Agreement on the distribution of the assets and liabilities of the East African Community and the opening of the border between Tanzania and Kenya

The three East African Heads of State met at Arusha on 16th. November and reached agreement on the division of the assets and liabilities of the former East African Community. This meeting and the agreement which followed are evidence of significantly improved relations between Tanzania and Kenya. The East African Community collapsed in 1977 after a period of disintegration marked by the blockage of fund transfers, the expulsion of staff not belonging to the country of residence and the progressive appropriation of Community institutions for national purposes. The problems of the Community were exacerbated by the deteriorating international economic climate and the seizure of power in Uganda by Idi Amin. The central problem of the Community was the economic predominance of Kenya and in 1967 an effort was made to rectify this imbalance by transferring to Tanzania and Uganda some of the Community’s institutional headquarters, including the headquarters of the Community itself to Arusha. A Treaty for East African Cooperation allowed for the protection for a limited period of infant industries by the imposition of transfer taxes. In 1970 the situation deteriorated greatly as a result of the import of cheap consumer goods, hitherto purchased from Kenya, from China in payment of local costs incurred in the building of the Tazara railway. The Kenyans resorted to various obstructive measures and in 1975 Tanzania closed the trunk roads of the country to Kenyan lorries used for trade with Zambia; in the following year the border between Tanzania and Kenya was closed.

The exceptionally complex task of valuing the assets and liabilities of the East African Community was given to a mediator, Dr. Victor Umbrich, and the agreement is the result of his years of patient work. The political climate for the agreement was improved by the removal from office of the former Kenyan Attorney General, Charles Njonjo, who had long been a bitter critic of Tanzania and an obstacle to improved relations between the two countries.

The agreement provides that the Community assets should be divided in the proportion of Kenya 42%, Tanzania 32% and Uganda 26%. As a result, Kenya and Tanzania will pay Uganda compensation in the sum of 191 million US dollars. Payment will be in convertible currency, the provision of goods and services and the offsetting of existing claims. The agreement also covers the pensions of former employees and a mechanism for settling disputes.

It is encouraging that some of the East African Community services have survived and will continue as joint East African institutions. They are the Soroti Flying School, the East African Development Bank, the East African Inter-University Committee, the Eastern and Southern African Management Training Institute and the East African Community Library Services.

Following the agreement on the East African Community assets and liabilities, Kenya and Tanzania agreed to open their border immediately for movement by people subject only to normal immigration requirements. The Presidents of Kenya and Tanzania instructed their ministers responsible for trade, transit traffic, air transport and tourism to meet without delay and to reach speedy agreement on these matters.

Commentators on the agreement believe that it will result in a sharp reduction in smuggling and illegal marketing. What is less certain is the extent to which the conditions which produced the original dispute have changed. Tanzania has, at considerable expense, established its own airline and telecommunications system, but it has not succeeded in persuading major tour operators to use Kilimanjaro airport and few of its industries are in a position to exploit the potential of the Kenyan markets. It remains to be seen whether Tanzania can now meet the challenge of dynamic Kenya and whether the grim economic prospects for Africa will stimulate mutually advantageous collaboration.

Political debate goes public
In Tanzania real political debate outside Parliament has been largely confined within the Party (Chama cha Mapinduzi) and the books and other writings of the staff of the University. In 1981 the National Executive Committee of the Party, meeting in Dar es Salaam, adopted a body of guidelines entitled ‘Mwongozo 1981’, which contained among other matters a series of recommendations on constitutional reform. In the spring of 1983 these proposals were elaborated in a public document, which was distributed for discussion throughout the country in Party cells, churches and other voluntary organisations and the reactions and proposals of these bodies and of individuals were invited. This shrewd move by the Party allowed for the expression of worries and questions that have been building up over five years of persistent economic crisis. People responded enthusiastically to this opportunity and the press and radio have been printing and broadcasting large numbers of letters, some asking for significant changes in the Union Constitution. The most frequent requests have been, first t for the Members of the National Assembly to make more effective use of their power to question Ministers and to call them to account for the actions and omissions of their Ministries and, secondly, for a choice of candidates in Presidential elections. A more detailed account of this important public referendum and its consequences will be given in a forthcoming issue of the Bulletin.

The Government’s campaign against economic saboteurs described in Bulletin No.17 of July, 1983, has also stimulated public debate. After the early successes in uncovering hoarded goods, doubts began to be expressed and fears that the investigations were beginning to hinder legitimate activities while not reaching some of those with the greatest responsibility for malpractices. In July, the level of disquiet persuaded the President to intervene and it was announced that he would reply to questions from journalists at a public meeting, which would be broadcast live. This kind of meeting was new to Tanzania and excited wide interest. The questions were those that were most frequently asked in the letters reaching the press and Radio Tanzania.

Reactions to the meeting and the broadcast were varied. Some of the older, more conservative Party Members were outraged that the President should be subjected to such questioning, but other people, including some of those most committed to the President’s policies, welcomed the innovation and hoped that the example of more vigorous .questioning would be followed by the National Assembly.

Official denial of alleged oil deal with South Africa
The Tanzanian Government has issued a categorical rejection of the allegations made in the ‘Observer’ of 13th. November, 1983, that there had been a secret oil deal between Tanzania and South Africa and that two Tanzanian leaders had been involved in an improper commercial relationship with an oil company. The statement goes into considerable detail with regard to the deal with the company Marcotrade, to which the allegations refer. This deal involved a supply of crude oil from Angola of a type that could not be refined in Tanzania and therefore had to be exchanged for Iranian crude. This exchange was arranged in a manner which minimised the foreign exchange costs to Tanzania. All letters of credit specified the origin and destination of the imports and exports and did not include South Africa. However, even before the Observer article was published, the Tanzanian• Petroleum Development Corporation had discovered that Marcotrade had attempted, as part of the package deal, to import a cargo of refined petrol originating in South Africa with documents giving the origin as Singapore. The Tanzanian Government views this attempt to evade its ban on trade with South Africa wi th grave concern.

A second vessel was named in the Observer report and the statement lists the destinations of its five voyages from Dar es Salaam. Its only calls at South African ports were for repairs following mechanical breakdown. The two leaders named in the article, Ndugu Al Noor Kassam, the Minister for Water and Energy, and the General Manager of the Tanzania Petroleum Development Corporation, have instituted legal proceedings against the Observer.

Increases in prices offered to agricultural producers
As part of the policy to increase foreign exchange earnings, producer prices of key export crops- coffee, cashewnuts, pyrethrum, cardamon, cocoa and tea- have been increased by about 40%. The price of maize has been increased for producers by between 39% and 82%, with the highest increases in the major producing areas. This difference presumably reflects lower costs of collection and is also intended to encourage production in the areas most suited to maize. The producer price for cotton has been increased by up to 50% and there are also increased producer prices for castor oil seed, millet and sorghum. The Government has decided to accord priority in the allocation of foreign exchange to export-oriented institutions. Firms and commercial farms, including those in the private sector, are being allowed to retain a proportion of their export earnings in external accounts for the purchase of machinery and other necessary foreign inputs. This will greatly simplify their purchases from abroad by bypassing the normal allocation machinery. A special allocation of foreign exchange will likewise be reserved to enable peasant farmers, whether producing for export, for industry, or for food supplies to purchase necessary equipment abroad.

Tazara railway
The Chinese Government has agreed to a postponement of repayments of the loan for the building of the Tazara railway. Repayments of the principal should have begun in 198~, but will not now start until 1993. The repayment of the loan for locomotives will begin in 1987 instead of 1980. The Chinese have provided a further loan of shs.180 million for the purchase of spares for the Railway and 250 Chinese personnel working for Tazara are to stay beyond the original date intended for their return home.

As reported in Bulletin No.16, the Tazara railway has been beset with operating problems and has been working far below its full capacity. The low level of operations has clearly made it difficult to generate the revenue necessary to start to repay construction costs. The leader of the Chinese delegation to the negotiations, Madame Chen Muhua, made a diplomatic, but none the less revealing, statement: ‘I share the views of President Nyerere, it was difficult to construct a railway, but more critical to manage it well’. The Tanzanian Minister for Transport and Communications promised that strong disciplinary action would be taken against Tazara employees who did not obey operating instructions.

John Arnold

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