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THE ROLE OF COMMERCIAL BANKING IN RECOVERY FROM ECONOMIC DISASTER IN GHANA, TANZANIA, UGANDA AND ZAMBIA. Charles Harvey. Institute of Development Studies. May 1993.

In this paper Charles Harvey examines the deterioration of the banks in four African countries and the slow progress of reform. He provides a lucid discussion of the economic and historical context and identifies a number of key themes which explain the enormous obstacles to creating sustainable and efficient banking systems.

Harvey focuses on three different types of banks. In Tanzania the expatriate banks were effectively nationalised after independence and it is only in the last year that commercial banks have re-entered the market. The first two, Standard Chartered and Meridien are dwarfed by the 100% government-owned National Bank of Commerce (NBC) and the smaller but substantial Cooperative and Rural Development Bank.

The author suggests that the colonial period did not leave any effective legacy of banking supervision and that the lending policies of expatriate banks in the countries where they continued to operate, still largely exclude most businesses aimed at and managed by Africans. At independence it was scarcely surprising that governments became closely involved in the direction of bank credit towards the needs of the newly created parastatal companies.

As a mechanism for directing credit, each of the four governments created new 100% owned government commercial banks. The intention was to provide more credit than before to borrowers previously neglected. This was bound to be hazardous because the new banks were pushed into the riskier and more marginal lending business. In Tanzania, for example, the banks built up significant exposure to the marketing boards and cooperative societies.

In African economies trying to build economic growth a major part of the economic strategy is to rely much more than in the past on the private sector which, in turn, will need a banking sector if that strategy is to succeed. The author suggests that to meet this role a banking sector must provide efficient financial intermediation and a payments mechanism. He concludes that in the countries under focus the banks have failed to perform these basic functions. In part defence, it is worth pointing out the constraints to performing these functions in a country such as Tanzania. These include the lack of a securities market (which would provide alternative and additional sources of liquidity to banks and operations) and the problems created by the lack of properly functioning telecommunications at a national level.

In the period since their formation most of the government owned banks allocated credit using non-commercial criteria; for example to loss making parastatals according to instructions from the government, or to their own directors and their businesses. Government pressure on the new commercial banks to lend to politically favoured customers created significant problems. The fact that the loans were made under pressure from governments or simply under orders, meant that the banks felt little need to evaluate the loans or to press for loan servicing. Failure to service bank lending was regarded as the government’s, not the bank’s problem. This led to reckless lending and borrowing.

The effect of this was to create an increasing government liability. Governments had either to create grants to repay their commercial loans, or to recapitalise their commercial banks after writing off their loans to parastatals. One way or another it became impossible to reform the banking system without at the same time doing something about the parastatals. Meanwhile, the quality of lending to parastatals reduced the credit available to the rest of the economy. Harvey picks out Ghana as being furthest along the way to banking reform and Tanzania as being at the earliest phase.
The main features of banking reform that he identified are:
– the transfer of non-performing assets to an assets recovery trust with interest bearing bonds being issued on these to the originating banks;
– replacement of the senior management and boards of directors of parastatal banks, while giving a mandate to the replacements to improve lending policy and practice, with the main emphasis on profitability;
– the establishment of new banking laws covering licensing, capital requirements, capital adequacy ratios, and portfolio concentration, to be enforced by central bank supervisory departments; and,
– the introduction of international accounting and audit principles.
The author sees Tanzania’s position as being particularly difficult due to the extreme concentration of the banking market in the hands of the NBC, the precarious economic situation of the parastatals and the legacy of subversion of the credit process away from commercial criteria and towards other goals. In the period up to 1992 NBC’s lending effectively became an extension of the government budget, with the banking system failing to direct lending to those who could make productive use of credit.

He describes the reform of Tanzania’s banking system as an impressive attempt to sort out an impossible mess, depending on the simultaneous reform of the commercial banks and the parastatal sector. He is less optimistic about Tanzania than the other countries, primarily because government did not just interfere but completely took over the allocation of credit. As a result employees have had little or no experience of commercial lending decisions for twenty years or so. Effective change will therefore depend on significant cultural change and a substantial investment in training a new generation of staff .

The author concludes that the transition to self-sustaining recovery from recovery strongly dependent on aid will take a very long time, much longer than was thought by the donors when structural adjustment programmes were first agreed. The slowness of commercial bank reform is not the only reason for this but the paper argues convincingly that it is an important contributory factor.
Chris Darling

THE ANTICLIMAX IN KWAHANI, ZANZIBAR. PARTICIPATION AND MULTIPARTISM IN TANZANIA. M Mmuya and A Chaligha. Fredrich Ebert Stiftung/Dar es Salaam University Press. 1993. 145 ps.

The first parliamentary by-election under multi-partyism was held in the Kwahani constituency in Zanzibar on April 18th 1993. It was an anti-climax because all the eleven opposition parties except one (the small Tanzania Peoples Party – TPP) boycotted it because of what they described as an intransigent and belligerent CCM regime in the Isles.

But the book itself is far from being an anti-climax. One cannot but be impressed by the sheer quantity of facts and figures and the skillful analysis of the political scene in Tanzania which is squeezed into this modest little publication; about the tangled politics of Zanzibar and how people still tend to be categorised as either supporters of the revolution or supporters of the former Sultan; the ideological vacuum; the Union issue; the powerful influence of the main opposition party the CUF: the religious factor; the effectiveness of CCMrs well-organised campaign; the part played by flags/dress/poetry/dance/music/gifts in the election; the details of the electoral process (including government funding) which had been laid down in the Political Parties Act No. 5 of 1992; the determined and successful efforts of the Electoral Commission to ensure a free and fair election; and, a lot of sound advice to aspiring opposition politicians.

Above all, the book gives an analysis of the significance of the 205 different ‘Maskani’ (neighbourhood meeting places which have become associated with the traditional and radical CCM at the grassroots) and how they are becoming a problem both to the CCM leadership and the new opposition parties. And the result of the by-election? The CCM candidate won with 89.3% of the votes cast. This is an essential read for anyone interested in politics in Tanzania in 1995 – DRB.

A COORDINATING AND PARTICIPATORY APPROACH TO MANAGING CITIES: THE CASE OF THE SUSTAINABLE DAR ES SALAAM PROJECT IN TANZANIA. Francos Halla. Habitat International. 18. (3) 1994. 12 pages.

This paper begins by demolishing the supporters of the ‘Master Plan Approach’ to town planning. The author quotes approvingly another writer’s criticism of it – ‘misleading in stated objectives, unrealistic in expectation of future conditions, invalid in diagnosing underlying causes of the most pressing problems, irrelevant in choice of major professional concerns, inflexible and static in methods and procedures, ineffective in influencing the direction of public resources or interventions …. We learn that Dar es Salaam has been ‘master planned’ (‘futile preoccupation’) in 1948, 1968 and 1979.

By contrast, after only two years, the pilot ‘Sustainable Dar es Salaam Project’ (SDP) with technical assistance from UNCHS (Habitat) is pronounced a success. The SDP seeks to ‘coordinate the development activities of all the key actors and promote their participation in all sector’s of the city’s community – popular, private and public’. The procedure involves four stages:
– preparation of the city’s environmental profile;
– consultation on environmental issues;
– preparation by working groups of action plans;
– strategic planning framework as a policy document for an increasingly effective management of the city;
The paper records achievements to date but indicates also some of the practical and institutional constraints. For example, unsuitable offices, the bureaucracy of both central and local governments, lack of funds, the dominance in working sessions of the public sector, the tendency for some of the actors to be entrenched in the orthodoxy of urban planning, and, most disturbingly, the author’s statement that ‘the continued existence of the approach has to a greater extent depended on the determination of the technical support team and financial support by international donors. Is this another imported project destined to disappear when the funds run out? – DRB


INSECT MAN: A FIGHT AGAINST MALARIA IN AFRICA. Alec Smith. Radcliffe Press. 1993.

This is one of a series of a dozen very personal memoirs of the lives of British expatriates in Africa at the end of the colonial era. Alec Smith spent the decades before and after independence in Tanzania working on the mosquitoes which carry disease and on insecticidal methods of controlling them. In 1950 he went to Ukara island in Lake Victoria to work on the mosquitoes which carry filarial worms, the cause of elephantiasis. There he first acquired the nickname Bwana Dudu from which the book’s principle title is derived. He then went to the Pare district to participate, during the late 1950ts, in the important Pare-Taveta scheme, in which residual deposits of the insecticide dieldrin were sprayed on the inside surfaces of the walls and roofs of houses to kill mosquitoes as they rested before or after biting. It is rather shaming to present-day medical entomologists to note that the Pare-Taveta scheme, with 1950’s technology, did a better job in suppressing malaria and the child mortality which it causes than anything which has been achieved in recent years anywhere in tropical Africa.

Around the time of Tanzanian independence Alec Smith and his wife moved to Arusha where he was on the staff, and later Director, of the Tropical Pesticides Research Institute. This Institute is intended to act as a base for evaluating insecticides, herbicides etc. for use throughout Africa, and beyond, against insects of medical importance, as well as agricultural pests of all kinds. Among his other achievements Alec Smith developed ingenious designs of experimental hut for the thorough evaluation of insecticides which repel and/or kill mosquitoes. Groups of these huts were built at Magugu, beside the road from Arusha towards Dodoma, and at Taveta on the Tanzania-Kenya border. These huts, built in the early 1960rs, are useful to researchers to this day.

Despite the book’s subtitle ‘a fight against malaria in Africa’, these important achievements are dealt with quite briefly and most of the book is devoted to an often very detailed account of what it was like for a young British couple to live in upcountry stations and in Arusha in colonial Tanganyika and in newly independent Tanzania. Matters such as amateur theatricals and tennis tournaments which apparently occupied much of the spare time of the hard-working British expatriates of yesteryear, are given much prominence. After leaving Tanzania in 1973 Alec Smith took up W.H.O. postings in southern Africa, Nigeria and Geneva. The period was very productive – the still current W.H.0 manual on chemical control of vector insects was compiled at this time by Alec Smith. He also claims credit for the idea of impregnating mosquito bednets with pyrethroid insecticides, which is the currently most popular, and rapidly spreading, method of protection against malaria mosquitoes. The roots of this idea can (as with most good ideas) be traced to several sources (repellent treated clothing in the USSR and USA , DDT treated bednets used in the Second World War, pyrethroid treated clothing in North America and insecticide treated bednets in China and in francophone Africa). However, Alec Smith certainly deserves credit for presenting the idea to a W.H.O. meeting and having it endorsed and propagated through widely-read W.H.O. manuals.
Chris Curtis

LAND TENURE REFORM IN EAST AFRICA: GOOD, BAD OR UNIMPORTANT? T C Pinckney and P K Kimuyu. Journal of African Economics. Vol 3. No 1. March 1994. 28 pages.

Despite its ambitious title this 1991/92 study was based on only about 115 households each in similar coffee-growing communities with very different historical backgrounds in Kenya and Tanzania. The authors compare the individual smallholder property rights developed in Kenya, which they conclude were cost ineffective, with the policy of abolition of private land titles by Tanzania after independence. Coffee had been developed in Tanzania as an African cash crop from about 1905, with its greatest expansion after 1920 whereas in Kenya it was developed as a ‘European’ crop, with prevention by the ‘settlers’ of ‘African’ development pre-1946 except in the remote districts of Meru and Kisii. Thereafter expansion was inhibited by the Mau Mau Emergency and the government’s programme of consolidating the numerous fragmented smallholdings.

The surveys were chosen from clusters which had been sampled in national surveys in the late 1970’s and again in 1982-83 in the Kenya district of Murang’a and above Moshi in Tanzania. The land holdings averaged two acres in Murangfa and four acres on Kilimanjaro, half in the coffee/banana zone and half below where annual crops are grown. The purpose of the study was to compare the individual land tenure under Kenya’s programme of consolidation of fragmented smallholdings, which was aimed at encouraging effective crop husbandry through possible access to credit and better security of investment, with Tanzania’s nationalisation and prohibition of purchase, sale or rental of land. While the Kenyans appreciated land consolidation, the authors consider that the funds needed for the subsequent land registration could have been much better spent because land titling did not lead to any increase in land-secured credit, partly because of failure to develop it. The authors did not examine the issue of indigenous tenure systems versus individualisation. The argument is about small farm tenure. Kenya embarked on its programme of consolidating densely fragmented smallholdings and the registration of land titles in 1956 and the prograiame has continued to this day, .even in remote areas. They started in areas with good potential for cash crop development – coffee, tea, pyrethrum and export of horticultural crops. The study does not consider or evaluate the benefits of economic crop development.

The authors find that densely populated communities as in Kenya may lead to landlessness and poverty. In Tanzania, the emphasis was on equity which demanded that land should became state property leaving a situation of laissez faire. In fact, in the area of Tanzania under study, land under permanent cultivation (coffee/bananas) was personalised for people to cultivate as long as they wished and land was still inheritable by sons, thus the tenure was as good as freehold. So, while the two countries have pursued extremes in land policy, the authors have come down on the side of Tanzania!
R J M Swynnerton

OTHER PUBLICATIONS

ARCHAEOLOGY IN THE NGUMI HILLS: IRON AGE AND EARLIER CERAMICS.
Carolyn Thorp. Azania. Vol 27. 23 pages. 1992 DRIVE SLOW SLOW – ENDESHA POLEPOLE. Carlotta Johnson.1994. 91 pages. £6. Obtainable from Jane Carroll, Britain-Tanzania Society (which will receive receipts from sales), 69 Lambert Road, London SW2 5BB. An account of a return to Tanzania after 17 years. The author describes it as a very personal account of belonging and not belonging and recommends it to anyone who recalls their own youthful contribution to the country, how little they learned at the time and how much they have realised since.

STYLISTIC APPROACHES TO E KEZILAHABI’S NOVELS AND POETRY.
Elena Bertoncini-Zubkova. Afrikanistische Arbeitspapiere. Vol 31. 1992. 62 pages.

MOSQUES, MERCHANTS AND LANDOWNERS IN ZANZIBAR STONE TOWN.
Abdul Sheriff. Azania. Vol 27. 1992. 20 pages.

DECENTRALISATION, PARTICIPATION AND SPATIAL EQUITY IN RURAL
TANZANIA: A COMMENT by Joseph Semboja and Ole Therkildsen. World Development. Vol 22. No 5. 1994. 4 pages.

THE SOUTHERN AFRCIAN ENVIRONMENT: PROFILES OF THE SADC
COUNTRIES. P O’Keefe and others. Earthscan Publications. 1993. 354 pages. Environmental problems faced by nine countries including Tanzania.

CHANGES IN BLOOD TRANSFUSION PRACTICES AFTER THE INTRODUCTION
OF CONCENSUS GUIDLINES IN MWANZA REGION. J Vos and others. AIDS Vol 8 No 8. August 1994. 6 pages.

A COMMUNITY MODEL OF AFRICAN POLITICS: ILLUSTRATIONS FROM
NIGERIA AND TANZANIA. G Hyden and D C Williams. Comparative
Studies in Society and History. 36. (1). January 1994. 28
pages.

EAST AFRICA: A TRAVEL SURVIVAL KIT. G Crowther. Lonely Planet.
1994. 32 pages.

COMMUNITY NUTRITION FOR EASTERN AFRICA. Ann Burgess and
others. African Medical and Research Foundation (AMREF). 286
pages. 1994. f 4.65 + p&p from TALC, P 0 Box 49, St Albans,
Herts AL1 4AX. A short up-to-date low-cost practical nutrition
manual for community-based workers.

THE POLITICAL ECONOMY OF LAND REFORM IN ZANZIBAR. I F Shao.
Dar es Salaam University Press. 1992. 106 pages. £6.50.

AIDS EDUCATION FOR PRIMARY SCHOOL CHILDREN IN TANZANIA: AN
EVALUATION STUDY. Knut-Inge Klepp. AIDS 9 (8) August 1994. 6
pages.

INDIGENOUS FARMER-MANAGED IRRIGATION IN SONJO, TANZANIA.
Geographical Journal. 160 (1). March 1994. 15 pages.
COST-EFECTIVENESS OF CHEMOTHERAPY FOR SPUTUM SMEAR-POSITIVE

PULMONARY TUBERCULOSIS IN MALAWI, MOZAMBIQUE AND TANZANIA.
Eric de Jonge and others. International Journal of
Health Planning and Management. 9 (2). April-June 1994. 30 ps.

(Tanzanian Affairs has information about many more recent publications but due to pressure on space these will be listed in the next issue – Editor)

LETTERS

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HISTORICAL DICTIONARY
I am at present working on the second edition of the Historical Dictionary of Tanzania for Scarecrow Press. As I would like to include an entry on the Britain-Tanzania Society I was hoping you could provide me with some information about your society.. . . . .I would also like to know when the Bulletin of Tanzanian Affairs started publication as I want to include it in the periodicals list.
Thomas Ofcansky
Arlington, Virginia, USA

THE NAME OF A MOUNTAIN
Thanks to Mr Duff for his response to my letter concerning the Morogoro mountain Mguru (ya) ndege. I should like to know more about the ‘upupu’ (macuna bean) which deterred people from hillwalking In the Morogoro region. Could this plant be the source of the penetrating thorns which dogged our ascent and which are still embedded in my hiking socks to this day?

It was intriguing to learn the local belief that Mindu was the home of a large snake. My ascent of Mindu in 1992 revealed no such serpent but future climbers should not assume that there are no snakes on this mountain. My father and colleagues at Sokoine University reported a number of species of snakes on and around her slopes and indeed, from time to time, reptiles found at the university were released there. Perhaps your readers could also throw light on the name ‘mafiga’, a village not far from Mindu and my parents’ home from 1991-93. We learned two theories as to how it earned this name which in Kiswahili means the three stones for supporting a cooking pot. First, the village was said to be a popular place for collecting good cooking stones which did not crack in the heat of a fire. Second, it is positioned between three mountains (Mindu, Mguru ndege and the Ulugurus), each apparently representing one of three stones of a giant mafiga. Or is there an entirely different explanation?
Max Cooper

FIRM "NO" TO GOVERNMENT FOR TANGANYIKA

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1.3 million members of Tanzania’s ruling CCM party, in a consultation process or ‘internal referendum’, have reacted overwhelmingly against a previously strongly supported Parliamentary motion that a separate government should be set up for Tanganyika. 61% voted for continuation of the present two-government structure i.e. the Government of the United Republic of Tanzania and the Government of Zanzibar; 29% for the establishment of one single government for Zanzibar and the mainland; and, only 8% for the creation of a third government for the mainland.

This decision becomes CCM party policy for forthcoming elections. It is not clear what happened next in Parliament but, according to a heading in the Swahili newspaper ‘Majira’ (August 9), the Group of 55 M.P’s who had been campaigning for a Tanganyika Government were being ‘condemned for being swallowed by the CCM party’. It is believed that there was strong support in parliament for a single government, although this would not be acceptable to Zanzibar. The CCM party did make it clear however that the ultimate aim should be a single government for the country.

TRIUMPH FOR NYERERE
These developments represent a triumph for former President Julius Nyerere who has been waging a crusade to preserve the Union in its present form. He felt that setting up a third government would mean the end of the Union.

Invited to speak at the crucial National Executive Committee meeting of the party during the weekend starting July 30th Mwalimu Nyerere delivered a passionate speech in defence of the constitutional status quo.

Because of the, for him, favourable result of the consultation process, he said that he would not now need to leave the CCM Party, something which he had been contemplating.

ZANZIBAR TO BLAME
At a subsequent press conference he put the blame for what had happened on the Zanzibar government for having ‘taken a series of actions aimed at maximising the Isles’ autonomy in flagrant breach of the constitution’. The main action had been two years earlier when Zanzibar had joined the Organisation of the Islamic Conference (OIC) without reference to the Union government (it later withdrew under pressure from Dar es Salaam). This action, Nyerere said, had been the cause of a retaliatory demand for the setting up of a separate Tanganyika (mainland) government, which had attracted the support of many CCM MP’s and senior government personalities. He was very critical of the present (Union) government for ‘first trying to cover up the matter and then taking a year to study an otherwise straightforward case of breach of the constitution’.

Mwalimu Nyerere was also reported to have said that there were some 27 problematic issues concerning the Union which should be dealt with. But CCM party and government leaders could not solve these problems because they were afraid to confront Zanzibar President Dr. Salmin Amour he said.

Some of the ‘Group of 55’ MP’s who had been leading the campaign for a Tanganyika government accused their own CCM party of rigging the results of the consultation. Nyerere hinted that if they were unhappy with the decision they should leave the party. He seemed to almost welcome such an outcome because, only in that way, he said, would Tanzania acquire an effective opposition watchdog in parliament.

FOURTEEN AREAS OF CONFLICT
Minister of Constitutional Affairs Samuel Sitta has admitted that there are fourteen areas in which the 1977 Union Constitution and the 1984 Zanzibar Constitution are in conflict.

On August 10 one of the factors which had aroused the wrath of many Tanzanians – the need for Tanzanian mainlanders to carry passports when visiting Zanzibar – was corrected. In future mainlanders would need only an identity card or letter from an administrative location.

Other administrative problems facing the Union would be the subject of a report to be presented to parliament in the very near future. There had been seven consultative meetings between the two governments recently on Union problems.

LATEST BY-ELECTION RESULT

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The results of the latest parliamentary by-election at Igunga surprised many observers who expected veteran opposition leader Joseph Kasella-Bantu (the former MP for the constituency) to gain a respectable second place after the candidate of the ruling CCM party. The results were as follows :

Rostam Aziz (CCM) 28,502
Henry Mapalala, Civic United Front (CUF) 15,816
Joseph Kasella-Bantu, United Democratic Party 3,375
Kirito Shija (TLP) 691
Ahmed Mahboob (UPDP) 665
Hashim Ndambile (NCCR-Mageuzi) 549
Juma Mabondo (NLD) 486
Alphonce Kiyabo (WNA) 426

The success of CUF in winning 31.3% of the vote came as a surprise. Although the party is strong in Zanzibar – ‘Africa Analysis’ describes it as the ‘only authoritative and credible movement there’ – it was not considered strong on the mainland where CHADEMA, which did not contest the by-election, had been considered the most significant party.

Many opposition leaders have been criticising the present electoral law and the failure of the government to amend a number of other laws to ensure fairness in multi-party elections. CUF leader James Mapalala has decided not to apply for any further election subsidy and to boycott all forthcoming elections until his demand for a constitutional conference to amend certain existing laws is agreed.

On July 28th the Express reported that CUF Vice-Chairman Seif Sharrif Hamad had made a courtesy call on Mwalimu Nyerere. ‘The talks did not last more than an hour and the press were only allowed to take pictures before the start of the meeting’.

Justice and Constitutional Affairs Minister Samuel Sitta insisted however, that the government would not agree to a constitutional conference; the country’s constitution fully respected human rights he said. He went on to say that the government had scrutinised the 40 laws listed as inhuman by the Nyalali Commission (which prepared the way last year for the multi-party system) and it was likely that some would be reviewed.

Once again, as at the previous Kigoma by-election, the CCM party had pulled out all the stops to ensure that it would win the Igunga by-election decisively. CCM Secretary-General Horace Kolimba assured villagers that an initial TShs 900,000 would be provided before the by-election date to pay cotton growers for their crops sold in 1992/93. The government had previously provided TShs 770,000 to cooperative societies but TShs 3.2 million had been ‘squandered’ by society officials according to the Daily News.

OPPOSITION PROPORTION OF THE VOTE GOES UP

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Yet, in spite of this intensive campaigning at Igunga the total opposition vote (for all parties) at the by-election reached 43.5% of those voting – a much higher figure than in previous by-elections. In Kwahani, Zanzibar it had been only 11% (most parties boycotted the by-election), at Ileje it had been 21.5% and at Kigoma it had reached 27.3% (see graph). The opposition remains divided however and steps taken by four parties to unite (Bulletin No 48) have made little further progress. A factor which probably influences some party leaders is that all registered parties, however limited then support, can receive government subsidies to cover some of their costs in by-elections.

EARLIER BY-ELECTION RESULT ANNULLED

CCM received very bad news when, in mid-August the High Court ruled that the Kigoma by-election result was nu1 and void. The CCM party had made very considerable efforts to win this by-election and the happy result had been the cause of much celebration in the party around the country.

However, as explained in Bulletin No 48, there had been many irregularities in the CCM campaign. The court accepted four of the fourteen grounds of complaint submitted by the CHADEMA candidate in the by-election, Dr. Aman Kabourou, who had come second, and required the CCM candidate, Mr Azim Premji, to pay Dr. Kabourou’s costs. Respondents in the petition, the Attorney General and Mr Premji, were given 14 days to appeal. The main complaints had centred on participation in the campaign by President Mwinyi using government transport and the CCM bias of Radio Tanzania.

Full reactions to the news about the Kigoma result were not available as we went to press but one citizen in Dar es Salaam was quoted as saying that the court’s verdict had tarnished the image of President Mwinyi because he had taken such an active role in the by-election. The CCM MP for Karatu was quoted as saying that the monopoly of Radio Tanzania by the ruling party was unfair and that there should be a reasonable allocation of radio time for other parties. The MP for Mufindi said that the CCM had panicked. There had been no reason for the senior leadership of the country to campaign for Azim Premji.

The next by-election will be in Tabora North. Although six parties originally named their candidates for the contest there is some uncertainty as to whether most of the opposition parties will take part as they doubt whether it will be free and fair.

BENACO – TANZANIA’S SECOND CITY?

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The news from the Rwanda-Zaire border which has horrified the world during recent days has taken the spotlight away from the Rwanda-Tanzania border where, according to the media, a new city has been created – Benaco – the second largest in Tanzania – a vast encampment of 350,000 Rwanda refugees in Ngara District, Kagera Region. The new arrivals exceed the existing population (170,000) of Ngara District. This is how the media have been describing the situation as it developed:

Mangengesa Mdimi in the Dar es Salaam Daily News (June 3): If a blind and deaf person were to be driven along the road from Rusumo Bridge, on the Rwanda Tanzanian border, and asked to identify the refugee camp, he or she would have little difficulty. The revolting smell of human waste welcomes all visitors to the camp.. . .But the Tanzanian Red Cross and others have started organising the construction of latrines. There were two problems – lack of enough timber and lack of cooperation from the refugees themselves who demanded payment for digging their own latrines.-….at peak hours the main street becomes so congested that it is almost impossible to move….Minister of Home Affairs Augustine Mrema, visiting Ngara expressed his concern about the environmental damage caused by the refugee influx. “Very soon Kagera and Kigoma regions risk becoming deserts” he said. The refugees need poles to build their huts and fuel to cook and trees are being chopped down indiscriminately – the rate of tree cutting grows faster than a bush fire …..

The Economist (July 2): The (former) Ngara District Commissioner (a new DC, Brigadier Selvester Hemed, has since been appointed), whose fading Christmas decorations still hang on the walls of his home, could hardly believe his eyes. On his doorstep, in this sleepy corner of Tanzania, has sprung up one of the world’s biggest refugee camps …… Amid the chaos the place is thriving. Little shops have materialised along the roads that run through the camp. There are several big markets where refugees sell part of their aid rations to buy fresh vegetables. Tanzanian shillings, Rwandan francs, American dollars are all accepted. Beneath the blue and white makeshift awnings are bars, butchers, bicycle shops, hairdressers, electrical stores, tailors and even watch menders. A ‘nightclub’ is now open for business all day; it costs 200 shillings (38 American cents) for men and 100 for women. Zairean beer flows freely …. the new city has meant new business for Tanzanians who Sell cigarettes and cloth or hire out vehicles to journalists at $200 a day. Roads have been named after well-liked aid workers and one is named ‘Julius Nyerere’.

The reason Benaco could be set up so fast is that Cogefar, an Italian contracting firm was already in the area building roads. The government and the UN hastily altered the contract and the machinery was transferred to improving an impassable road to the local airstrip, preparing food storage sites, filling termite holes on the strip, and providing water tankers. The UN High Commission for Refugees said it was the best cooperative effort it had ever seen – 200 foreign aid officials, 300 Rwandan staff and many Tanzanians all working together.

W F Deedes in the Daily Telegraph (July 18) under the heading ‘Truly, this was hell on earth’: This is no ordinary city. Some 6,000 of the citizens are children who are totally alone. In one community of 2,000 more than a quarter are orphans. I have seen refugees in many places but nothing comparable to this … a new dimension of the human experience …. Due to tireless professional work by people like the Red Cross, Medecins sans Frontieres, CARE, Concern, Oxfam working round the clock this human swarm is ‘orderly, fed, watered and clear of epidemics’. This latter due partly to the 2,670 latrines laid out in 267 blocks of ten.

Rations are centrally distributed. Cooking is individual all of it over open wood fires. At the evening meal the district for miles around is under a gigantic smog. Along every road approaching the camp is an unending stream of people carrying bundles of wood from the surrounding countryside. What will Ngara be like in a few months time? Someone has said that it is as if a plague of locusts had crossed the land. This new city might soon strain even Tanzania’s tolerance….As one observer put it ‘To visit a land where a massive genocide has been perpetuated or condoned by a population which expresses no obvious guilt or remorse, is as close to experiencing hell on earth as I can imagine possible’.

Anthony Ngaiza writing in the Dar es Salaam Family Mirror (August): Frustrated, angry and confused Henry Mabula sits on his bench at Pasiansi Market near Mwanza gazing at a pile of fish he caught in Lake Victoria this morning. It is 6 pm and only two out of his morning’s catch of 207 fish have been sold. “For four months now we have not been able to sell fish” he said. “People believe that all the fish are polluted since they heard about the 40,000 bodies of Rwandans washed into the Lake via the Kagera River”. Fish prices have dropped by 50%. FAO and WHO experts have indicated that there is no danger – Tilapia are basically grazers; Nile Perch eat only live fish. Water quality has been tested and is unchanged. The governments of Tanzania and Uganda have made great efforts to remove all the bodies but people fear that some bodies have been trapped in the water hyacinths which are prevalent on the lake.

Tom Walker writing in the Wall Street Journal (July 18): Benaco is a microcosm of almost every evil that afflicts Africa. The aid agencies, caught up in dealing with possibly the greatest single tide of humanity this century, have unwittingly allowed social structures traditional in Rwanda to be recreated in Benaco. Some 95% of the camp is populated by Hutus who have been responsible for most of the killings in Rwanda….Hutu killers have re-established their personal fiefdoms. Tutsis and moderate Hutus who had the misfortune to end up in the camp are murdered at the rate of about five a day…. In the warming sun that followed the rainy season the atmosphere was compared to Woodstock. The comparison looks hopelessly naive now as Benaco is a dark, medieval bedlam where many aid workers now fear to tread…..after a recent riot the Tanzanian authorities promised to remove the ringleaders but when they tried there was an uprising of 5,000 refugees that led relief workers to leave the camp for a week.. Tanzania is having to strengthen its police force in the camp…..Up to one third of the food that arrives in the camp is immediately sold by refugees, trucked back from the camp and resold on Tanzanian markets…the price of maize in towns along the aid corridor has dropped dramatically. “We Tanzanians are wondering what we are getting out of all this (trouble)” said the Principal Secretary in the Ministry of Home Affairs sadly surveying a letter of complaint from a Dar es Salaam blanket company that had not sold a single blanket to the international aid effort. Tanzanian manufacturers are by-passed and even soap and bottled water have been brought in from Nairobi.

The 60 supporters of the Rwandese Patriotic Front (RPF) – the new RPF government has now been recognised by Tanzania – who, as indicated in the last Bulletin, had been arrested in Mwanza on the orders of Prime Minister Malecela for celebrating the death of the late President Habyarimana in April have been released. According to the Family Mirror this was done on the orders of the former Ngara District Commissioner.


‘PAX TANZANIANA’
Meanwhile, Mukete MP Tuntemeke Sanga has suggested that the volatile states of Rwanda and Burundi should be rejoined with Tanzania under a ‘Pax Tanzaniana’. He recalled that these small states had been removed from the larger German East Africa after the first World War and that ‘that had been the source of all their problems’. Within Tanzania they would not have been able to obtain arms to massacre each other. Mwalimu Nyerere, in a press conference in New York explained that the region affected – Rwanda, Burundi and Tanzania – had inherited, due to colonialism, artificial barriers; they had divided people who were ethnically the same. Previously, when Rwandese or Burundi refugees had crossed into Tanzania they had been absorbed but this influx was of too great a magnitude.

As we go to press there are reports of a new influx of 2,000 more refugees a day into hard pressed Tanzania.

NATURAL GAS GO AHEAD

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Tanzania’s long-awaited ambitious plan to harness its natural gas and reduce its dependence on expensive imported fuel (which takes 60% of the foreign currency earnings each year) and hydropower (which provides 70% of the electricity) has received the go-ahead. The World Bank is providing a US$ 200 million loan for the project which will be undertaken jointly by the government and two Canadian firms in a new firm called Songas. The project will exploit an estimated 32,77 billion cubic metres of natural gas on the island of Songosongo, near Kilwa. The gas will be ferried to the mainland through a pipeline and a 100-megawatt electric power station will be built. It is hoped that some of the gas can be exported to Kenya.

Songosongo’s gas deposit was discovered 20 years ago but has remained unexploited because of lack of funds, In the last six years Tanzania’s electricity demand has been growing at 12% a year and is now estimated to amount to 800 megawatts, Between 1992 and 1993 there were serious power shortages because the prolonged drought had reduced water levels at the big Mtera Dam 400 kilometres southwest of Dar es Salaam. (An item on Tanzania’s progress in harnessing hydropower is to be found in the ‘Reviews’ section in this issue – Ed)

BALANCING THE BOOKS

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Just after they had been celebrating the 1994 New Year – on January 2nd – Tanzanians woke up to a shock. Finance Minister Prof. Kighoma Malima suddenly announced a new budget – it became known as the ‘mini-budget’ – to deal with a financial crisis. There had been a severe shortfall in revenue collection and expenditure was surging ahead. Details were given in Bulletin No 48.

As Roger Carter explained in the last Bulletin, when a government cannot balance its books there are all kinds of unhappy consequences. The government must borrow more – public debt in Tanzania increased by 20.3% in 1994/95 compared with the previous year; the government owned National Bank of Commerce, which is the banker for numerous loss-making parastatals, has just had to raise its interest rates from 30% to a prohibitive 39%; the value of the currency will fall – in Tanzania it has fallen from TShs 475 to the dollar in December 1993 to TShs 520 to the dollar today; inflation will increase – it has increased from 19% in 1990 to 23.5% at the end of last year.

CLOSING THE GAP BETWEEN REVENUE AND EXPENDITURE

So, when Finance Minister Malima examined the books before planning his main budget statement in June he again had to deal with the large gap between revenue and expenditure. His budget for 1994/95 envisages the following:

Revenue 292,310 mill TShs
Expenditure 514,284 mill TShs – 20% more than last year
Gap 221,974 mill TShs

The main cause of the proposed increase in expenditure has been internal and external debt servicing and the cost of the restructuring of the financial and parastatal sectors.
The minister announced that he was determined to reduce dependency on foreign donors for recurrent expenditure but he anticipated TShs 168.846 billion still coming from donors in 1994/95 leaving a gap of TShs 53.128 billion. Sweden has indicated that it will contribute TShs 16 billion.

To avoid an increase in inflation the minister stated that he would not borrow any more from the banking system and, in fact, to indicate his determination to deal with the bulging public debt, he intended to reduce his accumulated bank borrowing by shillings 20.16 billion in 1994/95. This, of course, would increase the gap again to TShs 73.288 billion. To reduce it, the minister would raise TShs 36.319 billion by continuing to auction Treasury Bills (a procedure first adopted last year) and thus reduce liquidity and hopefully, inflation; his ambition to bring inflation down from 23% to 10% in one year seems unlikely to be achieved.

The budget gap was now down to TShs 36.978 billion and this last part would have to be raised by painful measures to increase revenue and reduce expenditure.

A whole range of such measures were announced. These included broadening the sales tax base so that contractors, accountants, consultants, tour operators and many others would now pay this tax; an increase in customs tariff from 40% to 50% and reduction in import duty on industrial imports from 10% to 5% to help local manufacturers; a 5% levy on petroleum products to stop smuggling to neighbouring countries; an increase in road toll from TShs 30 per litre to TShs 40 to help cover road maintenance costs; strengthening supervision of collection of revenue, although this is not going to prove easy given the extent of the temptation to corruption it offers; reducing the number of government ministries; strengthening the unpopular ‘cost sharing’ policy (payments made for some previously free education and medical services); and a substantial reduction in the number of government operated vehicles (a particularly heavy drain on the exchequer).

To tighten up revenue collection, regulations governing the use of custom bonded warehouses would be amended; a Revenue Board to scrutinise all tax exemptions would be set up; every taxpayer would be given an identification number; fines for offenders would be increased;


CONFUSION ON INVESTMENT INCENTIVES AND TAX EXEMPTION

The minister was less sure footed in his budget speech when he came to dealing with tax exemptions allowed under incentive schemes to attract foreign investment. These were being misused and abused he said. The minister first said that he was going to abolish all tax exemptions except for a short list including diplomatic establishments, recognised foreign NGO1s, religious institutions and very large new investments (US% 10 million or more). Responsibility for exemptions was being moved from the Investment Promotion Centre to the Minister of Finance who would have sole authority.

BACKTRACKING

Later however, it had to be admitted that where there had been unpalatable tax exemptions these had been authorised by the Ministry of Finance and not by the Investment Centre. Under heavy attack from investors and the press the ministry back tracked on July 14th. All investors whose projects had been approved and been issued with tax exemption certificates before the budget were to be tax exempt. But, future tax exemptions would be ‘expost facto’ i.e. exemption would be granted only after completion of the project and the beginning of production or of delivery of the service. Raw materials, consumer items including spare parts, projects related to transportation of transit cargo, banking, radio, television, restaurants, casinos and tour operators would not qualify for tax exemption. Exemptions would be given for new projects worth more than US$ 5 million or, in the case of projects involving rehabilitation/expansion where they were worth US$ 2.0 million or more.

These instructions disturbed an already not very favourable environment for attracting investment so on August 10th there was further backtracking. ‘Business Times’ reported that President Mwinyi had ordered a revision of the Finance Bill to restore the tax exemption authority to the Investment Promotion Centre. To add to the confusion it was announced that a number of other changes would be made in the budget including the $10 million and $5 million minimum tax exemption qualifications.

It was also decided to amend or repeal the Exchequer and Audit Ordinance so that the Minister of Finance would remain one amongst other institutions and not first among unequals in tax administration. Incentives would also be restored for imports of spare parts and raw materials.

News that an electricity rationing scheme would have to be introduced in Dar es Salaam on August 15th because of the low level of the Mtera dam which provides hydro-power must have sent a further shiver down the spines of investors but longer term prospects for electricity supplies are good with many projects under way and new ones starting.

DRASTIC CUTS IN DIPLOMACY AND VEHICLES

Tanzanian diplomats received a shock when Foreign Affairs
Minister Joseph Rwegasira announced on August 9th that six of Tanzania’s 26 foreign missions would close shortly including, it is believed, Ottawa, Geneva, Paris and Harare following the closure in 1993 of the embassies in Angola, Zaire and Rwanda. In the remaining missions staff would be reduced and no more than four diplomats would man the largest. It was hoped to save $10 million per year. A new embassy has been opened in South Africa.

The government has also announced that three-quarters of its 18,000 vehicle fleet would be earmarked for sale through public auction. There would be a loan scheme for certain government officers. Two vehicles would remain in pools for each ministry and government department.

REVENUE COLLECTION SUCCESS

By late July there was good news. Revenue collected during the fiscal year 1993/94 had reached TShs 242.4 billion, ahead of the government’s target; it was the largest collection ever and gave general satisfaction all round – DRB.

PUBLIC ENTERPRISE REFORM AND PRIVATISATION

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The creation of state enterprises, whether by nationalisation or new starts, was an important instrument of policy in Tanzania for over two decades until the mid-1980’s. Most such firms enjoyed a combination of a monopoly position and preferential treatment with lack of accountability for results that has been characteristic of public enterprises worldwide. Multilateral and bilateral donors and their advisers assisted many such enterprises and share responsibility for results.

AIMS OF THE STATE ENTERPRISE POLICY
The aims of policy were many fold, including: gaining national control and thus pursuing self-reliance; taking initiatives to promote development where the private sector was seen as inactive; broadening the indigenous managerial base; achieving widespread regional development, and employment creation. Substantial progress was achieved towards many of these goals but by the late 1970’s it had become clear that commercial results and prospects were poor: on the one hand consumers’ interests were not being served, and on the other, most enterprises would neither be able to replace their initial capital nor create savings for the future.

RESPONSE OF THE GOVERNMENT TO PROBLEMS FACED
The response since the mid-80’s has been fourfold.

Firstly, parastatals in a monopoly position have gradually been expected to meet competition, often for the first time, as in the case of agricultural marketing bodies. An example is Tanzania Hides and Skins which, as a private purchasing and processing firm in the early 70’s had achieved around a 60% market share. Once nationalised it was given a monopoly and was profitable, but when the internal market was opened to new entrants in the mid-1980’s its 100% market share slid until the early 90’s when it almost hit zero; rental income from properties leased to competitors was sufficient to sustain the remaining staff houses and vehicles.

The second response has been to introduce external competition through liberalised imports, which has tested private and public sector firms alike. For some commodities, such as beer and clothing, import duties have in practice not been fully collected so import penetration has accelerated and public enterprises such as TEXCO have been hard hit: 13 of TEXC0’s 14 textile businesses are technically bankrupt.

Thirdly, the commercial banks – primarily the NBC and CRDB – have been expected to exercise commercial judgement in extending credit, and the share of parastatal firms in lending has dropped accordingly. Many firms, aware of the restructuring that must be undertaken if they are to be commercially viable, are unable to proceed because they have neither the reserves nor credibility in the eyes of lenders to be provided with further resources.

This constraint is paralleled by the fourth policy response by government which is, under the ‘hard budget constraint’, to decline to provide subsidies or additional share capital to public enterprises. This has affected marginal businesses such as Southern Paper Mills which, despite investment of over $400 million (in today’s prices) has yet to become profitable – but many other firms depend on it.

CONSTRUCTIVE INITIATIVES
This competitive commercial environment has led to many constructive initiatives by firms themselves, their holding companies (there are 28, some providing services of uncertain value) and potential buyers or joint venture partners. The emergence of the latter is the result of the latest policy thrust which complements those taken earlier. Divestiture of parastatals to private owners is actively being sought by the Presidential Parastatal Sector Reform Commission (PSRC) set up in 1992, whose policies have been set out in the Parastatal Privatisation and Reform Master Plan, published by Government in August 1993, and updated by the 1993 Review and Action Plan for 1994 and 1995, which was scheduled to be published in mid- 1994.

Divestiture has begun to take a variety of forms: in 1993 some 20 firms were sold, either through outright sales or joint ventures with a (majority) trade partner, or leases. A further two dozen firms were placed in liquidation or closed, and the assets put to alternative use. Sales included most firms in the leather sector; Carnaud Metal Box (T) Ltd reverted to the control of its former parent as a result of dilution of the government shareholding; the largest sale was that of Tanzania Breweries Ltd in which Indol 1nternational B.V. a subsidiary of South African Breweries, obtained a controlling interest by competitive tender which included assurances about rehabilitation as well as construction of a long-awaited brewery in Mwanza. In addition, Kunduchi Hotels, Mafia Island Lodge, the Mount Meru Hotel and Serengeti Safari Lodges have been leased to the French Accor (Novotel) Group.

BRINGING UNPALATABLE TRUTHS TO THE SURFACE
Divestiture as a process has the characteristic of bringing unpalatable truths to the surface – like, in the UK, the full cost of decommissioning nuclear power stations. A couple of Tanzanian examples will suffice. Firstly, in textiles, apart from the problem of protection mentioned earlier, divestiture requires the resolution of awkward questions on outstanding unserviceable debts, and raises the question: given the original (often erroneous) choice of location, inputs, technology and product mix, what can be done to help attract a buyer? Secondly, in the case of a firm supplying good quality professional services, the management wishes to purchase the company from the Government – an attractive MBO proposition. The assets comprise a solid, experienced team and some equipment in a leased building. A perfectly feasible proposition until it was realised that the main assets in fact comprised some three dozen executive and staff houses, undervalued, and rented to employees for between £1 and £2 per month. The business could not sustain the cost of purchasing or maintaining such a property portfolio. The solution? That requires another article!

By the end of 1993 almost 120 further enterprises were under consideration for divestiture. Other businesses which will remain under public ownership for the time being, such as Tanzania Harbours Authority, are likely to enter into Performance Contracts with their parent Ministry, spelling out their commercial and other objectives and accountabilities. Others, like Tanzania Telecommunications Limited, are divesting non-core functions such as subscriber premises wiring and preparation of directories, while inviting private firms to supply new services e.g. card-operated public call boxes and cellular networks.

PARASTATAL POLICY CHANGE WITHOUT A CHANGE IN RULING PARTY
All told, policy towards the parastatal sector has changed as dramatically and almost as rapidly in Tanzania as similar policies in Hungary or Poland but without a change in ruling party. Progress in ownership change, as a tool of parastatal reform rather than as a goal in itself, is likely to continue, but not at a breakneck pace. Reaching a consensus on the best courses of action requires consultation with managers, employers, the holding company and within Government.

Experience to date suggests that employees and their OTTU (Trade Union) representatives are well aware of the need for structural and management change including, often, an interim reduction in employment. However, the benefits of any programme of enterprise reform inevitably tend to emerge only over a period. So far though, the level of commitment to the programme remains high. 1994 should reveal whether enterprise buyers are similarly enthusiastic.
Bevan Waide