In Zanzibar, the status of SOEs is not as satisfactory as other countries. There has been a countrywide outcry on the performance of SOEs. The purpose of this study therefore, was to examine the governance and management of SOEs, highlight some benefits and challenges as well as propose a model for effective performance. Following the reviews of various literature and government documents, the study on hand has found that the governance of SOEs needs close revision regarding their management structure as there are roles conflicts between the top bureaucrats; the study also found that absence of SOEs policy has been a major bottleneck for the SOEs to perform at a reasonable level as no proper guidelines which direct the SOEs where to go and what to achieve in a specific time period. Furthermore, the study has found that the overstaffing of SOEs in one way or another puts pressure to the management to attain its intended goals resulting to low contribution in the country’s economy. The study recommends that SOEs need to be creative and innovative in their undertakings as they have to undertake diversification of their products in order to attract foreign markets significantly. It is also suggested that proper SOEs policy needs to be made in order to give proper directions to the SOEs so that the goal and objectives of their setup can be successfully attained.