NYERERE AND THE WORLD BANK

Extracts from a paper presented by Ron Fennell at a Britain-Tanzania Society seminar on Mwalimu Nyerere on March 11.
‘Confrontation’

An extreme version of the relations between the World Bank and President Nyerere might be:

Nyerere knew little about economics. He refused to address macro-economic policy issues, and failed to accept that state management was stifling growth. The Bank, on the other hand, did not appreciate the cost of nation building and the impact of external events. Since 1977 Tanzania had been battered by external events over which it had no control including in 1977 collapse of the East African Community (cost $100m) and collapse of the coffee boom (cost $100m); in 1979/81 the war against Uganda ($500m plus $100m assistance to Uganda);the 1979/80 oil price increases (cost $150m); the 1979 flood damage ($l00m) leading to imports of food (cost $50m).

While there is some truth in both viewpoints, they oversimplify the relationship between the World Bank and Tanzania, whose ultimate policy maker was Mwalimu Nyerere. We get a better understanding of the relationship if we look at the different phases through which that relationship passed:

1961 to 1967. Independence to the Arusha Declaration
During the first six years of independence relations between the Bank and Tanzania were cordial but low key. Good prices were obtained for export crops -sisal, coffee, tea and cashew nuts. Import capacity, measured in real terms by export earnings, reached its peak in the mid 60s. Industrial investment grew by 18% encouraged by government policies that safeguarded foreign investment and limited public sector involvement. The World Bank’s 1961 economic report outlined a strategy for the improvement of peasant agriculture. It had a significant influence on the first two five-year plans. Bank activity in Tanzania was influenced by the wish to establish a flourishing East African Community. Consequently, lending in Kenya, Tanzania and Uganda was seen as a total package. Lending concentrated on infrastructure and education. There was less attention in the Bank to possible flaws in national economic policy because it was assumed that the three countries were moving towards a common monetary and fiscal policy.

The McNamara/Nyerere alliance 1968 to 1973.
In 1968 Robert McNamara became President of the World Bank. A close relationship developed between McNamara and Mwalimu based upon mutual respect. McNamara saw that Tanzania was a stable country in a huge continent that seemed to be dominated by Cold War rivalries and coups. Its leader was highly intelligent, honest and charismatic and there was a reasonable prospect of political continuity. Nyerere managed to charm people with very different political philosophies ranging from those of Henry Kissinger to Chairman Mao. The Arusha Declaration of 1967 was a major policy statement as well as a skilful piece of political propaganda. Many of the principles of the Declaration -rural development, equity through basic education.’ ­matched McNamara’s concern for basic needs and smallholder agriculture. McNamara’s determination to triple the Bank’s lending programme and give increasing emphasis to Africa was a significant change in Bank policy. Lending concentrated on development projects rather than budgetary support. However, there was insufficient emphasis on economic and sectoral analysis. So began a series of operations in Tanzania supporting integrated rural development and export crop parastatals. Between 1970 and 1980 the Bank (IBRD and IDA) provided $256 million for agriculture, mostly in support of crop parastatals. Unfortunately, a retrospective evaluation of these projects showed that they generally performed poorly. This was partly because of crop production failures and partly because they did not anticipate the full effects of the government’s villagisation and internal trade policies. The Bank channelled nearly half of its total commitments in the agricultural sector to parastatals thereby reinforcing their dominant position. Out of ten agricultural projects audited by the Bank’s own Operations Evaluation Department, only two had an economic rate of return of over 10 percent, one had a rate of return of 4 percent and 7 had negative rates of return. Projects sometimes failed to take into account the social structures in the rural community.

Thus, for a variety of complex reasons many projects failed to bring the production response which had been expected.

The National Industrial Policy. 1973 to 1979

In 1973 the government turned its attention to improving the industrial base of the economy. Its Basic Industry policy -to improve self-sufficiency -received the support of many donors, including the World Bank, Sweden and China. Investment in that sector increased by 11 % a year but the rate of growth of production was sluggish. The share of the public sector in industrial employment rose from 15 to 50 percent and the number of enterprises ­mostly parastatals -tripled between 1967 and 1979. The national leadership, after making decisions about industrial investment, failed to monitor implementation and find out how they worked in practice. Nyerere himself noted in 1975 that Tanzania Breweries was only using 65% of its capacity.

In the enthusiasm for investment in new factories and facilities many in the international development community lost sight of the continuing import requirements of factories and their recurrent costs. Nyerere said ‘we must run while others walk’, meaning there was much to be done to raise the standard of life. But the development community was enveloped in an atmosphere of hectic activity and failed to detect the warning signals or foresee obstacles. Five years later, in 1985, I visited the impressive Mufindi Pulp and Paper Mill which was considerably delayed in start-up and was yet to achieve any of its targets. Building the access road from the main timber source on the plateau encountered major technical problems because the European contractor failed to consult local geologists and went bankrupt. Failure to reach agreement on use of the TANZAM railway proved to be another impediment.

The Industrialisation Policy assumed a large regional market: Kenya, Uganda and Tanzania as an economic community to provide a springboard for exports to more countries in the region. The East Africa Community collapsed in 1977. The efforts by each of the three countries to build their own industrial capacity after the collapse contributed to the poor rates of return of Tanzania’s new industrial enterprises.

Frequent changes in the organisation of rural administration were very disruptive. For example, the switch from district councils to regional Party structures, from cooperatives to marketing boards and back to cooperatives undermined the management capacity of Tanzanian officials. A concern for political correctness tended to undermine the freedom of senior bureaucrats to execute development projects. The increasing power of Party apparatchiks in the regions tended to divert resources to lower priority activities.

The nationalisation of the trucking fleet made evacuation of crops difficult and Tanzanians in the rural areas found it increasingly difficult to get essential goods from the government run stores. Before 1974 private truckers provided all the commercial freight haulage. By 1977 this share had declined to about half of the total market. Truckers left the agricultural industry and concentrated their operations in urban areas, leaving rural areas to parastatal trucking.

The collapse of the economy (1979 to 1982)
Between 1979 and 1982 the economy showed increasing signs of malaise but insufficient attention was given to macro-economic policy and balance of payments issues. Nyerere failed to appreciate that the overvalued shilling in the late 70s and early 80s and the inefficiencies of parastatal marketing were reducing farmers’ incomes. For example, coffee growers in Arusha were digging up coffee to plant tomatoes because the latter were more profitable.

Nyerere always had genuine difficulty in accepting the IMF’s draconian policies. This was partly a reaction to the Fund’s insistence on the inherent value (almost moral virtue) of devaluation and to the multiple conditionalities which he felt reflected arrogance.

Between 1981 and 1984 there was a prolonged debate in the Party about alternative economic policies -whether to go with structural adjustment and the IMF or to go it alone. This delay led to a further decline in the economy. Faced with no practical alternative from the Party hardliners, Nyerere, after three years trying to get consensus, reluctantly accepted that he had to deal with the IMF. The parallel economy -trading outside official channels at ‘black market exchange rates’ -was becoming essential for survival. The Economic Saboteurs Act of 1983 caused great resentment among small businessmen and among many senior civil servants who had started their own business to cover family expenditures. It was a clumsy attempt to stamp out survival entrepreneurship. The President realised that changes had to come.

The necessity of reform 1983 to 1985
When I was sent to Dar as World Bank Resident Representative in January 1984, Ernie Stem, the Bank’s Senior Vice President, made it clear to me that all Bank lending to Tanzania would stop after the approval of the Mtera Power Project in early 1984 unless the government entered into a more active dialogue with the World Bank on economic reform. Times were hard. People were suffering. The picking of tea in the Mufindi plantations fell behind because the women pickers were unable to get sugar to put in their own morning tea, which constituted their main source of energy in the fields. There was a severe shortage of basic consumer goods.

But there were some positive signs:
During the previous two years the Tanzania Advisory Group, an independent team of reputable international economists, financed by the World Bank and ably assisted by Tanzanians from the University of Dar es Salaam, had put together an action plan. This turned into the government’s Structural Adjustment Programme which Nyerere recognised as a necessary prerequisite for a dialogue with the IMF.

The government grudgingly agreed in 1984 to permit ‘own funded imports’-i.e. financing of imports from the proceeds of unofficial exports of gold and agricultural produce which found its way across the Kenya border. In the fITst year about $100 million dollars worth of essential goods (like salt and sugar) were imported.

Until 1984 a private individual was not permitted to carry more than two bags of maize in a vehicle. The Party hard-line ideologists thought that maize fanners had to be protected from rapacious traders who would offer them a low price and that farmers would end up starving in the hungry season. Prime Minister Salim successfully argued in Cabinet that the restriction on the movement in maize should be lifted in order to ease the food supply in the urban areas. People began to discuss reform more openly. The University arranged a public workshop in 1984 that gave people an opportunity for debate.

There were Tanzanians in the university and business who were capable of giving the government sound economic advice. Gradually the government took these people into their counsels, often against the wishes of the Party ideologues. The World Bank’s insistence that policy change should come before Bank funds were released weighed heavily on Finance Minister Msuya in his efforts to convince more conservative cabinet ministers on the need for reform. But measures which he had introduced in June 1984, particularly own funded imports (two years before the start of a Bank funded Economic Recovery Programme) brought improved supply of textiles, clothing, vegetable oil and pick-up trucks.

Conclusion
There is no doubt that mistakes had been made by both sides. The Bank itself went through major changes in its approach to development assistance over the period. There was a move away from project specific lending unless it was based upon a more thorough assessment of sector policies, incentive systems and financial performance. In the early 80’s the Bank recognised that budgetary support, based upon programmes of structural adjustment, was necessary to help economies hit by adverse terms of trade and external events. But these changes in Bank strategy and the time taken to agree on policy packages increased the uncertainty about overall donor assistance.

Nyerere himself was slow to recognise that parastatal inefficiencies were having such a detrimental impact on peasant farmers -his favoured beneficiary. The drive for villagisation was accelerated by over enthusiastic regional administrators competing against each other. Nyerere did little to slow the pace. He refused to accept the need to devalue the shilling until donor consensus and the parlous state of the economy made it unavoidable. Nyerere himself admitted: “There are certain things I would not do if I were to start again. One of them is the abolition of local government and the other is the disbanding of cooperatives. We were impatient and ignorant’.

Structural adjustment is a phenomenon in all societies but developing countries often lack the necessary financial resources to cushion society against the shocks. In Tanzania adjustment has gone on slowly ­probably too slowly at times Tanzania and the Bank continue to work together to strengthen government institutions and to assist the private sector to play a greater role in development.

The work of the World Bank: has been made easier by the friendliness of the people of Tanzania and a stable political environment -a rarity in Africa -and by a commitment to consensus building. All these are part of Nyerere’s legacy to Tanzania
R. Fennell

BUSINESS NEWS

Exchange rates (April 10): £1 = TShs 1,271 $1= TShs 799

President Mkapa praised the willingness of the World Bank and the IMF to listen to Tanzania especially their willingness to be flexible with regard to the new thrust towards growth and broader-based poverty reduction. Speaking in Gabon on 19th January he said that Tanzania had, in the last few years, witnessed in a World Bank President, Jim Wolfensohn and IMF Managing Director Michel Camdessus, an unprecedented willingness to listen to Africa.

EU Development and Human Affairs Commissioner Poul Nielson was quoted in South Africa’s BUSINESS DAY (March 3) as saying that Tanzania’s policies were hindering free trade in the region by unduly protecting domestic industry. “While the government’s commitment to the market economy is generally recognized it seems to be much less prepared to liberalize in the area of foreign trade” he said. He gave as examples Tanzania’s decision to pull out of COMESA and the fact that Tanzania was the most reluctant in the East African Community and in SADC to implement free trade protocols. Economists at the same event defended Tanzania saying that the country could not produce world class products due to poor infrastructure. Local manufacturers would be killed by free competition within the regions’ trading blocs they said (thank you David Leishman for sending this item -Editor).

Anglogold, the world’s biggest gold producer has taken a 50 per cent joint venture stake in Ashanti Goldfield’s Geita project in Tanzania. This followed the serious financial situation affecting Ashanti after the sudden rise in the price of gold in late 1999. Anglogold is paying Ashanti $205 million in cash for the 50 percent share and will procure or provide project financing to the Geita project totalling $130 million.

The Presidential Parastatal Reform Commission has been given four more years in which to divest l32 public corporations. 263 out of 395 corporations have been divested in the last six years. Those earmarked for early divestiture included TTCL, TANESCO, Air Tanzania, the National Microfinance Bank, the National fusurance Corporation and DA W ASA.

The 6,000 depositors in the failed Greenland Bank in Dar es Salaam and Zanzibar are receiving back funds in their accounts which were frozen last year -Daily News.

‘Alliance Air’ was in danger of collapse as this issue of TA went to press. The South African parent company Transnet decided to pull out from April 7. The other shareholders -South African Airways, Uganda and Tanzania -were deciding what to do -East African.

Tanzania’s 19th commercial bank will be Barclays which was licensed in January to resume operations in the country -East African.

A Netherlands-assisted $423 million project for the widening to 140 m and the deepening from 7.0 m to 10.2 m of the entrance to Dar es Salaam Port has been completed.

After one year of difficult negotiations and much popular opposition, the agreement under which 70% of the National Bank of Commerce has been taken over by the ABSA Group from South Africa was finally passed by parliament. A reduced sum of $18.75 million was paid to the Tanzanian Treasury by ABSA on March 30.

AID

Recent announcements on aid to Tanzania: CHINA -a loan of Shs 7 billion to TAZARA for equipment and spare parts for the Chinese-aided Tanzania-Zambia railway. LIBYA -assorted equipment including three tractors, an ambulance and medicine for Zanzibar. USA -$2.5 million to fight AIDS. FINLAND -Shs 3.1 billion for the Local Government Reform Programme and the National Forest Programme and Shs 1.2 billion for poverty eradication. SWITZERLAND -Shs 9 billion in budget support. KOREA -Shs 24 million for communication and agricultural equipment. The EU -Euros 42 million for roads in Mwanza and for tax administration; Euros 2 million over two years for training, equipment and support for the Prevention of Corruption Bureau’s public awareness campaigns and Euros 1.75 million for implementation of the Tourism Master Plan. JAPAN -Shs 66 billion for forestry in Lushoto district, Shs 3 billion in food aid (rice) and Shs 210 million for equipment for the Nattional Museum. DENMARK -Shs 1.7 billion for new transparent ballot boxes for the next elections.

BUSINESS NEWS

EXCHANGE RATES (December 20): £1 = Shs 1280 $1-Shs 797

There have been highly significant developments which are likely to ease Tanzania’s debt problem. Leaders of the world’s eight leading economic powers have offered to write off $100 billion of Third World debt and Tanzania is one of seven new countries brought into the debt relief programme. The major powers have also agreed to restrict their sales of gold which has stabilised the price of the gold being produced by Tanzania’s burgeoning gold mining industry.

President Mkapa on September 2 in Stockholm explained Tanzania’s recent decision to leave COMESA There was lot of overlapping of regional organisations and attempts to rationalise their objectives had failed. Comesa did not have a regulatory mechanism to take into account imbalances in industrialisation in the region. Tanzania had given one years’ notice and would see what happened during that period before deciding whether to pull out or reconsider its decision -Daily News.

Responding to criticism of his proposal to introduce a positive discrimination policy backed by law to economically empower indigenous Tanzanians, Minister for Industry and Commerce Iddi Simba pointed out that, since South Africa had adopted a similar policy in 1994, Black African businesses had increased their ownership of businesses on the Johannesburg Stock Exchange from 0.3% to 11%. He added that it would be absurd to associate the Tanzanian government with any policy which propagated racial discrimination. The government would not stop the further progress of any successful enterprise he said.

Two of Zanzibar’s oldest hotels -the Africa House (13 rooms) formerly known as the ‘English Club’ and the Zanzibar Hotel (24 rooms) -have been leased out by the government to Zanzibar Hotels and Tours Co Ltd. They are to be upgraded to 3-star standard without changing the outside structure. 80,000 tourists are now visiting Zanzibar each year.

The leading newspaper group in Tanzania, the Guardian Ltd, announced in August that it would have to retrench 100 of its workers. One of its rivals, ‘The African’ reported that the parent company (IPP Ltd) had started experiencing financial difficulties at the beginning of 1999.

Tanzania has its first desalination plant. It cost $500,000 and has been installed by Coca Cola Kwanza Ltd. as a strategic move because Dar es Salaam goes through dry spells with low water levels each year -East African.

Winners of the award for British consultancy of the year 1999 (Category B) are CMS Cameron McKennal Mott Macdonald who received a 25-year contract to privatise and operate Kilimanjaro Airport. Some £7 million is being spent in the fIrst phase of its rehabilitation -The Times.

The Bill under which the 35-branch National Bank of Commerce (NBC) has been privatised was passed in the National Assembly on November 9 under a certificate of urgency. This had to happen before the end of 1999 if Tanzania were to benefit from further IMF assistance and new debt relief. Under a Memorandum of Agreement, 70% of the bank was scheduled to be sold to the 1000-branch Amalgamated Bank of South Africa (ABSA). The newly appointed ABSA management of ‘NBC (1997) Ltd’ soon began to collect billions of shillings from bad debts. “The existing bad risk customers are going to pay the money back” declared what the Guardian described as the ‘tough talking’ new Managing Director Gerald Jordaan. Jordaan said it was not his policy to flood the place with South Africans (there would be not more than 25 expatriates) but only those local workers (who total 1,100) who merited their positions would be retained. He was not worried about the other banks in Tanzania (more than 20) many of which commanded international repute -“these banks create for us a competitive atmosphere” he said. One of the expatriate directors was quoted in the Guardian as saying that, when ABSA took over the Bank, it had a negative capital base -it was bankrupt. On August 31 the new bank announced that Shs 3 billion of debt had been recovered during the first four weeks since the takeover. On August 31 Jordaan said that the names of bankers who had been allegedly involved in fraud or theft but had been simply dismissed, suspended or left to go free would be submitted to the police the following week together with full details. The amount of money lost was colossal he said. The other part of the NBC, the National Microfinance Bank (NMB) has started operations with support from ‘Development Alternative Incorporation’ of the USA which has brought in four full-time experts.

The EU has lifted its ban on the import of Tanzanian fish from lake Victoria but has not lifted the ban on Kenyan and Ugandan fish.

The Tanzania Telecommunications Co Ltd expects to earn Shs 80.4 billion this year -a record for the company. The TTCL was established in 1993 and in 1994 had earned only Shs 33.2 billion -Daily News.

The London-based international tribunal looking into the tariff dispute between TANESCO and the Malaysian-financed IPTL power project (see several recent issues of Tanzanian Affairs -Editor) decided that the case fell outside its jurisdiction.

The duty on imported second hand clothes was increased in October from $0.55 per kilo to $2.50. Wholesalers complained that they would have to pay Shs 25 million for a container load of 500 bales (each of 45 kgs) compared with Shs 5 million before.

The Tanzania Cotton Lint and Seed Board has established a Cotton Development Fund to help farmers in their purchase of cheaper pesticides and cotton seed at half the normal price and would also support education and research. The fund would obtain its revenue through a 3% levy on Free on Board (FOB) cotton prices -Daily News.

In its determination to harvest the maximum quantity of cloves the government increased the producer price to Shs 600 compared with Shs 400 a kilo for first grade cloves and closed schools for a month from August 20 to enable schoolchildren to take part in the harvest. They also sent a team of doctors from Mnazi Moja hospital to Pemba to treat people falling from clove trees.

AID

World Bank President James Wolfensohn in his address to the Bank’s Board of Governors on September 28 singled out Tanzania (and only Tanzania) and its President for special mention. He quoted President Mkapa as saying to a Swedish audience “Ownership of development programmes is not only an understandably nationalist yearning, an inherent and sovereign right, but it also creates the most fervent disposition and conditions for hard work and for self-development”.

Wolfensohn responded by saying “We must recognise our role in helping not hindering those doers of development by better coordinating our own activities. It is shameful that Tanzania must produce 2,400 quarterly reports a year for its donors. It is shameful that Tanzania must suffer 1,000 missions from donors a year”. Tanzania has obtained a World Bank soft loan of $61 million to help reduce its foreign debt and strengthen financial institutions. The IMF has allowed Tanzania to borrow $31 million, the final tranche of the $241 million Enhanced Structural Adjustment Facility (ESAF) agreed some time ago -The Guardian.

BRITISH aid was expected to grow from £50 million to £60 million annually in two years time announced High Commissioner Bruce Dinwiddy on October 13. Half would go to the Multilateral Debt Relief Fund and the rest to the public sector. Tanzania would begin to get substantial benefits from the ‘Highly Indebted Poor Countries Initiative’ (HIPC) by the end of 2000 something in which the UK had been one of the first proponents he said. Other recent aid announcements: WORLD BANK -Shs 23 billion for continuation of the civil service reform programme. GERMANY ­$370,000 TO UNHCR for refugees in Kigoma region. JAPAN -Shs 3.65 billion towards debt relief. AUSTRIA -$125,000 for various dairy projects. THE NETHERLANDS EMBASSY -books worth $1.61 million for primary schools in Kagera and Shinyanga regions. SWITZERLAND -Shs 17 billion for health projects and roads and Shs 5.4 billion for debt relief. EUROPEAN DEVELOPMENT BANK -Shs 6.8 billion loan to finance small and medium scale investments.

TANZANIA LEAVING COMESA

Tanzania has decided to withdraw from the 22-nation Common Market for East and Southern Africa (COMESA). The Guardian reported that Minister for Industry and Commerce Iddi Simba, had announced on July 2 that, after some research, the country had decided to withdraw because of COMESA’s proposal to reduce customs tariffs for member countries by 90%. The first sign of this move had been a speech by President Mkapa at the meeting of COMESA Heads of State in Nairobi on May 25 when he said that it was unrealistic to expect the planned tariff arrangement to occur in October 2000 as envisaged. The development levels of member countries were too uneven he said.

And hesitating on East African Cooperation
A further indication of what many see as increasing protectionist sentiment in Tanzania was the recent announcement that the signing of the much heralded East African Community Treaty which was scheduled for July 30 would be postponed until October. Preparatory negotiations which extended to 12 days (Tanzania’s delegation totalled 25 people) apparently revealed fundamental differences between the three parties on the major sectors of tourism, trade and industry. Negotiators were said to have been preoccupied with safeguarding their national interests. Contributing to the delay had been a study report issued on June 22 that had recommended the setting up of a ‘Preparedness Unit’ to improve Tanzania’s role in the proposed community and stating that the reduction of tariffs should be phased in slowly. However, on August 12, Foreign Minister Jakaya Kikwete was quoted in the Daily News as stating that Tanzania was as committed as before to signing the treaty before the end of this year.

LATEST DONOR AID

BRITAIN -to increase its aid from £42 million in 1997/98 to £63 million in 2001; it has also provided recently $867,000 for anti-malaria research in East Africa particularly the problem of resistance to anti-malarial drugs and Shs 10 million to sponsor a ‘mock’ parliamentary session in which the participants were 150 students from secondary schools around the country. SWEDEN -$8.6 million for the rehabilitation of the Ubungo Power Station in Dar es Salaam. DENMARK -Shs 400 million to renovate the former Kivukoni Magistrates Court building to accommodate the new Tanzania Commercial Court and Shs 55 billion over five years for the health sector. JAPAN -Shs 8.4 billion for the Dar es Salaam Roads Improvement Project and Shs 3 billion to purchase rice to alleviate food shortages. ITALY -Shs 11.5 billion to pay for the contract already signed for the 43-km Wazo Hill to Bagamoyo road. Italy has also promised to help sponsor the preservation of historical sites in Bagamoyo. The BRITISH FOREIGN LEGION ~-Shs 3 million to be divided amongst 64 Tanzanian World War II veterans. CHINA -Shs 9 million for air conditioners for the National Archives. FINLAND -a further Shs 1.8 billion for the East Usambara Catchment Forestry Project and Shs 500 million to strengthen the Tanzania Revenue Authority. WORLD BANK -$117 Million aimed at doubling Dar es Salaam’s water supply including funds for the purchase of 100,000 water meters. NETHERLANDS -Shs 52 billion to be disbursed in this year for health, women and good government programmes. The FRANKFURT ZOOLOGICAL SOCIETY -Shs one billion for the Serengeti National Park. SOUTH AFRICA -four Puma helicopters for the army’s disaster rescue unit ‘in appreciation for Tanzania’s help in defeating apartheid’ -the Daily News.

BUSINESS NEWS & BUDGET

EXCHANGE RATES (August 11): £1 = TShs 1270. $1 = TShs 789

Negotiations for the Amalgamated Banks of South Africa (ABSA) to take a majority shareholding in the National Bank of Commerce (NBC) have been completed but signature is held up following a court injunction obtained by employees -Daily News.

China Human International Economic and Technical Cooperation has acquired 62% (leaving 38% with the government) of the shares in the Mbeya-based Kiwira Coal Mine. A large number of the 1,500 workers will be made redundant; coal production is expected to increase from 100,000 to 300,000 tons per year -Guardian.

The long-standing dispute between TANESCO and the Malaysian-financed IPTL over the power plant that has been built in Dar es Salaam but not yet started operations, looks like continuing for some time. The International Centre for the Settlement of Investment Disputes (ICSID) has fixed a hearing date for the case in June 2000. Meanwhile the government has successfully fought off a case in the Court of Appeal which would have forced TANESCO to start paying $3.62 million per month to the Malaysian company. This could have plunged TANESCO into serious losses.

The National Employment Promotion Bill of 1999 rules that no employer will employ a foreigner in any class of employment the appropriate Minister may declare to be employment in which citizens only may be employed. No foreigner will be employed unless he has a work permit. Government officers have started visiting places employing foreigners to ensure compliance with the new law. Over 5,000 expatriates applied for work permits since January 1997 and 2,900 others applied for extensions of their work permits. Some 7,000 now held such permits -Daily News.

The Tanzania Telecommunications Commission has increased the number of firms licensed to offer mobile phone services. In addition to TRITEL and MOBITEL which have already started, the new companies are the Tanzania Telecommunications Company (TTCL) -which plans to have 500,000 lines by the year 2004 -plus Planetel and Zantel -Guardian.


THE 1999/2000 BUDGET

The main features of the 1999/2000 budget introduced in Parliament by Finance Minister Daniel Yona on June 10 were as follows:

-To help investment -from July 1 rates of duty to be based on the degree of processing with the lowest rate for investment goods and the highest for consumer goods. Strategic and investment goods -zero %; raw materials, capital goods and replacement parts -5%; semi-processed goods and spare parts -10%; fully processed goods and motor vehicle spare parts 20%; and, consumer goods 25%.
-To help the low paid -minimum taxable income raised from Shs 20,000 to Shs 45,000. Minimum wage was later increased from Shs 17,500 to Shs 30,000 per month.
-To encourage tourism -air charters and aircraft to be exempted from VAT.
-To help civil servants -pension and health insurance funds to be introduced; monthly pensions for retired officers to be increased from Shs 2,000 to Shs 10,000.
-To encourage greater use -customs duty on computers to be reduced from 20% to 5%;
-To help local government -receipts from a number of cesses and taxes now levied for central government use to be transferred to local governments.

The latest economic data:

Estimated GROWTH RATE -4.9%; it was 4% in 1998-1999 (Zanzibar was -0.4%). Total FOREIGN DEBT -$8.29 billion (Shs 5.5 trillion); Shs 488 billion to be repaid in the 199912000 fiscal year compared with Shs 101 billion in the previous year. Total LOCAL DEBT -Shs 850 billion. Shs $70 million was received last year from seven donors plus $25 million in Structural Adjustment Credits.

Anticipated EXPENDITURE: Shs 1.16 billion -Shs 921 million recurrent (Shs 240 million for civil service salaries and Shs 681 million miscellaneous expenditures) plus Shs 243 million for development. Shs 822 billion would be from internal sources including Shs 762 billion from taxes

REVENUE collected by budget day (May 21) Shs 531 million.

EXPORTS: $672 million in 1998-99 compared with $717 million in the
previous year because of lower quantities and lower prices, the financial
crisis in Asia and the EI-Nino rains.

IMPORTS: $1,246 million; 9% up on the previous year due to the growing
demand for transportation and construction goods and equipment.

FUTURE PRIORITIES FOR EXPENDITURE: health, education and water.

There will be NO BORROWING from banks.

INFLATION RATE planned to drop to 5% compared with 8.8% last year.

THIRD WORLD DEBT

On 18-20 June 1999 the Finance Ministers of the Group of Seven industrial nations met to consider modifications to the Heavily Indebted Poor Countries (HIPC) Initiative in the light of criticisms from a number of quarters, including the United Kingdom Government. The outcome was a statement entitled the Cologne Debt Initiative and was welcomed and endorsed by the Heads of Mission. In essence the report supported ‘faster, deeper and broader debt relief for the poorest countries that demonstrate a commitment to reform and poverty alleviation’. Thus for the first time an explicit link was created between debt relief and the relief of poverty. With this end in view the Ministers asked for modifications in existing programmes of support by the World Bank and the IMF, in particular the IMF’s Enhanced Structural Adjustment Facility, adhesion to which had been a condition of entry into the HIPC process. The Bank and the Fund were asked to help qualified poor countries to formulate plans for the use of savings derived from debt relief for the reduction of poverty.

The suggested role of the Bank and the Fund in the formulation and implementation of plans for the reduction of poverty might be seen as intervention in matters of domestic responsibility. It is important, therefore, that the International Financial Institutions proceed with sensitivity and restraint in seeking the co-operation of the governments of the highly indebted countries involved. The Ministers called upon the Bank and the Fund to develop plans for poverty reduction in time for the Annual Meetings of these bodies in September.

The Ministers were concerned about the slow pace of the HIPC programme. While retaining the programme’s two stage structure, they recommended that the debtor countries should be allowed to bring forward the ‘completion point’ through improved performance. The second stage could thus be shortened significantly in the case of countries meeting ambitious policy targets.

The amount of debt relief granted is intended to bring the remaining debt burden down to a level that can be sustained without further international intervention. The debt relief calculation depends on a variety of factors, including the ratio of debt to exports. The Ministers suggest that the present target ratio should be brought down from 200 -250 percent to 150 percent. Combined with other adjustments, this reform will lead to a deeper level of debt relief. The Ministers also propose that greater attention should be given to the serious budgetary consequences of debt servicing.

It is not easy to specify with certainty the benefits that Tanzania will enjoy as a result of the Cologne Debt Initiative, but it is hoped that the Tanzanian Government will be in a position to press for earlier access to the completion point of the HIPC process and that there will be benefits resulting from other changes in the HIPC Initiative. Finally, it is understood that Tanzania is benefiting from technical assistance with respect to the monitoring and management of external debt. It is plainly of first rate importance that machinery should exist to avoid a new debt overload once the burden of debt has been brought down to sustainable levels.
J Roger Carter

BUSINESS NEWS

Exchange rates (early April): US$ 1 = TShs 695 £1 = TShs 1,130

Under a new Bill passed by Parliament which is designed to reduce unemployment, employers will be severely punished if they employ foreigners in a variety of jobs after May 1 1999. The government has published a list of 24 businesses whose operation will be reserved for Tanzanians. The list includes retail and sub-wholesale shops, small hotels with up to 20 rooms, restaurants, photography, chicken rearing, carpentry, bakeries, milling machines, laundry, radio repairing, guest houses and bureau de change. In another list of 13 other businesses including consultancy services, cargo handling, catering services, publishing, printing, shipping agencies, supermarkets, garages and cinemas, foreign operation will be allowed only if Tanzanians own 50% or more of the business ­Daily Mail and Daily News.

Tanzania is among the top 20 countries in the world in GDP growth. The world economy is likely to grow by 1.3% on average this year but Tanzania is anticipating a growth rate of 5% -Sunday News.

President Mkapa officially opened the Resolute Company’s Golden Pride gold mines at Lusu in Nzega on February 6. It is the country’s first large scale gold mine. The Bulyankhulu (Geita) and Kiabakari (Musoma) mines have been re-opened. As the gold boom in the Lake Victoria region gathers pace, Danish investors have already disbursed $610,000 for a new ship on the Lake; it is under construction -Daily News.

The Bank of Tanzania suspended operations of the Greenland Bank in Dar es Salaam on April 1 following similar action taken at its Uganda HQ.

The TAZARA railway has extended its service to Kitwe in Zambia to speed up the transportation of copper. The new service is expected to reduce transit time for cargo between Dar es Salaam and Kitwe from 10 to 4 days. China has recently provided 24 new coaches and six buffet cars for the line -New African.

Precisionair has bought 3 new 19-passenger planes from the Czech Republic and has started new routes to Moshi, Mafia, Inringa and Mbeya -Daily News.

Ralli Estates Ltd. in Tanga Regions has planted 1,000 hectares of casuarina, teak, eucalyptus and acacia trees at its Mjesani-Bamba estate under its diversification (from sisal) programme -Daily News

Asian Kilombero M.P. Abbas Gulamali surprised participants attending a workshop on poverty in Dar es Salaam in December when he said that he was glad that Mwalimu Nyerere had nationalised Asian property in 1967. He thought that otherwise Asians would now be subjected to intimidation by the indigenous people who were becoming continually poorer than their Asian counterparts. He said that during the era of Nyerere businessmen like himself were nicknamed ‘Makupe’ but were now respectfully called ‘the informal sector’.

According to an article in the South African ‘Business Day’ (February 15) government bureaucracy and an unpredictable investment climate have led to the loss of at least two $2 million ventures -in 1992 the South Korean Hyundai car company took its money to Botswana and a Middle Eastern farmer who wanted 10,000 h of land to grow mangoes was denied the land by local authorities. The Executive Director of the Tanzania Investment Centre Samuel Sitta was quoted as giving the example of an official of South African Breweries, the majority shareholder in Tanzania Breweries, who was held up for hours at Dar es Salaam airport because he didn’t have a yellow fever vaccination certificate.

Minister of Tourism Mrs Zakhia Meghji has announced that the tourism sector was now contributing 16.5% of Tanzania’s GDP, was earning 50% of its foreign exchange and employing some 35,000 people. In 1998 there were 401,000 tourists compared with 295,000 in 1995.

Three months before the three East African countries are due to sign a formal treaty under the ‘East African Co-operation’ which would harmonise tariffs, resistance against the plan is said to be mounting in Tanzania. Opposition is coming from businesses, intellectuals and some high ranking government officials -The Guardian.

For the first time in 23 years Tanzania recorded a single-digit inflation rate (9.1%) in January. The Bank of Tanzania said that this was largely due to the government’s prudent monetary and fiscal policies. In December 1995 inflation was 29.7%. But commercial lending rates remain high at 20-25% while savings interest is only 3.5% -7.0% -East African.

Mtwara, the second deepest port in Africa, is to be developed into Tanzania’s first modem free port from June this year following the signing of a memorandum between five South African companies and the governments of Malawi and Tanzania -East African.

TANESCO suffered a reverse in its attempts to avoid paying the Malaysian­ financed Independent Power Tanzania Ltd. (IPTL) the $3.6 million a month it agreed to pay for electricity (under a 1995 agreement) when, on March 5 the High Court instructed it to pay until the tariff dispute is settled through international arbitration. T ANESCO has appealed. Prior to this IPTL was losing $3.6 million per month in capital charges on the $150 million project. Both sides have agreed to arbitration on the dispute -Guardian.