mkuza financing and strategic allocation of … · resource allocation into those areas that...

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REVOLUTIONARY GOVERNMENT OF ZANZIBAR

MKUZA FINANCING AND STRATEGIC ALLOCATION OF

RESOURCES INTO AREAS THAT SUPPORT PRO-POOR

GROWTH

Draft Report

Prepared by

Deograsias P. Mushi

Salum S. Ali

Iddi Salum Haji

January 2010

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Resource Allocation and Strategic Financing of MKUZA January 2010

Table of Contents

1. INTRODUCTION...................................................................................................................... 3

1.1 BACKGROUND ......................................................................................................................... 3 1.2 OBJECTIVE OF THE REPORT ................................................................................................... 4 1.3 APPROACH AND METHODOLOGY ........................................................................................... 4

2. ANALYSIS OF THE GENERAL BUDGETARY RESOURCES, ALLOCATION

AND PUBLIC EXPENDITURE FOR THE IMPLEMENTATION OF MKUZA ............. 5

2.1 ISSUES, IMPLICATIONS AND RECOMMENDATIONS .............................................................. 5

3. ANALYSIS OF ALLOCATION OF RESOURCES AND ACTUAL EXPENDITURE BY MKUZA CLUSTERS AND SPECIFIC INTERVENTIONS ......... 8

3.1 RESOURCE ALLOCATION TO MKUZA CLUSTERS: ISSUES AND RECOMMENDATIONS...... 8 3.2 RESOURCE ALLOCATION TO MKUZA SECTORS: ISSUES AND RECOMMENDATIONS ..... 10

3.2.1 Allocation of Resources within MoEVT ........................................ 11

Community contributions to the Education sector .................................... 14

The impact of the spending on the Education sector ................................ 14

3.2.2 Allocation of Resources in the MoHSW ....................................... 15

The impact of the spending on the Health sector ..................................... 19

4. THE CONTRIBUTION OF THE PRIVATE SECTOR IN PUBLIC SOCIAL

SERVICE PROVISION AND PROSPECTS FOR PUBLIC-PRIVATE PARTNERSHIP IN ZANZIBAR ................................................................................................ 19

5. EMERGING GENERAL ISSUES AND SUMMARY OF RECOMMENDATIONS 21

REFERENCES ................................................................................................................................... 23



1. Introduction

One crucial aspect of MKUZA financing is strategic alignment of budgetary and other

resource allocations into the clusters and the strategic interventions of MKUZA by

reflecting on its general and specific goals. A critical issue in the process is mainstreaming

resource allocation into those areas that support pro poor growth. In this regard, the

MKUZA Implementation Monitoring Secretariat determined to commission a study, of

which this document is a draft report, with a view of determining a better and an effective

strategic allocation of resources to MKUZA. The report is organized to give a brief

background to MKUZA Strategy, an analysis and discussion of the findings of the study on

financing of MKUZA, emerging issues and implications, and a summary of

recommendations.

1.1 Background

The second generation Strategy for Growth and Poverty Reduction for Zanzibar (ZSGRP)

or MKUZA was launched in January 2007. The strategy constitutes the continuing effort by

the Revolutionary Government of Zanzibar to ensure the attainment of sustainable growth

that will reduce both the income and non-income poverty to the majority of Zanzibaris. It

is thus a part of the strategies to implement the long term development plan, the Vision

2020. The ZSGRP comes as the second generation of the first three-year Zanzibar Poverty

Reduction Plan (ZPRP) that was launched in 2002. The ZPRP recorded significant

achievements; the challenges encountered during its implementation have been taken as

strength towards development of the second generation strategy, MKUZA, which has

generated a strong agenda aiming at sustained broad-based growth whilst emphasizing

equity and good governance.

MKUZA has three but not mutually exclusive clusters for growth and poverty reduction

outcomes. These are (i) Growth and Reduction of Income Poverty (ii) Social Services and

Well-being, and (iii) Good Governance and National Unity. Each cluster contains key

issues, a defined broad outcome, goals, key strategic interventions and lead actors to

coordinate implementation.

MKUZA offers recommendations cum interventions on how the Government, the Non

State Actors including Development Partners, the Private Sector, Civil Society

Organizations and the Community can engage their actions and approaches to

significantly enhance economic growth and thus poverty reduction. The ultimate objective

is to achieve high standards of social well being for all the citizens of Zanzibar.

Implementation of MKUZA entails aligning sector strategies, programs and projects and

Local Government plans through the Medium Term Expenditure Frameworks. In addition,

efforts have been made to align various systems, processes, reforms, and programs with

MKUZA. For example, with regard to resource mobilization, several instruments including



the Zanzibar Budgetary Allocation System (ZBAS) have been developed to align

budgetary allocations with MKUZA interventions.

The costing of MKUZA in 2007/2008 indicated that Cluster One (Growth and Reduction of

Income Poverty) would need US$ 232.7m in 2008; US$ 226.5m (2009); and US$ 233.9m

in 2010. Analogously, Cluster II (Health, Education, and Water/Sanitation) would need a

total of US$ 625.9m. The implementation performance trend so far shows that 66% of

MKUZA development expenditure went to Cluster I; 28.5% to Cluster II, and 5.4% to

Cluster III.

The main sources of revenue for financing MKUZA have largely been domestic which

constitute about two thirds of the total budgetary financing. External sources of finance

have remained to be one third of the total budgetary financing. The foreign financing has

been channeled through various modalities, including Government Budget Support (GBS)

– the most dominant and the biggest, project support, etc. Efforts to reduce this

dependency have included measures to increase domestic resource mobilization (tax and

non-tax revenues) as well as community contribution; and of late, the Public-Private

Partnerships (PPP) has been sought as one of the important sources of financing.

A crucial aspect of MKUZA financing, as indicated earlier is strategic alignment of

budgetary and other resources into the clusters and the strategic interventions of MKUZA

by reflecting on its general and specific goals. And as also observed earlier, one critical

issue is mainstreaming resource allocation into those areas that support pro poor growth

– and thus impact simultaneously and directly on growth and poverty. This requires a

continuous detailed assessment of resource allocation and the extent of strategic

allocation into MKUZA Clusters and interventions – the subject matter of this report.

1.2 Objective of the Report

The overall objective of this report is to assess the financing of MKUZA and the extent to

which resource allocations are aligned to MKUZA, especially allocation into areas that

support pro-poor growth. This entails assessment of the overall and specific budgetary

allocation to MKUZA Clusters and interventions, including the extent to which these

resources reach lower levels – communities in particular. The assessment includes the

role played by the private sector through the PPP arrangement, and community

contributions to MKUZA.

1.3 Approach and Methodology

Preparation of this report involved general and specific approach focusing on the scope of

the work as outlined in the terms of reference; this was to ensure that each item of the

scope of work is adequately addressed and the objective of the study is achieved. Desk

work reviews constituted the main task in the implementation of the assignment. This

involved going through public expenditure reports and all the relevant documents relating



to plans and performance of MKUZA financing as obtained from the various government

Ministries and Departments and a few other sources. Thus, the main source of information

and data were published and unpublished reports as cited in the relevant sections of this

report.

In addition, the study team made field visits in selected service outlets in Zanzibar as

follows: Unguja: Kandwi, Chaani, Gamba, Mkokotoni, Pale, Kizimkazi, Makunduchi, Paje,

and Bwejuu; and Pemba: Vikunguni, Kiuyu Mbuyuni, Kiuyu Maziwa, Ngombe, Mgwiye and

Micheweni Urban. The objective of the field visits was to assess the extent to which

services are available and accessible – a proxy measure of resources reaching community

level; and also to establish the extent to which communities contribute resources to

complement government efforts.

2. Analysis of the General Budgetary Resources, Allocation and Public Expenditure for the Implementation of MKUZA

Ideally, this section presents an assessment of the trends of allocation of financial

resources generally to the MKUZA clusters, and specifically to the interventions of MKUZA

particularly those areas that by design or default support pro poor growth. We would want

to establish the absolute and relative allocations to the MKUZA interventions. This

involves tracking budgetary and non budgetary allocations and expenditures in various

public institutions that are implementing MKUZA; basically covering the period 2007/08,

2008/09 and 2009/10. The analysis shows the composition of the sources of financing and

the strategic allocations to the major clusters and interventions of MKUZA and potential

beneficiaries therein. The presentation is organized to point out the observed issues and

therein the evidence and implication on the attainment of the objectives of MKUZA.

2.1 Issues, Implications and Recommendations

I. Budget growth is somehow aligned to growth of domestic revenue

Table 1 provides analysis of variability in resource allocation for financing public

expenditure in Zanzibar. Notwithstanding the current dependency on external resources

of about one third of the total budget, it is observed that growth of the government

budget of about 24 percent somehow matches the growth of domestic revenue that

averaged 24.7 percent for the past two years. By implication, growth in domestic revenue

mobilization has helped to hold constant the ratio of external budget dependency

although public spending has been increasing throughout. This records a credit for good

tax policy and effort in Zanzibar. However, as we indicate later in this section, the trend of

the flow of external resources has not been as smooth as expected.



Table 1: Analysis of Variability in Resource Allocation for Financing Public Expenditure in

Zanzibar

2006/07 2007/08 2008/09 2009/10

Total Domestic Revenue

89,629,586,532 110,652,537,776 139,561,305,544 58,804,953,905(up to November)

Domestic Revenue Growth (%)

23.5 26 -

Government Budget 214,801,618,000 266,942,535,000 331,234,881,000 410,255,000,000

% growth of government budget

24.3 24.1 23.9

Actual Government Expenditure as a % of the total budget

82.7 67.1 70.2 N/A

MKUZA Costing* (000,000)

504,960 523,800 554,040 N/A

Foreign sources

(i)Expected (Tshs)

156,305,000,000 173,751,83 5,000 199,188,000,000 N/A

(ii) Actual (Tshs)

63,762,352,402 47,122,646,239 15,517,128,414 ( up

to October)

N/A

(ii) As a % of (i)

41 27.12 7.8 N/A

* The figures do not include costing for Cluster III

N/A = Not available/applicable

II. Actual expenditure falls short of budget by a big margin

It is observed from Table 1 that actual expenditure by the government has averaged 73

percent, indicating that expenditure falls short of budget by 27%. For example, in the

financial year 2008/2009, it was only 70% of the total budget that was realized as actual

expenditure – this is a resource gap that challenges attainment of budgetary objectives in

Zanzibar.

Recommendation: Align government budget with the actual resource flows to the public sector

By either asking Development Partners to honour their commitments or to be concrete in their

kind support to the development of Zanzibar. Second, improve government revenue prediction

in Zanzibar by outsourcing expertise in the short term and more training in the long term.

III. Actual flow of external resources is far below the corresponding commitments

We observe further in Table 1 that actual external financing has never exceeded 50% of

the total commitments from Development Partners for the past three years – the trend is

generally worsening with time. This constitutes the major source of volatility in the public

sector actual spending versus budget commitments in Zanzibar. Much of the external

resources are usually used to finance development expenditure which is directly linked to

MKUZA implementation and attainment. By implication then, attainment of the objectives

and goals of MKUZA will largely depend on the trend of the inflow of external resources.



Recommendation: Improve the flow and reliability of external support by asking

Development Partners to be more concrete to their budget support to Zanzibar

IV. Annual cost of full implementation of MKUZA is not affordable to Zanzibar

Table 1 shows further that the annual costs of the implementation of MKUZA is slightly

more than half a trillion excluding costs for cluster three; and also more than twice the

annual total government spending. Attainment of the objectives of MKUZA sounds

unrealistic given that the total annual government domestic revenue is less than 20% of

the total estimated annual costs of implementation of the strategy. By implication, more

external sources of finance are necessary to achieve the objectives of MKUZA because the

strategy is too ambitious as compared to the available resource envelop.

Recommendation: Mobilize more external and domestic budgetary resources for

Implementation of MKUZA. Prioritize items to be implemented every fiscal year within the

MKUZA framework and the actual available resource envelop.

V. Actual development expenditure for MKUZA is far below budgetary commitments

Table 2 shows development budget for MKUZA and the actual spending on the same for

the period 2007/08 through 2009/2010. Actual development expenditure for MKUZA for

the period hardly exceeds 50% of the budgetary commitments. By large, the observed

resource gap is a limiting factor to the implementation of MKUZA.

Table 2: Performance of the development budget for MKUZA - Summary

Development Budget 2007/08 2008/09

2009/2010

Amount budgeted

135,646,424,000

376,824,249.00

239,913,000,000.00

Actual development expenditure

73,906,404,402

134,993,724.00 31,785,651,414.00

Actual expenditure as a % of the budget

54.5 35.8 13.2% (by October 2009)

We observe too sources of underfunding for MKUZA; one is the general annual budget

ceiling for each sector, as issued by the Ministry of Finance and Economic Affairs, and may

also involve monthly limits; the second is the resultant underfunding that is generated by

the difference between the approved budget and actual disbursement of funds. The latter

introduces reprioritization of spending in order to accommodate the resource gaps, and

thus may potentially be misaligned with the original budget priorities.



Recommendation: Ensure that the Government sources of finance for development

projects are concrete and financial support committed for development by the Development

Partners is fully realizable.

3. Analysis of Allocation of Resources and Actual Expenditure by

MKUZA Clusters and Specific Interventions

3.1 Resource Allocation to MKUZA Clusters: Issues and Recommendations

Tables 3a – c provide an analysis of financial commitments and actual development

expenditure for the implementation of MKUZA for the period 2007/08 – 2009/10. A

number of issues and observations with regard to the financing of the implementation of

MKUZA emerge from the three tables as we discuss next.

I. Development budget for MKUZA is too much dependent on external sources which

are not smoothly realizable/predictable

It is observed from Table 3 that more than eighty percent of the development budget is

from external sources which are not smoothly predictable and realizable. Although small,

government contributions to the development expenditure have been more realizable

than external sources.

Recommendation: Reduce dependency of the development budget on external resources by

Allocating more domestic resources to the MKUZA development budget.

II. The actual development expenditure for MKUZA sectors is far below the

corresponding budgetary commitments

Table 3b shows that in 2008/09 the actual development expenditure for the three clusters

of MKUZA was 35.8% of the total budget commitment. This is observed to be too low

compared to the actual annual costing of MKUZA. The source of such an underfunding, as

underscored throughout this report, is mainly the external support which is not

predictable or smoothly realizable.

Recommendation: Ensure that financial commitments from external sources for MKUZA

implementation are reliable and realizable to avoid underfunding and reprioritization



Table 3a-c: Analysis of development financial commitments to MKUZA clusters in FY 2007/2008 - 2009/10

(a) 2007/08

Source of Funds

CLUSTER Total

I II III Budget Actual Budget Actual Budget Actual Budget (000

Tshs) % share

% of the total financial commitment

66.1 - 28.5 - 5.4 -

135,646,424

100

% of SMZ contribution 9 - 13 - 47 - 16,277,570.88 12

% of External sources 91 - 87 - 53 - 119,368,853.12 88

(b) 2008/09

Source of Funds

CLUSTER Total

I II III

Budget Actual Budget Actual Budget Actual Budget (000

Tshs) Budget %

share Actual (000

Tshs)

Actual as a % of

budget


32.8 29.6 16.2 19.2 51 51.2 376,824,249.00 134,993,724.00 35.8

% of SMZ contribution

7.5 28.5 9.9 18.1 9.6 26.8 33,766,000.00 9 34,579,358.00 102.4

% of External sources

92.5 71.5 90.1 81.9 90.4 73.2 343,058,249.00 91 100,414,366.00 29.3

(c) 2009/2010

Source of Funds CLUSTER Total

I II III Budget Actual Budget Actual Budget Actual Budget (000

Tshs) % share


60.7 33.5 5.7 239,912,883.00

% of SMZ contribution

16.3 12 53 40,725,105.00 17

% of External sources

83.7 88 46.8 199,187,778.00 83



III. Additional financial resources for strategic implementation of the Cluster One

objectives and goals are necessary in order to enhance achievement of the rest of

MKUZA objectives and goals

Growth and reduction of income poverty is a pre-requisite for sustainable availability and

access to social services, reduced morbidity, improved nutritional and calorific intake,

reduced mortality, improved learning capacities, etc. Accordingly, more resources for

implementation of cluster one of MKUZA is necessary to speed up growth and reduction of

poverty. For example, in 2008/09 priority by spending was Cluster III, and in 2009/10

priority by budget commitment is cluster I (Tables 3b & c).

Recommendation: Prioritize and increase actual allocation of resources going to the

implementation of Cluster One for strategic attainment of the other objectives and

goals of MKUZA

3.2 Resource Allocation to MKUZA Sectors: Issues and Recommendations

I. Priority sector in resource allocation in Zanzibar is Education

The general budgetary allocation of resources to government ministries in Zanzibar is

provided in Table 4. Clearly, the priority sector is Education and Vocational Training

(MoEVT). The Ministry of Finance and Economic Affairs (MoFEA) comes second to the

allocation, and the Ministry of Health and Social Welfare (MoHSW) ranks third in terms of

government budget and spending priorities. Over all, allocation to Ministries favours

Cluster II as the priority in the general budget and actual expenditure – which is a good

and strategic allocation to trigger growth and poverty reduction (Cluster I) in the long

term.

Table 4: GoZ Budget Allocation to Ministries

MDA FY05/06 FY06/07 FY07/08

Budget Expenditure Budget Expenditure Budget Expenditure

Rank % Rank % Rank % Rank % Rank % Rank %

MoEVT 1 25.5 1 27.6 1 25.8 1 23.3 1 26.8 1 28.5

MoFEA 2 10.1 2 11.3 2 9.8 2 10.2 2 11.1 2 8.9

MoHSW 3 8.5 3 9.4 3 8.1 3 8.8 3 8 3 9.3

HoR 4 6.8 4 5.6 4 6.3 4 5.9 4 5.4 4 6.5

MoALE 5 6.1 5 6 5 6.3 5 5.9 5 5.7 5 6.3

Source: PER MoHSW 2008

Recommendation: Continue prioritizing the Education Sector in resource allocation for

long term and sustainable growth and reduction of poverty in Zanzibar.



3.2.1 Allocation of Resources within MoEVT

Analysis of allocation of financial resources within MoEVT, as provided in Table 5 and

Figure 1&2, compares budgeted resources by item of expenditure, actual release of funds

and actual expenditure by category and item of spending in the ministry. Accordingly, the

analysis raised a number of issues as we discussed next and make proposals for further

improvement.

II. Actual expenditure falls short of the sectoral budget by a big margin

In 2007/08 the MoEVT actual expenditure as a percentage of the sectoral budget, as

indicated in Table 5 and Figre 2, was 67 percent. The resource gap was thus 33 percent.

The situation was much better for the previous years as indicated further in Figure 2. The

underfunding varies by items of expenditure leading to reallocation of resources.

Recommendation: Match approved budgets with actual resource availability in the public

sector to avoid reallocation that is potentially associated with outside-budget reprioritization

III. Financial commitments to development expenditure are not binding and thus

difficultly realizable

It is observed from Table 5 that it is only 28% of the budgeted development expenditure

that was finally realized in the financial year 2007/08. Loans were not smoothly accessible

as had been budgeted, which is actually the main source of the short fall. The share of the

development expenditure varied from the budgeted 37% to only 15%; and thus, MoEVT

was not able to implement 72% of the planned development projects in the sector – this

is a profound setback on the implementation of cluster II of MKUZA.

Recommendation: The GoZ and Development Partners will have to find a way of rationalizing

Financial support and commitments in order to institute a more realistic development budget

for MKUZA. Notwithstanding, thanks to DPs for their continued support for the

people of Zanzibar

IV. The current resource allocation in the public sector leaves too little for development

expenditure

Attainment of MKUZA will involve massive investments in the key sectors as indicated in

the costing exercise for the same. Incompatibly, the current allocation cannot afford a big

share for development expenditure. For example, Table 5 shows that actual expenditure

for development in the education sector was 15%. In the previous tables, we also observe

that development expenditure was too small – in 2008/9 the realizable expenditure for



Table 5: Resource Allocation within the Ministry of Education and Vocational Training (MoEVT) in 2007/08

S/N Particulars Budget Actual Expenditure Item share out of

the total actual

expenditure

Budgeted item share out

of the total MoEVT

budget

Actual expenditure on

the item as a share of

the budget on the

Item

Recurrent

1 Salaries & Allowances 21,640,066,000 20,959,681,550 70 49 97

2 Non-wage 1,995,090,000 1,383,000,345.10 4.61 4 69.32

3 Subvention 4,371,000,000 3,020,097,069 10 10 69

Sub Total 28,006,156,000 25,362,778,964 85 63 91

Development

1 GoZ contribution 1,340,000,000 1,289,996,210.50 4 3 96

2 Loans 12,350,000,000 390,061,399.97 1.30 28 3.16

3 Grants/Donations 2,846,610,000 2,955,113,445.95 9.85 6 103.81

Sub Total 16,536,610,000 4,635,171,056.42 15 37 28

Grand Total 44,542,766,000 29,997,950,021 100 100 67

88% 88% 89% 89% 90% 90% 91% 91% 92% 92%

2004/5 2005/6 2006/7 2007/8 Budget Performance 100%

Figure 2: Percentage of budget performance

Source: MoEVT PER 2007/08

Figure1: MoEVT Recurrent Expenditure 2007/08

78%

1% 5%

16%

salaries& allowances Capital Non-wage Institutional contri.



development was only 35% of the budget for development. Clearly, some measures must

be taken to address the situation.

Recommendation: In addition to rationalizing flow of external financial support, the GoZ

should find means of increasing the local share of development expenditure. It may involve

fund mobilization outside the tax system in addition to being prudent in the current allocations

V. Do the funds allocated to the MoEVT reach the targeted communities?

There is no a clear evidence from the Public Expenditure Review Reports for MoEVT that

indicates explicitly how funds are spent at the community level; the reports show general

allocation for educational materials but not the actual purchases or expenditure at the

service outlet level. However, there are two points to observe and discuss to illustrate the

community-level incidence of expenditure of funds allocated to MoEVT. One is further

analysis of Table 5, and second is field work observations and assessment by the study

team of this report.

It is quiet unusual to divert funds for personal emoluments because these are earmarked

for personnel in the respective sector. Development and other charges funds are however

the point of focus. Since most of the school materials are procured centrally, it is fairly

easy to control OC funds in the education sector. But whether or not development funds

reach their target communities is an issue of deeper analysis.

The study team travelled to selected communities in Unguja and Pemba to make

assessment of whether MoEVT and other funds allocated to projects reach communities.

Annex 1 of this report indicates funds reaching communities by different projects in

Micheweni. There is clear evidence that funds allocated through special interventions and

transferred directly to communities reach the target. However, whether the funds are

spent as planned to benefit communities is a different issue that needs auditing.

Nevertheless, the fact that education services are running smoothly despite the normal

problems as observed by other studies is a clear indication that recurrent funds allocated

to the education sector reach communities though reallocation as observed earlier may

lead to reprioritization. But we cannot make the same general conclusion for development

funds; much detailed analysis involving physical auditing is needed.

Recommendation: Carry out expenditure tracking study regularly to establish the

extent to which recurrent and development funds allocated to Ministries and

Government Departments reach grassroots beneficiaries including an assessment of

Whether the Services realized at the service outlets match the funds disbursed.



Community contributions to the Education sector

Cost sharing in education is widely practiced according to MoEVT PER 2007/08. There are

three types of community contributions to the education sector. These are fees and other

financial contributions payable directly to schools, in kind direct contribution to schools in

the form of labour and materials, and household direct expenditure on school materials

and other needs.

The MoEVT PER 2007/08 mentions that primary school pupils are required to pay 3,000

shillings annually, secondary school students pay 5,000 shillings annually and upper

secondary pay 7,000 shillings. The report says further that some schools do not remit

funds collected to the head quarters instead they use the funds at school level. The report

concludes that cost sharing is widely practiced in schools. However, no clear data cum

information are available to elaborate the actual financial resource base attributable to

direct contributions by communities.

In terms of in kind direct contributions in the form of labour, communities have continued

to support government efforts by participating in various construction works in schools.

This includes contribution of materials ranging from construction to learning facilities.

Again data on these contributions are not properly compiled and archived.

At the household level, direct expenditure on school-related materials has continued to be

the main household contribution to the education sector not only in Zanzibar but also in

the mainland Tanzania.

Recommendations:

1. Carry out an assessment of the potential of fees in schools as a source of revenue.

2. Consider fund raising for schools by putting the liability on the respective entire

Community rather than those households with pupils in schools. In this regard, fund raising

Can be a biannual event that may involve different invitees.

3. Community authorities should organize fund raising and other contributions to schools

rather than the schools themselves. Additionally, sensitization for raising such funds or

contributions should be done by local leaders including religious leaders, not the schools.

The impact of the spending on the Education sector

With the onset of MKUZA gross enrolment in basic education has increased from 91.5% in

2004 to 95.7% in 2008. In particular, gross enrolment for boys increased from 92% in

2004 to 94.1% in 2008; and enrolment for girls increased from 91.1% in 2004 to 97.3%



in 2008. Clearly, this is an increasing trend that has seen adult literacy rising to 75.8% by

2008.

Class-pupil ratio has declined from 81 in 2004 to 68.5 in 2008. This is a remarkable

achievement given that enrolment is increasing simultaneously with the improvement of

the learning environment.

The pass rate for basic education improved from a rate of 44.4% in 2004 to 53.9% by

2008. Enrolment in Universities has remarkably increased from a total of 857 students in

2004 to 2,910 in 2008.

Recommendations:

1. Clearly, more effort is needed to further improve enrolment in Schools; in particular, the net

enrolment in basic education should be the focus in this regard. Involvement of communities – Shea,

is deemed crucial to ensure early enrolment in schools

2. The pass rate and thus the transition rate at form two is too low; more effort is

necessary to raise the rate in order to ensure that more Zanzibaris get access to advanced

education, college training and university.

3.2.2 Allocation of Resources in the MoHSW

Analysis of resource allocation in the Health sector is provided in Tables 6 – 10. In

general, budget performance in the MoHSW is much better than that of the Education

sector. Both domestic and external sources have performed well according to the results

indicated in Table 6. However, there are several issues that are clearly observable from

the analysis.

I. Real expenditure in the Health Sector has been increasing with time

Table 6 indicates that real expenditure in the Health sector has been increasing both in

total expenditure and per capita expenditure. In 2005/06, per capita USD expenditure in

the Health sector was USD12.6; by 2007/08, per capita expenditure had reached USD

13.7, which is an indication that more resources have been made available for the Health

sector.

II. Except for the year 2007/08, performance of the Health sector development

budget has been good compared to the performance of the general development

budget

Table 7 shows the breakdown of expenditure into recurrent and development categories.

With an exception of the year 2007/08, the actual development expenditure as a

percentage of the corresponding budget was more than 85%. However, in 2007/08,

actual release of development funds was only 50% of the budgeted resources.



Table 6: Budgetary Allocation and Actual Spending in the Health Sector

Source FY05/06 FY06/07 FY07/08

Budget (1) Expenditure(2)

Share

(2) as % of

(1)


Share

(2) as % of

(1)


Share

(2) as % of (1)

GoZ(Tshs m) 6,108 5,775 34% 95 6,621 6,727 48% 102 9,184 7,967 40% 87

External

Funding(Tshs m)

10,860 65% 7,101 6,997 51% 99 12,318 11,868 59% 96

Cost-sharing(Tshs

m)

107 0.6% 162 1% 166 164 1% 99

Total Tshs(m) 16,742 100% 13,722 13,886 100% 101 21,668 19,999 100% 92

Total Tsh per capita 14,976 11,880 12,022 101 18,157 16,758 92

FX Rate(USD1=Tsh 1,192 1,318 1,221

Total USD(m) 14.1 10.4 10.5 101 17.7 16.4 92

Total USD per capita 12.6 9.0 9.1 101 14.9 13.7 92

Source of Data: MoHSW PER 2007/08

Table 7: Nominal MOHSW spending, FY2005/06 - FY2008/09(Tshs m)

FY2005/06 Budget (1) Expenditure(2)

(2) as % 0f

(1)

FY2006/07

Budget (1) Expenditure (2)

(2) as % 0f

(1)

FY2007/08

Budget (1) Expenditure (2)

(2) as % 0f

(1)

FY2008/09 Budget

Recurrent

Development

6,108 5,775

233 291

95

125

6,351 6,489

270 239

102

86

8,384 7,562

800 405

90

50

9,553

1,550

Total 6,341 6,066 96 6,621 6,727 102 9,184 7,967 87 11,103

% growth 2% 26% 4% 11% 39% 18% 21%

Source of Data: MoHSW PER 2007/08

Table 8: External Funding by Category, FY2006/07-2007/08(Tshs m)

Category

FY2006/07 FY2007/08

Budget

Total %

Expenditure

Total %

Budget

Total %

Expenditure

Total %

Drugs and medical supplies 2,134 30 2,043 29 3,658 30 4,390 37

In-service training 1,181 17 1,383 20 1,097 9 1,535 13

Other running costs(stationery, minor repair) 563 8 708 10 692 6 1,332 11

Staff costs(salary ,top-ups, allowances etc) 1,201 17 748 11 1,245 10 1,348 11

Transport and fuel 287 4 264 4 1,543 13 1,540 13

Total Recurrent Costs 5,366 76 5,146 74 8,235 67 10,146 85

Long-term training 64 1 47 1 678 6 137 1

Other Capital costs 38 1 38 1 27 0 27 0

Physical infrastructure 1,089 15 1,392 20 2,713 22 848 7

Purchase of equipment(including vehicles) 543 8 375 5 666 5 709 6

Total Capital Costs 1,735 24 1,851 26 4,084 33 1,722 15

Total 7,101 100 6,997 100 12,318 100 11,868 100

III. The Health sector financing is too dependent on external sources

It is observed in Table 6 that more than 50% of the total financing in the Health sector

comes from external sources. In fact in 2007/08, the proportion was 59%. Though in

general the flow of external sources is smooth and predictable compared to the general

budget, the observed dependency is too high and unhealthy to sustainable development

of the Health sector in Zanzibar.

IV. About one third of the external resources in the Health sector go to drugs and

medical supplies

Table eight indicates that 80% of the external resources in the Health sector are used to

finance recurrent expenditure of which the main item is drugs and medical supplies. It is

only about 20% of the external resources which is used for development in the sector. As

observed earlier, the sector is too much dependent on external financing; and even more

worse, much of the recurrent expenditure in the sector is externally financed.

Recommendation: Mobilize more domestic resources in the long term to address external

dependency in the Health sector. This can involve establishment of local basket fund for the

Health sector similar to the Road Fund. This could include such funds at various levels.

For example sale of crops and small businesses could include special fee/contribution to a

locally agreeable health fund

V. Much of the spending in the health sector outside the MoHSW happens at Mnazi

Mmoja National Referral Hospital

The National referral hospital, Mnazi Mmoja, takes the lion share of the spending in the

Health sector outside the MoHSW as indicated in Table 9 below.

Table 9: Estimated allocations for running of health facilities, FY07/08(Tsh m)

FY2007/08 Personal Emoluments (PE) Actual

Other Charges (OC) Actual

Total Percentage of the total allocation

OC as a % of category of facilities allocations

PHCU 1,095.6 13.4 1,109.0 23 1

PHCC 388.8 50.9 448.7 9 11

DH 930.7 27.1 957.8 20 3

MMH 2,205.8 71.6 2,277.4 48 3

Total 4,620.9 171.9 4,792.8 100 4 Source of Data: MoHSW PER 2007/08

The national referral hospital is fairly reachable by all the people of Zanzibar at a cost, but

not so for many people during an emergency. As such, decentralization of the services will

make them more accessible and affordable by all the people. In this regard, deliberate

effort should be taken to improve district hospitals and primary health facilities – even a

selected few ones to begin with.

Recommendation: Improve selected district and primary health facilities so that

resource allocation and thus services in the Health sector reach more people at a

close distance.

VI. The OC allocation is too small and thus limits actual and discretional spending by

health facilities

Table 9 shows further that OC allocations to health facilities is only about one digit

percentage of the total allocation for each level of facilities. This is too small compared to

expenditure needs of health facilities. In addition to cost sharing, health facilities should

be given more OC facilities to cover expenditure at the facility level – this may include

regular rehabilitation, addressing shortages of supplies, cleaning and gardening, food for

patients, fuel, etc.

VII. Cost sharing contributes about 1% of the total resource envelop

Cost sharing contributes about 1% of the total health sector financing and about 50% of

the total OC for health facilities. Viewed from the central level, cost sharing appears to

have insignificant contribution to the total resources available for the Health sector in

Zanzibar; but at the facility level. Cost sharing contributes about 50% of the total

expenditure. But also households incur costs in terms of transport cost and purchase of

other medical supplies as part of the expenditure on health.

Cost sharing makes it possible to introduce effective accountability at the health facility

level because every supply must be fully accounted for and audited. However, critics of

cost sharing have argued that such a system constitutes a barrier to the poor households

to access medical services. A general solution and a long term one will be establishment

of a social insurance system. In the short term however communities may opt to establish

local health basket funds for which contribution is completely independent from the

incomes of patients and their access to services.

Recommendation: Work to establish a social insurance system in the long term; in the

short term sensitize communities to establish community basket health funds.

VIII. The MoHSW takes the lion share of expenditure in the Health system

About 50 percent of the total spending on health in the public sector is done by the

MoHSW (Table 10). This is too much centralization which leaves too little for discretional

expenditure by health facilities. By implication much of the planning is done at the central

level living communities with little say when it comes to expenditure decision. This affects

the extent to which local contributions can be effectively mobilized. Decentralization will

make communities more responsible to the delivery of health services and thus more

willing to contribute for them.

Table 10: Crude expenditure breakdown by category, FY07/08(Tshs m)

Category ZANZIBAR Percentage allocation

Planning 1,056.8 10.7

Preventive 1,052.0 10.6

Curative 2,107.5 21.3

SW & SA 446.2 4.5

Chief Chemist 277.2 2.8

MoHSW 4,939.7 50.0 Source of Data: MoHSW PER 2007/08

IX. Do the funds allocated to the MoHSW reach the targeted communities?

In general the funds allocated to the MoHSW reach communities but those who live close

to the national referral hospital have a better access to quality services than those living

far away. Decentralization is deemed crucial for improved access to health services in

Zanzibar.

However, in terms of availability of services at the grassroots level and services outlets, a

more thorough study is needed to carry out physical assessment and auditing.

The impact of the spending on the Health sector

The impact of the spending in the health sector is outstanding. Majority of people in

Zanzibar have access to health facilities within 15kms. Life expectancy in 2004 ranged

from 53.5 to 58.4 by regions, but by 2008, the range was 55.9 to 60.8.

Other health indicators are also improving. The infant mortality rate had decreased from

75.3 in 1996 to 61 in 2005. Analogously, the under-five mortality rate declined from

107.5 to 101. The MDG evaluation report for Zanzibar shows that with regard to the

targets on reduction of mortality rates, the sector is on track. Needless is therefore to

underscore that the increasing expenditure on health in Zanzibar has impacted positively

on the health of the general population and other health indicators. However, Zanzibar is

still far from the objectives enlisted in its development vision and even much far away

when compared to same achievements elsewhere in Africa and the developed world.

Definitely, more effort is needed.

4. The Contribution of the Private sector in public social service provision and prospects for Public-Private Partnership in

Zanzibar

There is a growing recognition of the importance of the private sector contribution in the

attainment of national objectives in Tanzania. The contribution of the private sector has

taken two forms – the traditional one and a more innovative way – or the so called Public-

Private Partnership.

In the traditional approach, the private sector provides services to those who can afford to

pay – it is a system of pay to get service. This is common in the sectors of education,

health, security services, etc. The private sector plays a big role in this regard. Of the

298,777 total enrolment in basic and lower secondary education in Zanzibar, 15,538

students or 5% are in private schools. Also, of the 277 basic education schools in

Zanzibar, 45 or 16% are private. At the secondary level, the private sector has seven out

of seventy eight schools. Clearly, the contribution of the private sector in the education

sector in Zanzibar is growing though still marginal. One way of increasing the contribution

of the private sector in education services is for the public sector to give incentives that

will attract more investment in education by the private sector. This may include

earmarked land plots for schools, tax incentives, building materials in the form of loans,

etc. There should be specific consideration to benefit the rural population because private

sector services are in most cases urban based.

Recommendation: Consider a package of incentives for the private sector to Increase their

investment in the education sector. This may include earmarked land plots for schools, tax incentives, building materials in the form of loans, etc

In the health sector, of the 225 health facilities in Zanzibar, 82 or 36% are private. As

indicated earlier most of these facilities are found in urban areas, and are mainly primary

health facilities. However, private health facilities constitute an important part of the

health system in Zanzibar. For example, private pharmacies complement public health

facilities which may sometime run out of medical supplies. One critical factor in the health

system is medical staff, which many health facilities in both the public and the private

sector have high demand. One way of complementing the effort of the private health

providers is for the public sector to provide short and long term training to their medical

staff. Once trained, medical doctors will work for Zanzibaris regardless of whether they

are in the public or private sector – the benefits to the public are the same. Also, other

forms of support to the sector like medical equipment would improve provision of health

services by the private sector.

Recommendation: Provide support to private health providers to improve their services.

Consider short and long term training of medical personnel and other forms of support such

as medical equipment deemed necessary for better and reliable services.

In the new approach of engaging the private sector in public service provision, a more

innovative and efficient model has been developed and adopted. This is famously called

Public-Private Partnership – PPP. This may be formally new in Zanzibar but widely

practised in the mainland Tanzania. The PPP involves contractual arrangement between

recognized and registered private institutions/dealers and the public sector with regard to

provision of specified services. The contractual specification includes details of the

services to be provided, payment schedules, supervision, etc. In the mainland Tanzania

the initiative started some years back, and the 2008 impact evaluation indicated a

remarkable improvement in quality and service availability in the areas of security

services, cleaning and gardening services and catering services in public hospitals.

However, the costs of provision for catering escalated but those of the other services did

not. Therefore, it was observed that with careful outsourcing, services in the public sector

could be improved substantially with the same costs or marginal increase. In fact in some

cases the costs went down. The PPP approach makes accountability and supervision fairly

easy and efficient in the public sector. This gives more time to the public sector staff to

deal with policy effectiveness and issues rather than managerial issues and therefore

raising efficiency in the public service delivery. Obviously, the PPP stands to be beneficial

to Zanzibar if carefully adopted and supervised. This may start with selected services like

cleaning and gardening, catering services for patients, reception services, distribution

services, etc.

Recommendation: Pilot the PPP approach in Zanzibar towards its adoption for improving

Service provision in the public sector. Learn best practices of PPP from the mainland

Tanzania and other countries.

5. Emerging General Issues and Summary of Recommendations

The analysis of resource allocation in the public sector in Zanzibar, as carried out in this

report, has indicated a number of issues and made proposals as recommendation for

improvement towards the attainment of MKUZA objectives. One major issue which has

surfaces throughout the report is resource gap that emanates from internal constraints

and also failure on that of external resources to flow in as expected. In this regard, there

has been always a big gap between the budgeted resources and the actual expenditure.

This has been most problematic and common in development budget and expenditure

leading to too little resources for development and sometimes leading to reallocation and

thus reprioritization within spending units. This compromises smooth implementation of

MKUZA and thus on-schedule impacts and outcomes.

The report has come up with several recommendations that include measures to mobilize

more resources for development expenditure and at the same time ask the Development

Partners to be more concrete to their kind support to Zanzibar.

Community contributions in the form of cost sharing have to be reviewed with a few of

engaging local communities to contribute effectively without compromising the ensured

universal access. For example, it has been mentioned in some reports that students pay

school fees, but there are no clear figures on compliance, the amount collected and

expenditure thereof. This information is important input to making concrete decision on

cost sharing in the education sector. In the health sector, cost sharing contributes just

1% of the total spending of the sector, but forms 50% of OC spending at the facility level.

Looking forward to establish a local basket fund that will culminate into a social insurance

appears to be the way forward for improving community contributions in the health

sector.

The PPP approach for selected services is potentially good for Zanzibar. It will complement

government efforts in service provision and improve efficiency in the sector.

Dependence on external resources has been observed as a major issue in the public

sector financing in Zanzibar. Efforts to reduce it in the long term are necessary for

sustainable provision of good and reliable public services. Economic growth and increased

mobilization of fiscal resources will provide long term solutions to resource gaps and

dependency in Zanzibar. Therefore, investment in cluster one of MKUZA either from

domestic or foreign sources should be encouraged.

The current arrangement for external funding includes budget support, basket funding

and programmes/project support. These modalities are expected to undergo full

assessment in the on-going evaluation of JUST in Zanzibar. However, each of those

approaches has significance depending on the purpose of financing and the targeted

beneficiaries. For example in the Health sector, basket funding, programmes and projects

appear to be common, and they have had a profound impact on the health system in

Zanzibar. However, on the basis of JUST and the general budget support reviews, there

should be an agreeable way forward for the modalities of external financing.

The annual budget ceiling for MDAs in Zanzibar constitutes a challenge to the MKUZA

implementing units in Zanzibar. MDAs have to strive with the limited allocation they get in

relation to what they really need. The government has had to introduce the budget ceiling

approach to make planning more realistic and less tedious by avoiding recasts. However,

the question and a challenge indeed is how the ceilings are determined. This is a crucial

process which should be as participatory by MDAs as possible. Just like the priorities, the

rationale for the ceilings must be elaborative and common knowledge to MDAs as much as

possible.

With regard to the impact of the resource allocation on service provision, the report has

found improving social service provision which to some extent meets the Millennium

Development Goals and partly MKUZA targets. Notwithstanding, more resources and

efforts are needed to achieve full implementation of MKUZA.

References

1. Serikali ya Mapinduzi ya Zanzibar: Wizara ya Elimu na Mafunzo ya Amali,

Hotuba ya Waziri wa Elimu na Mafunzo ya Amali, 2008/2009





4. The Revolutionary Government of Zanzibar: MUKUZA Annual Implementation

report,2007/2008.

5.Serikali ya Mapinduzi ya Zanzibar : Hotuba ya Wizara ya Fedha ya

Uchumi,2008/2009

6. Mkuza Monitoring Master Plan,2007

7. Serikali ya Mapinduzi ya Zanzibar: Hotuba ya Wizara ya Fedha ya

Uchumi,2009/2010

8.Mapitio ya Hali ya Uchumi na Utekelezaji na Mpango wa Maendeleo

Zanzibar,2006/07,2007/08,2008/09/2009/010

9.Serikali ya Mapinduzi ya Zanzibar: Wizara ya Kilimo, Mifugo na Mazingira,

Hotuba ya Makadirio ya Mapato na Matumizi, 2006/07, 2007/08, 2008/09,

2009/2010.

10. .Serikali ya Mapinduzi ya Zanzibar: Wizara ya Maji, Ujenzi, Nishati na Ardhi,

Hotuba ya Makadirio ya Mapato na Matumizi, 2006/07, 2007/08, 2008/09,

2009/2010

11. Serikali ya Mapinduzi ya Zanzibar: Wizara ya Afya na Ustawi na Jamii,

Hotuba ya Makadirio na Mapato na Matumizi, 2006/07, 2007/08, 2008/09,

2009/2010

12. Michel Schaeffer (2009), Strengthening the Budget Preparation Process.

13. Zanzibar Health Sector Public Expenditure Review, 2008

14. Revolutionary Government of Zanzibar: Office of Chief Government

Statisticians, Zanzibar statistical Abstract,2007

15. MKUZA Costing Exercise,2008

16. Revolutionary Government of Zanzibar: Government Budget Guideline,

2008&2009

17. Revolutionary Government of Zanzibar: Office of Chief Government

Statisticians, Social- economic survey,2008

18. Revolutionary Government of Zanzibar: Zanzibar Human Development

Report,2009

19. Revolutionary Government of Zanzibar: Education Sector Public Expenditure

Review, 2009

20. Revolutionary Government of Zanzibar: Zanzibar Strategy for Growth and

Reduction of Poverty ( ZSGRP), 2007

Annex 1: Special allocations to specific interventions

JP5. MICHEWENI INTERVENTIONS

Funds allocation To Implementing patners and Activities for project Period SEPT 2009 TO DEC. 2009

First Trip Second Trip Third Trip TOTAL

Ministry of agriculture,Live stock and

Environment

Beekeeping

21,809,000.00

11,104,400.00

-

32,913,400.00

Irrigation infrustructure

25,000,000.00

26,014,000.00

-

51,014,000.00

Adoptive research for soil and crops

31,590,500.00

4,659,800.00

36,250,300.00

Alternative source of energy for cooking

11,267,000.00

2,085,000.00

13,352,000.00

Promote dairy Goats and Poutry

husbandary

40,883,750.00

14,760,800.00

55,644,550.00

Promote Seaweed and Fish Catch quality

10,420,000.00

9,898,000.00

20,318,000.00

TOTAL

140,970,250.0

0

68,522,000.0

0

-

209,492,250.00

Ministry of eduction and Vocational Training

Construction of Pree-Nursery School 69,041,900.00

34,848,000.00

103,889,900.00

TOTAL

69,041,900.00

34,848,000.0

0

-

103,889,900.00

Ministry of Labour ,Youth women and child

Development

Reduce child labour activities

38,004,400.00

38,004,400.00

TOTAL

-

38,004,400.0

0

-

38,004,400.00

Ministry of Information ,Culture and Sports

-

Raising community awareness,challenge

and opportunities for reducing poverty

23,571,000.00

6,480,300.00

30,051,300.00

TOTAL

23,571,000.00

6,480,300.00

-

30,051,300.00

-

Ministry of health and social Welfare

-

Constructuction of Twin house for service

provider

76,073,522.00

49,694,000.00

125,767,522.00

TOTAL

76,073,522.00

49,694,000.0

0

-

125,767,522.00

-

Ministry of Trade ,Tourism and Investment

-

Increases promotion of Eco-Tourism

9,996,000.00

24,222,100.00

34,218,100.00

TOTAL

9,996,000.00

24,222,100.0

0

-

34,218,100.00

Zanzibar Water Authority

-

Provision of clean and safety Water

81,416,320.00

187,057,000.0

0

TOTAL

81,416,320.00

187,057,000.

00

-

-

-

Ministry of Finance and Economic Affairs -

Project Operational Cost

102,354,600.00

187,532,000.0

0

247,632,000.00

537,518,600.00

TOTAL

102,354,600.0

0

187,532,000.

00

247,632,000.0

0

537,518,600.00

TOTAL INTERVENTIONS

503,423,592.0

0

558,355,400.

00

247,632,000.0

0

1,040,937,672.

00

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