Oman Intensifies Commitment to Zanzibar
Zanzibar may not be top-of-mind as a business destination for most global investors. For the Oman Investment Fund, though, the island is now home to another pivotal infrastructure investment. We estimate that the value of a just-announced tourism-port project could reach $100 million, depending on scope, by the time it is completed over a three-to-five year period.
The arrangement between the Muscat-based sovereign wealth fund and the Government of Zanzibar is limited to a feasibility study at this time. The intent is to look closer at redeveloping the Malindi waterfront into a tourist magnet. Presumably, the effort could include multiple ship berths, a hotel-and-resort component, and even an event center. The culprit for the ambiguous wording of the arrangement is probably the current state of the cruise-line industry, as well as the potential for any UNESCO-related issues. Malindi is part of Stone Town, a World Heritage Site.
The Oman Investment Fund has a natural proclivity to this project, akin to how other sovereign wealth funds profile their investment activity:
Complementarity. The project is an auxiliary component of the large-scale commercial-port project, which Oman is now helping to develop at Mangga Pwani, some 25 kilometers from the historic center. The agreement on that deal was signed in January 2021.
Affinity. The Oman government has been successful at redeveloping the Mutrah Corniche in Muscat as a tourist destination. In addition, there are legacy ties between Oman and Zanzibar. At one point in the mid-1800s, the Sultan of Oman actually moved his capital to Zanzibar.
Diversification. Most of the Gulf sovereign wealth funds are looking to balance domestic investment with offshore activity to brace for weakness in the oil economy. The twist here is that this capital allocation would focus on the real economy, not technology.
Capital Requirement. The Oman Investment Fund is a smaller sovereign wealth entity with near $20 billion in assets. While not as hefty in dimension as those funds in nearby Gulf nations, it does need to put its capital to work in larger deals, not smaller venture opportunities.
The allure for sponsoring a tourism-port project is likely tied to the expectation of strong rebound in discretionary travel in the post-pandemic era. The project also aligns with domestic efforts in Oman to build a sustainable tourism industry.
Zanzibar is technically part of Tanzania, but it is administered as an autonomous region with its own government. The population of Zanzibar is roughly 1.5 million. Tourism is its most important industry, traditionally dominated by Italian arrivals.
Our Vantage Point: With sovereign wealth funds, strategic interests often override strict financial criteria. They put their capital to work patiently, at times in unexpected places.
Learn more at The Citizen (Tanzania)
Image shows waterfront at Stone Town, the historic center of Zanzibar. Credit: Oleksandr at Adobe Stock
