around the world.

Proponents say the project will reduce Zanzibar’s dependence on the volatile tourism sector, which was hit hard during the coronavirus pandemic, and chart a new future for the island, where poverty levels remain high and education outcomes low. But whether Silicon Zanzibar can challenge the dominance of Nairobi, Kenya’s capital, as a technology hub for the region – and how quickly – is very much an open question.

Wasoko, which the Financial Times last year declared Africa’s fastest-growing startup, has been involved from the start. Early last year the company was on the hunt for a new pan-African technology hub. Within months, chief executive Daniel Yu, who was also looking at Kigali, Nairobi and Dubai, had sold Zanzibar’s government on the plan.

“As a pan-African tech company, Wasoko has been looking for a location where we can bring together the best talent from across the continent and beyond to innovate and develop new products and services for our customers. While we considered more traditional centres such as Dubai and London, we were ultimately committed to the belief that technology for Africa should be built in Africa,” Yu said at the launch of the hub. 

“We’re proud to be working alongside a government which is heavily invested in supporting this mission and are honoured to be a founding partner for Silicon Zanzibar. We strongly believe Wasoko will be the first in a long line of tech companies to establish a presence on the island.”

Government offers incentives

The wider Silicon Zanzibar initiative is led by Zanzibar’s Ministry of Investment and Economic Development, while Fumba Town is being developed by CPS, a real estate developer. Companies that make the move will receive incentives under a pre-existing free economic zone programme, established by Zanzibar’s government on Fumba peninsula in 1992, including 10 years of corporate tax exemptions and easy access to work visas. But a joint task force is formulating specific tech-friendly policies, which should be unveiled this quarter.

Tobias Dietzold, chief operating officer of CPS, says the current administration, in power for just over two years, is relatively young and “very progressive in their policies”. Zanzibar has been much quicker to attract foreign investment than the Tanzanian mainland, he adds, and the Zanzibari government “understands that we have to open our labour market in order to diversify the economy”. 

In addition, the island boasts a beautiful climate and turquoise waters that have already drawn “digital nomads” – freelance workers who settled in Zanzibar during the Covid-19 pandemic and work remotely for companies in Europe and North America. “With a war for talent globally in tech, [start-ups] need to offer their employees more than just a good salary, they need to offer a destination,” says Dietzold. Fumba Town, he argues, is reminiscent of the all-encompassing Google campuses, where work, leisure and living are minutes apart.

For Zanzibar’s government, which is backing the programme, Silicon Zanzibar is an attempt to broaden beyond its historically strong tourism sector. According to the World Bank, tourism accounts for 27% of Zanzibar’s GDP and 80% of its foreign exchange earnings. While the government wants to hit its target of 800,000 tourists annually by 2025, officials insist the archipelago can be much more than a beach destination.

“We are providing an open and enabling environment for all tech companies and their team members to be based in Zanzibar – one of the world’s most attractive destinations – allowing everyone building tech for Africa to be based in Africa,” says Mudrick Soraga, Zanzibar’s minister of investment and economic development. “Attracting tech companies and global talent brings in a lot of purchasing power into the country, which definitely will be beneficial for its economy,” says Dietzold.

Zanzibar’s economy struggles

Despite substantial improvements in living conditions and GDP growth in the past decade, poverty reduction in Zanzibar has been relatively slow, particularly because Zanzibar has one of the world’s highest population growth rates.

When the tourism industry ground to a halt during the coronavirus pandemic, economic growth slowed from 7% in 2019 to 1.3% in 2020. Shani Smit-Lengton, an economist at Oxford Economics Africa, says the drop marked “a much worse performance than at the national level, with the broader Tanzanian economy [which is less dependent on tourism] having grown by 4.8% in 2020”. 

While the economy has rebounded since then – Zanzibar’s GDP is predicted to grow by 5.4% in 2022, according to Tanzania’s central bank – the Russia-Ukraine war has sent the prices of essential commodities soaring across East Africa.

In a recent report, the World Bank called on Zanzibar to improve its business operating and regulatory environment, particularly for small and medium-sized enterprises that source inputs from low-income communities, in order to spur job creation and poverty reduction. And officials on the island have for some time viewed economic diversification as the key to long-term growth.

Besides Wasoko, Silicon Zanzibar has so far attracted two companies: Ramani, a supply chain software startup, and Kenyan social commerce platform Tushop. However more than 150 firms have inquired about establishing a presence in Fumba Town and are now waiting for the government’s tech-specific incentives, says Dietzold.  

Yu recently said half a dozen companies were in the process of joining its Zanzibar hub. Naturally, Dietzold is bullish about Zanzibar’s prospects, particularly after the vote of confidence from Wasoko. He says he expects “quite a number of tech companies” to be settled in Zanzibar by the end of 2022.

Project faces strong competition

Nevertheless, analysts wonder whether an all-encompassing tech ecosystem can really be built from scratch, and suspect it will take many years before Silicon Zanzibar can call itself a competitive tech ecosystem, particularly with other African hubs, including Nairobi, still drawing in foreign companies and startups. 

“Silicon Zanzibar will first have to compete with neighbouring Kenya and Mauritius,” says Smit-Lengton. “Dubbed the Silicon Savannah, Nairobi has become a technology epicentre over the past two decades, while Mauritius recently unleashed a premium visa to attract foreigners wanting to work remotely.”

There are other drawbacks. Currently, Tanzania as a whole is ranked 116th in the world for mobile speeds and 141st for fixed broadband speed as of November 2022 according to Speedtest (specific results for Zanzibar are not available), suggesting internet infrastructure improvements are likely to be needed.

Power cuts are frequent on Zanzibar’s main island of Unguja. And with no technology education in Zanzibar’s schools, nor any first-class universities on the island, most of the talent will likely need to be imported. That could be complicated given that Zanzibar does not have full control over its immigration policy, but must instead defer to the central government.

Even if the project achieves a fraction of what developers have promised, it could transform Zanzibar’s tourism-dependent economy.

“The Silicon Zanzibar project should not just be viewed as government attempts to create a tech hub, but rather as efforts to leverage the island’s comparative advantages as an attractive location,” as well as the “proliferation of remote working and the elimination of geographic constraints” due to technology, says Smit-Lengton. “Most countries globally will have to step up their tech game and Tanzania is evidently centring those efforts around Zanzibar.”