REVOLUTIONARY GOVERNMENT OF ZANZIBAR
Growth and Poverty Reduction in Zanzibar:Why such a Mismatch?
1stDraft Report
By
Dr. Mohammed H. Khalfan,
Mr. Joseph G. Kakunda, and
Mr. Said M. Khamis
December 2009
1
MKUZA Review Study on a Mismatch between Growth and Poverty Reduction
Contents
ABREVIATIONS AND ACRONYMS
1INTRODUCTION
1.1Zanzibar Location, Population and Administration
1.2Background to the Study
1.3Objectives of the Study
1.3.1Overall Objective
1.3.2Specific Objectives
1.3.3Study Questions
1.4Significance of the Study
1.5Organization of the Study
1.6Methodology
Nature and Approach of the Study
2REVIEW OF LITERATURE
2.1Theoretical and Empirical Perspective
2.1.1Definitions of Poverty
2.1.2Measurement of Poverty
2.1.3Alternative Measures of Poverty
2.1.4Assessing Relationships between Growth and Reduction of Poverty
2.2The Zanzibar Macro Economic Policy Framework
2.2.1The Vision 2020
2.2.2Zanzibar Strategy for Growth and Reduction of Poverty (ZSGRP) - MKUZA
3FINDINGS
3.1Introduction
3.2General Overview on Growth, Income Inequality and Poverty Reduction in Zanzibar
3.3Zanzibar Economic Performance
3.3.1Zanzibar Per Capita Income
3.3.2Per Capita Household Expenditure
3.3.3Inequality and Poverty
3.3.4Economic Growth and Population Growth
3.3.5Income Inequality and Asset Ownership
3.3.6Measures for Reducing Income Inequalities
3.3.7Business Environment Conduciveness
3.4Assessment of the Results against Targets
3.5Accuracy of the Zanzibar Macroeconomic Policy Framework
3.5.1A Snapshot of Achievements and Challenges
3.5.2Revisit of Important Attributes to the Zanzibar Growth
3.6Mobility Factors
3.6.1Social Investments Pattern at Household Level
(education, health, water);
3.6.2Linkages between Employment and Growth
3.7A Mismatch between Growth and Poverty Reduction
3.8Feasible Growth Level for Zanzibar Poverty Reduction
3.9Public Opinion
4Conclusions and Recommendations
LIST OF REFERENCES
APPENDIX 1: ZANZIBAR POSITION IN MDG IMPLEMENTATION
APPENDIX 2: STAKEHOLDERS VIEWS
ABREVIATIONS AND ACRONYMS
AIDS / Acquired Immune Deficiency SyndromeAMP / Aid Management Platform
ASDP / Agriculture Sector Development Programme
ASSP / Agriculture Support Service Programme
BEST / Business Environment Strengthening for Tanzania
CAG / Controller and Auditor General
DPP / Director of Public Prosecution
DPs / Development Partners
FDA / Food and Drug Authority
GBS / Government Budget support
GBS / General Budget Support
GDP / Gross Domestic Product
GER / Gross Enrolment Rate
HBS / Household Budget Survey
HIV / Human Immune-deficiency Virus
HoR / House of Representatives
ICT / Information and Communication Technologies
IDA / International Development Association
ILFS / Integrated Labour Force Survey
MACEMP / Marine and Coastal Environment Management Project
MCC / Millennium Challenge Corporation
MKUZA / Mkakati wa Kukuza Uchumi na Kupung uza Umasikini Zanzibar
MoFEA / Ministry of Finance and Economic Affairs
MTEF / Medium Term Expenditure Framework
OCGS / Office of Chief Government Statistician
ODA / Overseas Development Assistance
PADEP / Participatory Agricultural Development and Empowerment Project
RGoZ / Revolutionary Government of Zanzibar
SEZ / Special Economic Zone
SMART / Specific, Measurable, Affordable, Required and Time bound
SMEs / Small and Medium Enterprises
SWOT / Strengths, Weaknesses, Opportunities and Threats
TRA / Tanzania Revenue Authority
UNDP / United Nations Development Programme
URT / United Republic of Tanzania
ZBC / Zanzibar Business Council
ZIC / Zanzibar Insurance Corporation
ZIFA / Zanzibar Institute of Financial Administration
ZIPA / Zanzibar Investment Promotion Authority (ZIPA)
ZNCCIA / Zanzibar National Chamber of Commerce, Industry and Agriculture
ZRB / Zanzibar Revenue Board
ZSGRP / Zanzibar Strategies for Growth and Reduction of Poverty
ZSSF / Zanzibar Social Security Fund
GROWTH AND POVERTY REDUCTION IN ZANZIBAR:
WHY SUCH A MISMATCH?
1INTRODUCTION
1.1Zanzibar Location, Population and Administration
Zanzibararchipelago comprises two main islands of Unguja and Pemba and several other islets some of which are uninhabited. Zanzibar is located in the Indian Ocean, about 30 kilometres off the East Coast of Africa between latitudes 5 and 7 degrees south of the Equator; its weather is mostly tropic. The Island has a total area of 2,654 square kilometres; out of this, Unguja, which is the largest, has an area of 1,666 square kilometres while Pemba has an area of 988 square kilometers.
Picture 1: Zanzibar: Unguja, Pemba and Surrounding Islets
Source: NES, 2009.
According to the Population and Housing Census (2002) Zanzibar had a population of 981,754 with a growth rate of 3.1 percent and a population density of 370 per square kilometres. Of the total population, 40 percent live in urban area and the remaining 60 percent settle in rural areas. The outburst of the population growth rate was mostly attributed to high fertility rate of 5.3.
Politically, Zanzibar is a semi-autonomous part of the United Republic of Tanzania with its own Government: the Executive, headed by the President of Zanzibar, its own Judicial System as well as a legislative assembly known as the House of Representatives. Zanzibar is divided into five administrative regions (three in Unguja and two in Pemba), 10 districts two in each region, 50 constituencies and 296 shehias. As development aspects are administered by the Zanzibar Government,ever since the 1964 Revolution, the Revolutionary Government of Zanzibar has taken various measures to address the main development challenges it faces; which are ignorance, diseases and poverty.
1.2Background to the Study
In 2000, the Zanzibar Government launched the Zanzibar Development Vision 2020, a development strategy with comprehensive social, political, cultural and economic guidelines to follow until the year 2020. The thrust of this vision is eradication of absolute poverty and attainment of sustainable development.
To ensure implementation of the Vision, a three-year Zanzibar Poverty Reduction Plan (ZPRP) was drawn up and launched in 2002. Implementation of the ZPRP had some significant achievements, but there were also some challenges highlighted during the ZPRP review process which initiated the development of a new implementation plan for the long-term Vision 2020. This is the Zanzibar Strategy for Growth and Reduction of Poverty (ZSGRP - MKUZA). The focus of MKUZA is on ensuring the attainment of sustainable growth that increases the income and reduces non-income poverty of the majority of Zanzibaris. The strategy is in line with various international goals, commitments and targets, including the Millennium Development Goals (MDGs).
The MKUZA (Mkakati wa Kukuza Uchumi na Kupunguza Umasikini Zanzibar), offered recommendations or interventions on how various stakeholders – the Government, the Non State Actors including Development Partners, the Private Sector, Civil Society Organizations and the Community – can positively engage in the implementation process and how through their own actions and approaches can significantly enhance economic growth and thus reduce poverty in the intermediate periods towards the long term goal of the vision, which is to achieve high living standards and social well being of all Zanzibaris. MKUZA also underscored the need to improve Good Governance and promote national unity as a cornerstone for realization of economic growth and reduction of poverty aspirations.
According to its scheduled horizon, MKUZA implementation cycle will come to an end at the end of June 2010. In this respect, the Revolutionary Government of Zanzibar is spearheading the MKUZA review process that will culminate into the new national strategy that will start to be implemented by 1st July 2010. The Ministry of Finance and Economic Affairs has commissioned various studies with the aim of technical assessment of the MKUZA progress on targets, drawing lessons learned during implementation including what interventions worked and what are areas that need further strategies and refining the interventions accordingly including the issues of sequencing and prioritization. The assessment puts cognizance of new emerging challenges at national, regional and global levels with the view of repositioning successor strategies during the next cycle of implementation.
Growth and poverty reduction in Zanzibar: why such a mismatch? is amongst those several studies that were commissioned for this purpose. The overall objective, specific objectives and significance of this study in contributing to the MKUZA review process are presented in the objectives’ section.
1.3Objectives of the Study
1.3.1Overall Objective
The overall objective of the study is to uncover the barriers which have been obstructing spillovers from economic growth achieved in Zanzibar since early 1990s, thus innovatively recommend the solutions that will permit the trickle down of the growth benefits that will result in improving human development and accelerate the reduction of poverty to Zanzibaris.
1.3.2Specific Objectives
i)To analyze the extent at which the policy framework has been right and effectively implemented
ii)To analyze whether the policies have been properly prioritized (taking account of critical importance of the issues in terms of development impact and resource availability)
iii)To investigate on whether or not economic growth in Zanzibar is a real phenomenon?
iv)If it is real, to what extent has it benefited (Zanzibaris particularly) the poor? The Civil Servants? The Public Servants?
v)To provide reasons of why growth has not translated into corresponding or expected poverty reduction and welfare improvement?
vi)Recommend on potential strategic interventions to address this discrepancy?
1.3.3Study Questions
Various economic reports indicate Zanzibar economy has registered some growth since early 2000s with sector growth varying from the highest in few sectors such as Tourism and Trade and low in sectors like agriculture, much as the latter is the largest in terms of supporting livelihoods and generation of employment especially in the rural. This phenomenon raises some critical questions:
i)Is economic growth in Zanzibar real phenomenon?
ii)If it is real, to what extent has it benefited Zanzibaris, particularly the poor?
iii)If growth has not benefited the poor, which implies that there is a mismatch between Growth and poverty reduction, then where and why does this mismatch emerge?
iv)Where does the mismatch originate?
v)What should be done to rectify the situation?
1.4Significance of the Study
In order to evaluate whether efforts to reduce poverty and improve human development through growth perspectives is bearing fruits in terms of growth benefits to people’s development or there is existence of a mismatch between growth and reduction of poverty; the existing situation was assessed, comparing it to the past and usedthe findings to provide recommendations for the future.
This study is of paramount importance mainly because of the multidimensional nature of poverty and its measurements. In addition to the income measurements; the study has considered freedom of choice, democracy and social benefits arising from social investments as pillars of pro-poor growth and poverty reduction because of their linkages to inequalities that may be arising from inequity in planning, execution and benefits distribution chains.
1.5Organization of the Study
The study has been divided into three major sections; Introduction, theoretical and practical aspects. As a consequence, the structure of report starts with introduction where background information of the study is provided followed by section two on review of various theoretical and empirical works on growth and poverty measurements. The third section predominantly discusses major findings with regard to the mismatch of growth and poverty reduction in Zanzibar and the last part presents conclusions and recommendations. To provide additional information to interested readers, appendices have been added on the performance of Zanzibar vis-à-vis MDG, and also results of the survey done. Despite importance of all responses in the latter, the study scope does not allow to present their extensive discussion.
1.6Methodology
A comprehensive desk review and assessment of MKUZA and related studies such as HDR was done. The scope covered several pre MKUZA studies with concentration on post MKUZA period.
Nature and Approach of the Study
In addition to the desk review shown in the scope of the assignment, there was a combined exercise with other methods such as analytical assessment, consultations, and Focus Group Discussions (FGDs). The analytic study included further analysis on MKUZA - Annual Implementation Reports, MKUZA Monitoring outputs and preliminary findings from the draft ZHDR 2009, HBS 2009 and other documented literature.
For the purpose of clarity on various data and information, key stakeholders were consulted through interview discussions with government officers from institutions such as the Ministry of MoFEA, MALE, ZIPA and BoT; focused group discussions with cross sector representatives and recording and analyzing responses from sampled survey respondents done through a simple questionnaire. Analytical draft reports at various stages, basing on disaggregated data and information by age, education, gender, size, capacity and geographical areas, were presented to workshops for more synthesis and opinion before final incorporations to the report. All documents reviewed are listed in the list of references.
In executing the assignment, the division of labor was based on equal distribution of responsibilities amongst the consultants where two Co-consultants together acted as focal point persons in terms of ensuring the quality of work, coordination and submission of the inception, draft and the final reports. The duo were assisted by one assistant from MOFEA who was responsible for making follow ups on the progress of the assignment, collecting the required documentation within various offices in the Zanzibar, arranging for focused group discussions, arranging for workshops and making the appointments with various individuals with the view of gearing the assignment in a participatory and consultative manner. The MOFEA was responsible for overseeing and steering the whole process of the study from commencement to the end.
2REVIEW OF LITERATURE
2.1Theoretical and Empirical Perspective
The review has been divided into two aspects; a theoretical one, which covers definition and measurement of poverty as well as relationship between growth and poverty reduction. This is complemented by an overview of Zanzibar macroeconomic policy framework.
2.1.1Definitions of Poverty
The concept of poverty is much broader than lack of income as it includes deficiencies in terms of assets, health, life expectancy, education, empowerment, and other social indicators. However, the quantification of the non-income attributes of poverty is much more difficult than the quantification of income poverty. Basing on this approach, UNDP has produced poverty measures that are based on a broader definition of poverty, basing on a strong correlation between trends in income poverty and non-income measures of poverty.
A key distinction can be made between relative and absolute measures of poverty. The former refers to the proportion of the population below a certain relative income level and is insensitive to trends in real income over time if the income distribution is constant. The latter refers to the proportion of the population with real income below a certain level and it will fall over time if real income increases and the income distribution is unchanged. The literature on cross-national trends of poverty in developed countries is largely based on the relative poverty concept, generally defined as one-half median equivalent after-tax household income.
In contrast, the literature on poverty in developing countries generally uses the absolute poverty concept, which one can argue is more relevant in poor countries where many people are close to the physiological minimum needed for survival. Absolute poverty is defined as the proportion of the population living on one or two U.S. dollars per day. The World Bank in particular has popularized this notion of poverty.
A second measure of poverty used by some researchers on poverty trends in developing countries is the share of income going to the bottom quintile of the population, and the rate of growth of the income of this quintile relative to average income (Dollar and Kraay, 2001). This is more a relative concept of poverty than an absolute concept.
2.1.2Measurement of Poverty
Griffin (2003) provides a good overview of poverty measurement issues.The two most frequent ways to measure poverty in the literature are the poverty head count and the poverty gap. The first measure is one of incidence. It is the ratio of the people falling below the poverty threshold over total population. The other one is the poverty gap, which is a measure of the depth of poverty. It is equal to the difference between the poverty line and the average income of the poor (those who fall below the poverty line), divided by the poverty line. It represents the percentage rise in income that is needed to lift a person out of poverty on average. But to use these measures of poverty which are based on a lack of money income, the unit of observation, the type of income and the poverty threshold have to be defined.
The household is typically the unit of observation. An obvious problem with using this unit is its variable size. For an equal income, members of a larger household will probably have a lower standard of living. For this reason, income has to be divided by the number of persons in the household. This yields household income per capita. In developed economies, this procedure leads to underestimation due to economies of scale in consumption, as a larger household needs less income to experience the same standard of living than a smaller household because of the sharing of fixed costs such as consumer durables and living space. This has led economists to develop measures of adult and child equivalents to take into account such economies of scale.
For its poverty studies, the World Bank has defined the poverty threshold as an income of one dollar a day per individual in base year prices, based on purchasing power parities (PPP)[1]. Nevertheless, the use of PPPs as they are currently constructed is the source of major problems for the measurement of poverty in developing countries. The World Bank also produces a two dollars a day poverty measure.
2.1.3Alternative Measures of Poverty
Poverty measures based on money income have been judged uni-dimensional since the poverty lines are set so as to define the poor as people who do not eat the minimum vital calorie intake. As well, income poverty does not take into account the provision of public goods by the public sector. In 1976, The International Labour Organization proposed a multidimensional measure of poverty based on a variable bundle of goods that should cover the basic needs of an individual as they are defined in each society. And a person remains poor as long as all his or her basic needs are not satisfied. That is to say there are no possibilities of substitution between basic needs.