SHOCK OVER COOPERATIVE DEBTS
Members of the National Executive Committee of the CCM Party have expressed shock over the huge debts cooperative unions owe the banks, the Committee’s Department of Mass Mobilisation and Political Propaganda said in a statement on October 12th 1989.

The Committee directed that the following cooperatives should, by January 1989 pay their debts or explain why they should not be deleted:
Nyanza Shs 5,250,000,000
Shinyanga Shs 3,440,000,000
Ruvuma Shs 1,570,000,000
Mara Shs 1,450,000,000
Mbeya Shs 1,340,000,000
Kagera Shs 1,270,000,000
Tabora Shs 1,200,000,000

The next day, during a short meeting of the National Assembly in Dodoma, the Member for Shinyanga Urban twisted a debate on a new Written Laws Bill by rejecting the amendment on the Cooperative Law and suggesting instead the suspension of its application and a change towards free marketing of crops. He said that the Cooperative Law, which provided for a monopoly to be given to cooperative unions, was a barrier to people seeking their own markets.

The member for Bariadi said that high interest charges on the unions were among the reasons for their poor performance. Shinyanga cooperative union was paying Shs two million in interest charges. A Nominated Member said that the marketing boards were a burden to cooperative unions and that they should be scrapped as they were useless – Daily News.

MWINYI OUTLINES INVESTMENT CODE
During a state visit to Japan in late December 1989 President Mwinyi gave the first indications of the shortly to be announced Investment Code for Tanzania. The President listed, at a meeting with Japanese economists, the eight areas of priority for investment. They were agriculture and livestock development, tourism, natural resources (forestry, fisheries, fish farming, game cropping and wildlife ranching), mining and petroleum development, (particularly oil and gas, gold, diamonds, gemstones), manufacturing industries (including agro-based industries, steel and metal engineering, printing and publishing, pharmaceuticals and electrical engineering ) construct ion (hotels, houses, warehouses), transport and transit trade.

On investment protect ion the President said that Tanzania will undertake to maintain a legal framework that will give guarantees of protection to foreign and domestic investors. Tanzania would join the International Centre for Settlement of Investment Disputes (ICSID) and the Multilateral Investment Guarantee Agency (MIGA).

On incentives he said that initial investments would be granted a tax holding on profits for the first five years of production. Constraints on foreign exchange remittance would be minimised. The President spoke at length about the importance of the private sector and appealed to the Japanese business community to invest in Tanzania – Daily News.

TANZANIA DEVALUES AGAIN
Tanzania devalued its Shilling again on December 4th 1989. This time the devaluation was by 17.1% to a new value of Shs 190 to the US dollar. The Bank of Tanzania said that the devaluation was meant to sustain recent gains in the agricultural and industrial sectors.

SWEDEN GETS TOUGH ON TAZARA
The Swedish Aid Agency (SIDA) has lashed out at ‘bad management and indiscipline’ in the Tanzania Zambia Railway (TAZARA) and threatened to pull out its multi-million dollar support unless the two states tackle the problems. In identical scathing letters to the Ministers of Communications in Tanzania and Zambia the Director General of SIDA said that it was not in the interests of Sweden nor the TAZARA owner countries to finance investments in the railway as this would merely replace resources being wasted due to bad management and indiscipline.

He noted that when the line was handed over to Tanzania and Zambia in 1976 there were 128 locomotives. Of these, only 39 were in operation in October 1989, another 39 were awaiting repair and 50 had been scrapped. Between July 1986 and August 1989 12 locomotives, 140 wagons and 26,500 sleepers had been damaged in 145 accidents costing roughly US$12 million. This excluded losses on salvage operations, opportunity losses and permanent loss of market share. The procurement of 350 new wagons by TAZARA with Swedish support would merely cover about seven years of wreckage of wagons at the present rate he said.

Sweden is in a US$ 4O million agreement to aid TAZARA. The total amount of aid being provided by all donors is US$ 150 million. Sweden had offered to help finance a thorough review of the TAZARA management system by an experienced consultant.

An official of the Finnish Development Authority said that though they had not yet evaluated a Finnish supported project involving the supply of rescue cranes and rerailing equipment, casual observation would show that there was a state of indiscipline and slackness within the authority’s management.

An official with the Norwegian Development Agency who spoke on condition of anonymity said there was a state of turbulence in TAZARA.

A USAID representative however stated that he did not see the problems that other donors had ‘capitlised on’ but that his agency would be ready to offer short course training in management. USAID is providing 17 locomotives and manpower training to TAZARA.

Speaking a month earlier TAZARA General Manager Standwell Mapara said that the railway, after several loss-making years, now seemed to be on the right lines. It would shortly be one of the most profitable lines in Africa. It had recorded losses of US$37 million in its first seven years but since 1984 it had begun to make meaningful profits. In 1986/87 it had earned a surplus of US$413,000.

The line was now carrying one million tons of freight – double the carrying capacity of 1986 and this would shortly increase to 1.6 million tons thanks to the modernisation programme being supported by eleven Western countries and international agencies – Business Times/Daily News.

CABINET RESHUFFLE
President Mwinyi reshuffled his cabinet in September 1989. He took over the Defence portfolio himself and moved five Ministers. This followed the departure of Mr Salim Ahmed Salim for his new post as Secretary General of the Organisation of African Unity. A full Ministry of Information was set up and the International and Regional Cooperation portfolio which was under the ministry of Foreign Affairs was shifted to the Ministry of Finance.

Shs 2 BILLION IN BRITISH AID
The British Government has agreed to give Tanzania £10.4 million (Shs 2.47 billion) in support of its Economic Recovery Programme. Some £4.5 million will also support English teaching. The programme will be expanded to cover 324 government and private secondary schools and will concentrate on a reading programme and in-service training for Tanzanian English language teachers.

Britain’s support for the University of Dar es Salaam will continue with the provision of 3508,920 to institute a MS Education programme in Applied Science at the Department of Zoology and marine Biology.

Tanzania’s Police force will receive £358,250 to assist in training programmes for criminal investigation and prevention.

The Songea-Makambako road built by Britain, will receive £1.57 million for extension of the existing maintenance project and the rehabilitation of the Lilondo quarry.

PARASTATALS RECEIVE ‘CLEAN’ REPORTS
More than half of the 396 parastatal accounts audited for the year ending June 30, 1989 received clean reports, The total of 51.5% is the highest proportion yet achieved. Another 35% of the account s were given qualified audit reports. 176 accounts disclosed profits and 189 recorded losses – Daily News.

SHERATON TO MANAGE KILIMANJARO HOTEL
According to the November 10th issue of Tanzania’s ‘Business Times’ Sheraton International will assume the management of the Kilimanjaro Hotel in 1990 under a partnership agreement with the Tanzania Tourist Corporation. Seven other hotels, including the Lake Manyara Lodge, Ngorongoro Lodge, Kunduchi Beach Hotel and the Mafia Lodge will also enter into joint management agreements with Accor, a French fir~ which Is already managing the Mount Meru Hotel. All the hotels are to undergo extensive repair and expansion at a cost of some US$35.0 million to be provided by a consortium including Swiss, German and Yugoslav firms plus the European Investment and African Development Banks.

The Economic Recovery Programme (ERP) came to an end on 30th June 1989. On balance it has been a successful programme, though formidable problems remain. Between 1978 and 1985 overall growth reached an average of only 1.5% per annum and, since the population was growing at an average rate of 2.8% per annum, this represented a decline in living standards. In 1986, however, this situation was reversed with an economic growth rate exceeding that of the population at 3.6% and in 1987 at 3.9% while in 1988 the growth rate reached a level of 4.1% Export income grew and the contribution of non-traditional exports, though small, showed particular promise. Employment, except in minerals, rose. Many consumer goods again became available in the shops though generally at a high price and, following a reasonable series of harvests, food was generally available, though special measures had to be taken to deal with local shortages caused by flood damage earlier this year. The improvement in the economy was sufficiently visible and pervasive to bring about an atmosphere of hope and expectation, leading to an improved state of morale and a spirit of enterprise.

While the importance of these gains must not be underrated, they fell short in certain important respects of the targets set out in the ERP. Overall growth at 4.1% in 1988 failed to reach the planned growth figure of 4.5%, while official export revenues were substantially less than planned expectations. Inflation, which was expected to have fallen to 20% in 1988, in fact remained stubbornly at 28.2% These outcomes do not invalidate the policies implicit in the ERP, but expose the unreliabilty of some statistics and the difficulty of forecasting in present circumstances. For example, in respect of export revenues, the true situation may be considerably better than the official figures suggest. Total exports in 1988 are estimated to have been nearer to US. 686 million than the official figure of US$ 362 million in view of the substantial volume of exports that are at present going unrecorded. Notwithstanding these shortfalls in performance, the trends set up by the ERP were promising.

INFLATION AND THE TRADE GAP
But great difficulties lie ahead. The two most critical problems are reduction of the rate of inflation and narrowing the gap between export earnings and import requirements. High rates of inflation present a constant threat to standards of living and, in the absence of indexing, wage adjustments always lag behind price increases. Inflation creates incessant cost problems for industry and places serious impediments in the way of economic forecasting. As to the trade gap, exports pay for no more than a third of imports, the shortfall being made up chiefly by external aid in the form of loans and grants. This degree of economic dependence is highly undesirable and explains the great importance rightly placed by the Government on a vigorous programme of export promotion.

THE MONEY SUPPLY AND THE EXPANSION OF CREDIT
But neither of these tasks is easily accomplished. The main engine driving inflation is the excessive growth of the money supply and the expansion of credit. By addressing these problems the Government hopes to bring down inflation to 20% by the middle of 1990. Part of the difficulty lies in the financing of the recurrent budget, inevitably made more difficult by the increase in wages and salaries in the public service announced in the budget speech, increases essential to morale not only in government, but also throughout industry and the parastatals where equivalent rises are expected. Nevertheless the budget for 1989-90, as in 1987-88, relies on borrowing from the banking system to fill the gap between revenue and expenditure, though only to the modest extent of Shs 600 million, amounting to 0.4% of total revenue.

The most serious problem lies in the expansion of credit to the marketing boards and cooperatives. The ERP aimed to contain the increase in credit to 15-20%, but in the event it rose by 23% in 1985-87 and 55% in 1987-88. The aim in 1988-89 is to limit the growth of credit to 30% Much has been said about the inherent inefficiency of the marketing boards, but there are also practical reasons for their insatiable need of funds. The dilapidated state of the roads and the obsolescence and inadequacy of transport vehicles have caused great difficulty in the movement of crops, leading to increased costs both in the transport sector and for the financing of stocks. These problems have been exacerbated by a substantial growth in production, especially of maize and cotton, and the inadequate capacity of processing factories, particularly in the case of cotton, tobacco, sisal and coffee. Between June 1986 and March 1989, credits to the National Milling Corporation grew from Shs 2,465 million to Shs 6,249 million while advances to the cooperatives increased almost sixfold. During this period the National Bank of Commerce was obliged to resort to the Central Bank to finance the needs of the economy including the crop parastatals and the cooperatives, and Central Bank advances to the National Bank of Commerce rose from Shs 418 million to Shs 40,595 million. The control of these inflationary influences lies not only in an improvement of financial management within the marketing parastatals themselves, but in the rehabiltation of Tanzania’s entire transport system and the rebuilding and expansion of processing capacity. Vigorous steps are in train with the help of external aid to rehabilitate transport and crop processing establishments, but, especially in the case of transport, it will be a long haul.

The improvement of transport and communications will also boost exports. Furthermore, the Government plans to extend the ‘retention scheme’ under which exporters may retain up to 35% of their export earnings in foreign exchange to finance machinery spares and designated imports of consumer goods. This arrangement acts as a strong incentive to traders seeking to enter export markets. Banking facilities in foreign currency are to be established at the National Bank of Commerce to accommodate traders’ export earnings. These arrangements will help to avoid the bureaucratic delays and uncertainties associated with applications to the Central Bank for foreign exchange and will greatly simplify the satisfaction of exporters’ requirements obtainable only in foreign currency. A further devaluation of the shilling from Shs 137 to 145 to the $US will also increase exporters’ profit margins in local currency terms.

Closing the trade gap will call for unremitting effort over a number of years. Apart from traditional exports, Tanzania has no great experience of exporting and a learning process will have to accompany the efforts of entrepreneurs, who, in increasing numbers, are attracted by the idea of entering the export field. Active consideration is now being given to the creation of advisory and information services for the benefit of traders entering foreign markets for the first time. The exploration of new commodities and new markets is all the more important both because of the stagnation in the world prices of traditional products and also because of the greater security to be obtained from a wider spread of export commodities. Competition among primary producers desperate to solve their foreign currency problems seems likely, in t he absence of natural calamities, to depress the prices of many traditional products in the near future.

Although, in common with previous budgets, much attention has been given to increases in government revenue to meet expenditure needs and reduce the impact of bank borrowing, the importance of psychological influences has not been overlooked. Thus the budget provides for an increase in the minimum wage in response to inflation, while the income tax threshold has been raised. At the same time income tax liability has been reduced. The psychological effects of budget changes are of considerable importance at all income levels for the successful prosecution of policies for economic recovery.

Nevertheless, the fact has to be faced that, in the words of the Minister of Finance in his budget speech to Parliament “development is a long journey and there are many pit falls along the way”. One such impediment is the growing obligation in respect of the payment of interest and capital on external debts, which are a prior charge on the country’s foreign exchange resources. In 1970 Tanzania’s external debt service was equivalent to 5.3% of export earnings but by 1987 obligations had risen to 18.5%. Discussions with the World Bank, the IMF and bilateral donors are continuing with a view to a reduction of the debt burden by extending the repayment period in certain cases. The recent decision by Belgium, France and the United States to convert loans into gifts follows similar previous action in the same sense by Britain, France, West Germany and some other countries.
J. Roger Carter

MANY CHANGES IN BUDGET
– Income tax down by 5% to between 10 and 50 per cent; taxable income level raised from 1,500/- to 1,900/- per month;

– the shilling devalued again to 145/- to the dollar instead of 137/-;

– minimum wage increased from 1,645/- to 2,075/- per month; a new four-category civil service salary structure (Operational Service 2,075/ to 7,285/- per month; General Scales 3,095/- to 12,075/-; Rare Professions such as pilots 5,980/- to 16,400/-; Super Scales for senior executives 12,785/- to 19,035/-);

– secondary school fees up to 2000/- instead of 1500/- per annum for day schools and 4000/- instead of 3000/- for boarding schools;

– airport service charges up from 510 to 520 for non-residents;

– taxes on cars, videos, refrigerators, cookers and other luxury goods increased;

– beer (a Safari Lager will now cost 152/- in grocers and 176/- in tourist hotels) soft drinks, cigarettes and petrol taxes up;

– land rent up by 50%;

– Tanzanian nationals working abroad can now open foreign accounts with the National Bank of Commerce or Bank of Tanzania.

Tanzania is now in the fifth year of its economic recovery following six years of drought. Food production has grown at 3.5 to 4% over the past three years. The economic growth rate for 1988 seems certain to reach 5%, with inflation on the decrease and some signs of vigorous recovery in industrial output. Over the past four years the Gross Domestic Product (GDP) has grown about one fifth from its low point in 1983, and over one seventh from its recession level in 1978. These figures show the long hard slog that faces Tanzanians on the road back to full recovery. The present pace of growth remains unsatisfactory, with the living standards of almost half of urban households and, perhaps, a third of rural households still only at, or even below, the poverty datum line.

Sustained recovery now depends on at least a few more years of reasonable rainfall; increased efficiency in the public and private sectors; a lessening of the defence budget (which has risen because of the military aid being given to Mozambique); and on the terms of foreign trade not changing adversely. Given these conditions it is possible for Tanzania to maintain a growth record of 6 to 8% through to 1991; even so, this would restore per capita income to between 93% and 100% of the 1977 level – the year of Tanzania’s economic collapse due to the quadrupling of oil prices; the beginning of the six year cycle of drought; the cost of the war against Amin’s Uganda; the downturn of world trade prices for the country’s exports, and the increase in the cost of imports; as well as because of some mistaken government policies, especially in the performance of several parastatals.

Writing in the next volume of the African Contemporary Record, Prof. R. Herbold Green of the Institute of Development Studies of Sussex University, estimates that the cost of Tanzania’s military assistance to Mozambique was between US$ 125 and US$ 150 million in 1987-88. Two thirds of this expenditure involved direct or indirect imports. The restoration of security across the border would therefore be of considerable benefit to Tanzania’s national budget.

Weather and trade terms are ever present threats. However, the last four averagely good harvests have enabled the country to build up a maize reserve of up to 180,000 bags, which is enough to see it through at least one bad season.

Prof. Green estimates that external financial gross inflows are probably in excess of between US$ 500 and US$ 900 million. If technical assistance is excluded, the figure is between US$ 650 and US$ 800 million which, he says, is not enough for the country’s needs – especially if there is still no agreement on alleviating the unmanageable external debt-service burden.

Exports have not increased as much as was hoped for due to disease of cashew nut trees, falls in coffee prices, a slow turnaround of sisal production and bottlenecks in processing and transporting cotton. But even if these products, which form the old bases of export earnings, are marketed normally, they would still be insufficient to produce the needed lift-up of the total economy. They will need to be supplemented by increased manufacturing, natural gas exploitation and greater gold production.

Efficiency increases have been achieved – from grain marketing through operations of the Dar es Salaam harbour to electricity; but there are still sectors of poor services such as water supply for the capital, local transport, agricultural processing and in much of industry.

Prof Green cites three reasons why Tanzania’s external balance remains fragile.

First, with 1987 imports of goods at US$ 1,092 million and exports at US$ 347 million, only a net transfer receipt in excess of exports is able to keep the gap plugged. Second, exports are not rising rapidly, remaining static over 1986-87, with main commodity proceeds falling over 20% for price and volume reasons, balanced by rises in manufacture, secondary commodities and minerals . Third, the 1987 import level of US$ 1,092 million (only 4% up nominally and down perhaps 6-8% in volume terms on 1986) includes US$ 125-150 million worth of consumer goods and, perhaps, US$ 50-75 million defence-related elements not included in the US$ 1,200 million minimum imports for efficient rehabilitation and operation of the economy so that the shortfall is of the order of 20% Compared to the 1983 situation, however, imports are up over 35% in nominal terms (and perhaps 25% in real terms), and external transfers are up markedly, albeit exports have actually declined (largely for price reasons), falling over US$ 90 million to 1985 before rising to over 1]S$ 60 million thereafter.

On a fiscal year basis the trends are slightly more encouraging. The 1986-87 level was US$ 355 million and 1987-88 is estimated at US$ 388 million; but even here main commodity exports showed a fall of US$ 44 million whereas exports of manufactured goods rose US$ 32 million (the whole net gain), and of minerals and secondary commodities by US$44 million.
Colin Legum

Asukile Kyando of SHIHATA has been interviewing Mr. Sylvanus Mipawa, General Manager of Williamson Diamond Mines about the present state of affairs at the mines.

They are situated in Mwadui town in Shinyanga region and were first discovered in 1940. They have the largest Kimberlite pipe in the world with a surface area of 360 acres. 50% or more of the production is gem quality diamonds. Total gross diamond sales between 1958 and 1987 are quoted at Shs 5,309 million. There are about 3,000 workers. The mines recorded their highest production of diamonds in 1966 – 47,000 m carats (a carat is equivalent to 0.2 grams) but in 1987 there were only 124,000 m carats.

One of the main reasons for the fall in production is the diminished ore grades. The former and richer deposits have been depleted after 48 years of mining but there still remain some 75.4 m tons of ore reserves at a grade of 5.1 carats per 100 tons. Ore available for mining to the planned 300 ft level is 35.1 m tons with a total of 2,202 m carats of diamonds. “So therefore” Mr. Mipawa said, “we shall keep on hearing about Mwadui mines for a very long time to come – we are certainly talking of a lifespan of at least ten years – provided that steps are taken to rehabilitate the plant and machinery”.

Mr. Mipawa was asked how he compared the old Mwadui and today’s Mwadui. He replied: “Mwadui town is relatively new. The biggest part of it was built in the 1960’s. Hence people have sweet memories of new houses, roads and other facilities. But now the town has started to age. It requires a facelift. Mwadui was also famous for its very modern self-service supermarkets with almost everything one can think of on sale. That is no longer the case and the difference is significant. …. Even in the production areas things have changed. The plant is old and its performance is very unsatisfactory … What we have in mind is to carry out a rehabilitation programme that will put plant availability back to an average of 80% In order to do so we will need at least US$ 5.0 million.”

Nearly half the parastatal organisations whose accounts were scrutinised by the Parliamentary Parastatal Organisations Committee in 1986 were loss making the National Assembly was told recently. The loss making institutions included the Tanzania Railways Corporation which lost Shs 110 million in 1982; Mwanza Textile Mill, Shs 87.2 million in 1984; the Sugar Development Corporation Shs 39 million in 1985; Musoma Textile Mill Shs 28.3 million in 1984; Tanganyika Planting Company Shs 19.8 million in 1985; and the Kagera Regional Trading Company Shs 15.9 million in 1983.

Profit making parastatals included the National Bank of Commerce with a profit of Shs 405.1 million in 1985, the Bank of Tanzania Shs 303.1 million in 1985; Tanzania Harbours Authority Shs 45.5 million in 1983; Aluminium Africa Shs 29.1 million in 1984; Arusha Regional Trading Company Shs 29.1 million in 1984; and Tanzania Elimu Supplies Shs 29 million in 1983.

Meanwhile, the Minister of Finance, Economic Affairs and Planning, Mr. Cleopa Msuya, has been telling a ‘Workshop on Public Enterprises’ in Dar es Salaam that the public sector had grown from 43 parastatals in 1967 to 421 today.

He said that out of the 707 establishments in the industrial sector employing 10 or more people 196 were wholly or partially state owned. He spoke of the deficits in certain parastatals as being a matter of grave concern and said that they were suffering from inexperienced management, over-extended involvement, over-employment, failure to adjust to changing circumstances, financial problems, inefficient working practices and inappropriate technologies.

Mr. Msuya noted that in the UK nationalised businesses were being privatised, in the Soviet Union a policy of ‘Perestroika’ was being evolved and in China ‘open door’ policy had been adopted.

In Tanzania loss making enterprises like sisal estates had been sold and others closed or merged – Daily News

WHO WILL BOSS THE BOSSES?
This problem of loss making parastatals became the subject of a subsequent article in the Sunday News by its satirical writer, Adam Lusekelo.

‘Why can this be?’ he asked. ‘Frankly I don’t know’ he wrote. ‘You ask the guys who are supposed to be in the know and they mutter something about socialism.

But then, who said that socialism means losses, inefficiency, embezzlement and nepotism? It’s stuff like this that gives socialism a bad name.

But should the parastatals be allowed to bleed the Treasury of a cool 2.5 billion bob? .. For example the money could be used by the Ministry of Lands, Natural Resources and Nyatis to increase the number of anti-poaching game rangers from 100 to 1000 and provide them with decent tracking equipment.

Again, do we need the loss-making paras? Of course we need them – otherwise they would not be there. Besides, they are pretty to look at. 141 loss-making paras means 141 prosperous looking general managers. 141 loss-making paras means platoons of marketing managers, legions of glamorous looking secretaries and other staff half of whom are relatives of the big boss. Long live the extended family.

Which is why I decided to approach one of the general managers to ask him why his para was making a terrible financial loss and still surviving …….
“We lose money, yes, but that is because of sabotage, imperialist propaganda, lack of inputs and … ,”
“Lack of foreign exchange” I finished the song.
“Good man. This is what I always say. Newsmen have a role to educate the masses. Now if you know that my para doesn’t have foreign exchange then the masses will know …….. ”

So I shifted to new ground. “The accountability thing. You remember Sir?”
“of course I remember.”
“Are you going to take full responsibility for the losses?”
“Of course I will”.
“So what are you going to do? Resign or beg forgiveness?”
“Who! Me? Resign? You are bonkers. Never leave your job in Tanzania. What I will do since I am the top boss – I am going to write a strongly worded letter … to myself. I will warn myself that the habit of losing government money should stop forthwith …. and, to pay for my sins, I will not drink more than four beers a day at the club ….. compared with my usual twenty. I am sure that that is punishment enough even in this age of accountability …..”