Perhaps you have repeatedly read on this website the historical role of Zanzibar as a political power house of East Africa. Because of its political dominance, Zanzibar managed to build a strong economy and, at those days, the name was decorated with many superlatives and history making achievements. It was the first in the region to have railways in 1879. The railways headed southwards from Zanzibar town to Chukwani and its two cars were initially pulled by mules. The economy was initially dominated by trade of ivory and slaves but when the trade in human cargo was limited in the early years of the 19th century, Zanzibar retained a large proportion of slaves to work in clove and coconut plantations. Therefore, cloves and copra became the leading commodities for Zanzibar and hence agriculture has been, and is still now, the anchor of its economy.
The economy of the Sultanate of Zanzibar was capital oriented and few people owned a large share of wealth. The govenment collected taxes and levies from businesses and offered some social services to the general public but private entrepreneurs covered most sectors of micro- and macroeconomy. The architect of the economic system during the era of Sultan Sayyid Said and his sons was Tharia Topan, an Asian businessman from Kuchi in Northwest India. He supervised tax collection as well as the task of building the Zanzibar's Stone Town. The clove dominated economy was largely made of the plantation owners (mainly Arabs and Shirazis) and Indians who acted as financial brockers and specialists in marketing. The latter had an upper hand on the importation of much needed consumer commodities obtained cheaply from India.
The British colonial administration did not significantly change the structure of the economy but assisted the Sultan in maintaining his rule on the islands of Zanzibar and Pemba. They modelled the government more or less following that of Britain with departments such as education and agriculture being more visible than during the early periods. They also encouraged the development of the commodity associations such as the Clove Growers Association (CGA) at the expense of Indian dominated agencies. The consequences of such ethnic based and capitalistic type of economy was the increase in income unequalities, uneven land distribution, and the tendency to have more social services such as roads, health centres, schools and employment opportunities in areas where cash crops or other capital goods were produced.
Zanzibar economy continued to grow for the greater period of the colonial times but, as a capitalistic system lacking a concrete social policy, it kept many of its citizens living under absolute poverty and impoverishment. The revolution of 1964 attempted to reverse the negative trends by offering free education, free health care and providing farming land to all the people regardless of their ethnic identity or social status. However, the new socialist policies of the post-colonial government has not lived to the expectations.
The government that confiscated private property worth millions of dollars and replaced private entrepreneurs with inefficient and corrupt public institutions has ditched Zanzibar into a hot poverty bowl. Until early in the 70s, Zanzibar was the leading producer of cloves in the world and the country had accumulated enough foreign currency reserves. Through the attitude of restricting democracy, disregarding human rights and ruling by decree, the Revolutionary Government of Zanzibar (RGZ) or as known in Swahili, Serikali ya Mapinduzi Zanzibar (SMZ), completely halted Zanzibar's development drive.
Zanzibar enjoyed years of solid economy but the honeymoon is now over! With the decline in clove production, rising population growth and corruption, Zanzibar's economy is in deep trouble. Efforts to find an alternative to clove industry that could save her ailing economy has been, hitherto, met with little success. Trade and tourism are thought to be the two competing alternatives but the absence of democracy, lack of good governance, and political instabilities have cripled Zanzibar's development ambitions and brought the economy to a standstill. Currently, the government has come up with the Zanzibar Poverty Reduction Plan (ZPRP), a project that is more of a donor platform than a real substance on the ground.