By 
Zanzibar’s legacy tourism sector risks being undermined by lease revocations and failure by authorities to honour land leases crucial to the development of luxury resorts which are key to the Island’s economic mainstay, new evidence has revealed.
Tourism is the backbone of Zanzibar’s economy, accounting for up to 30% of the GDP of the semi-autonomous state, and driving major foreign exchange earnings and employment.
Zanzibar, a semi-autonomous region does not exercise state sovereignty in foreign affairs, except under the Union government with mainland Tanzania.
According to official figures, about 918, 000 international tourists visited Tanzania last year, making the Island one of the most popular tourist destinations on the continent.
However, Zanzibar’s tourism investment climate risks being undermined by lease revocations and policy uncertainty adding an undesirable factor threatening to reverse recent gains in the crucial sector.
There are rising concerns about increasing cases of expropriation of assets owned by foreign investors with top level government officials being accused of being behind the grabs that especially targets high valued assets.
At least two large-scale disputes between Zanzibari authorities and global tourism developers have emerged, casting a negative light on the growth prospects of the sector.
In 2023, British developer Pennyroyal Limited sued Tanzania at the International Centre for Settlement of Investment Disputes (ICSID), seeking over US $1bn in damages following the termination of their land lease for the $1.6bn Blue Amber Resort in Matemwe, Zanzibar with the land allegedly to have been transferred to other investors in unexplained circumstance.
Pennyroyal, partly owned by a Mauritanian investor, claimed it had spent US $55m on preliminary development of the resort before being kicked out of the project where it had planned a private airport, underwater nightclub, and thousands of luxury villas on the 411-hectare site.
The case is pending at the ICSID where it was scheduled for preliminary procedural matters last April after two previous failed attempts by the government to reach for an out-of-court settlement with the investors who acquired a Strategic Investment Licence for the project in 2014.
The latest addition to the growing list of disputes between Zanzibar and developers over lease revocations is Opulent, a British developer has also accused authorities of undermining a planned luxury resort without due process by the luxury property developer.
According to official court documents, Opulent is facing possible revocation of its 99-year land lease for 26 hectares earmarked for their real estate investment.
Opulent and its main shareholder, Al-Karim Bashir Hakamali Nathoo, are protesting the possible revocation of the 2016 licence issued for its Pongwe Zanzibar project in Unguja which was cancelled without notice.
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The complainants say this happened despite the project retaining a valid Zanzibar Investment Promotion Agency – ZIPA – certificate and build permit.
Last April, Opulent lawyers, Fladgate Attorneys, filed a formal notice of dispute to the ministry of lands and Zanzibari Attorney General Hamza Johari, accusing Zanzibar of a gross breach of the investment promotion and protection agreement between the UK and Tanzania.
At the centre of the dispute is Opulent’s land lease document.
“The original lease title document was deposited with Bank of Baroda as security,” Fladgate said in its submission, adding that Bank of Baroda duly registered its charge in Zanzibar, which remains valid and subsisting.
“The bank subsequently informed the Investor that the original lease document has been misplaced. A replacement title was requested from the ministry of lands but has not been issued to date,” the claim stated.
In the Pongwe Zanzibar project, attempts to get a duplicate lease title, coupled with the then-global financial crisis, and the Covid-19 pandemic significantly frustrated the project’s development timelines.
Despite the administrative hiccups, Opulent has continued to mobilise for the project rollout having carried out substantial works at the project site while keeping in close contact and providing progress briefings to government authorities, including relevant Zanzibar ministers.
Opulent, in the document, says ZIPA’s approved project kick-off date of January 2026 wasn’t respected, adding that this forced the minority shareholders based in the United Arab Emirates to seek $700,000 in compensation in a Dubai court.
Should Opulent and authorities at the Island fail to agree, the complainant could refer the matter to ICSID, making it the latest case to be referred to the World Bank-affiliated dispute resolution institution amidst growing concern among international investors.
Notwithstanding the current dispute, Opulent says it has enjoyed an excellent and longstanding relationship with the governments of Tanzania and Zanzibar and through its investments, it has contributed significantly to tourism development, job creation and community initiatives, delivering meaningful social and economic benefits.
Marriott, which says it has no stake in the Pongwe project, has major franchise investments in the Tanzanian tourism circuit, with properties such as the Beach Resort in Nungwi, Hotel and Conference Centre in Stone Town, Beit al Salam Boutique Hotel (also in Stone Town), Delta Hotel by Marriott in Dar es Salaam, Element by West in a Marriott Brand Hotel in Dar es Salaam, Marriott Brand Lodge near Ngorongoro, and a Marriott Brand Lodge under construction in Manyara and the Serengeti National Park.
Flagging unity between Zanzibar and mainland Tanzania.
The Opulent and Pennyroyal disputes have all occurred under Zanzibar President Hussein Mwinyi’s watch with some foreign investors claiming these and similar actions amount to a growing arbitrary targeting of their prime beach assets by influential individuals within, or close to the government leadership.
Being a semi-autonomous state, aggrieved foreign investors can only sue Zanzibar through the mainland Tanzania.
These arbitral land grabs come at a time when the Tanzania-Zanzibar union tensions are deepening ahead of 2028 constitution review which could impact the 62-year old Union.
Underlying political, cultural and economic tensions have historically characterised the relations between the people living on both sides of the union, but heated arguments in favour or against the 62-year-old union spilled over onto social media, while MPs, opposition ranks and legal experts also weighed in, some criticising the statements as divisive.
Recent arguments have opened old wounds regarding the union of mainland Tanzania and Zanzibar, signalling fault-lines that could redefine the government structure in the impending constitutional review process in 2028.
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