ANALYSIS OF REVIEW OF THE NATIONAL ECONOMY, 1976-77
Hali ya Uchumi wa Taifa Katika Mwaka 1976-1977, Government Printers, Dar es Salaam, 1977, Shillings 14.70

Amazingly the price of the report is now nearly halved – a refreshing start to a much more cheerful document since the state of the economy showed considerable improvement over the previous years. The National Income increased by 5.2% compared with 4.6% in 1975 and only 2.5% in 1974, whilst the food situation eased considerably although it was still necessary to import shs. 177.6 million worth of grain to bridge the gap between production and consumption. The food sector increased by 4.7% and other key sectors such as industry (6.2%), Transport and Communications (6.1%) and Electricity and Water (5%) also increased significantly. Only the wholesale-retail trade showed a decrease, mainly because of greatly reduced orders of overseas goods especially foodstuffs. The balance of payments showed a welcome turn-round, exports increasing from £130 million in 1975 to £205 million in 1976, an increase of 49.6%, while imports declined by 4.8% from £284 million in 1975 to £271 million in 1976. As a result the trade deficit narrowed to £65 million compared to £146 million the previous year. Coffee sales played a big part, accounting for 31% of all exports; cotton, tobacco and tea also fetched good prices. Foreign currency reserves increased accordingly from £55 million to £74 million.

Although prices continued to rise in 1976 the inflation rate began to slow down from 15.2% in 1975 to 12.1% in 1976, helped by a considerable fall in the retail price index for lower paid workers in Dar es Salaam from 33.9% to 14% during the same period. The difference between a ‘developed’ and a ‘developing’ country strikes one forcibly when one notices that instead of an endless preoccupation with unemployment this report refers to a 3% reduction in employment from 470,799 paid workers in 1975 to 456,787 in 1976, with a concomitant 2.2% drop in the total wages bill. A very different ‘ball-game’ as the Americans have it!

There was a 16% increase in all buildings completed and a 34% increase in buildings other than housing, mainly schools and factories, but also including the beautiful Mount Meru Hotel at Arusha whose foundation stone ceremony I attended in 1973. The completion of the great KIDATU hydro-electric scheme added 100 megawatts to the national grid and also reduced the incidence of power cuts listed by the authors as one of 8 reasons for disappointing industrial output in a number of plants – similar to last year’s frank list of shortcomings. However some comfort can be gleaned from the 104% increase in flour production and the 18% increase in the output of beer and chibuku resulting from the improved wheat crop.

On a sadder note a short but poignant paragraph states baldly that ‘in the period 1976/77 the East African Community was in a state of confusion. This period witnessed the break-up of the East African Harbours, Railways and Airways’. It is good to see in a recent news-report that reconciliation is now hoped for early in 1978, since only a truly unified East African Community makes economic sense for young nations struggling for higher living standards in a harshly competitive world.

Randal Sadleir

As elsewhere in the world, the cost of living in Tanzania has risen considerably in recent years, though the impact has been unequally divided between town and country. In peasant farming areas the increase has been substantially cushioned by the absence of a wage-cost element in domestic agriculture. The increased burden on peasant families has, therefore, been largely confined to the items bought for money, such as clothing and utensils, but as their money income is small the volume of such purchases is likewise limited. Other increased money costs are fuel and transport. But these increases have been largely offset by the growth in money incomes arising from the sale of crop surpluses. Thus, between 1970-71 and 1976-77 the price paid to the peasant producer of marketed maize rose from 23 cents per kilo to 80 cents per kilo, an increase of 220%. Similar increases in rice and wheat prices are recorded. These rises in price were deliberate acts of government policy to compensate peasant growers for the effects of inflation and to encourage increased food production in the face of the serious food shortages in 1974 and 1975.

While the peasant farmer in many areas probably enjoys an improved standard of living as the result of higher market prices for his product, the main brunt of increased prices has fallen on the towns, where normally there is little chance to eke out food requirements by home production. The impact of price rises can be seen from the national consumer price index, which rose by some 132% between 1970 and March 1977. This rise contained an increase in food prices of 169.6%, in fuel, light and water of 207.8%, in transport of 172.6%, in furniture and utensils of 151.3% and in clothing and footwear of 125.4%. Only rents show a fall of 61.7% following the nationalisation of buildings in April 1971. As food occupies 47% of the consumer basket, the price of food exercises a strong influence on the general index.

Food prices increased dramatically between December 1973 and December 1974, by no less than 77.5% causing the general index during that period to rise by 40.5%. An important cause of this drastic increase was the serious drought, which severely curtailed home production of food and enforced on the government a large import programme of food grains at high world prices. The subsequent recovery of domestic food production under the stimulus of better weather, higher buying prices for peasant farm surpluses and the national campaign caned Kilimo cha Kufa na Kupona (Cultivation for Life or Death) enabled the government to reduce and ultimately to terminate food grain imports. The ending of food imports and the recovery of home production arrested the growth of food costs and even caused a small diminution of the food index by almost 10 points between December 1974 and December 1975.

Food prices then remained stable until the end of 1976, when the upward trend was resumed in the first quarter of 1977 with repercussions on the general index. The food price index rose during this period by 17.9% and the general index by 13.3%. Meanwhile the index for fuel, light and water showed an increase of 69.7%. On the other hand, clothing and footwear prices remained unchanged, while furniture and utensils actually fell by 20 points. The higher cost of food is said to have been due to higher prices for vegetables and fruit, while the rise in fuel costs was laid down to a steep increase in the price of charcoal and firewood.

While the national consumer price index gives a picture of the urban areas of Tanzania in general, the Dar es Salaam price indices paint a picture of life In the former capital. There are two such indices, both based on a household budget survey carried out in 1969, one relating to wage earners with an income at that time of shs. 2,OOO to shs. 4,000 per annum, the other to middle grade civil servants earning shs. 3,OOO to shs. 20,OOO per annum. The indices constructed on the basis of this information are published against a base line of 100 in 1969, but in the following paragraphs they have been converted to a base line of 100 for 1970 for comparison with the national index.

The fact which springs immediately to mind in comparing the national indices with those for Dar es Salaam is the steeper rise in Dar es Salaam prices, amounting to 248% between 1970 and March 1977 for wage earners. In the same period food prices rose by 274%, a very serious increase for wage earners most of whom depend on the shops for their supplies. During the same seven year period the rise in prices for middle grade civil servants was nothing like as steep, being 141% or only marginally greater than the rise in the national index, while the rise in food prices for this income group was 186%.

Still, the rise in consumer prices has undoubtedly reduced the standard of living of the salaried class. With effect from 1st May 1974 civil service salaries were increased by 15% for the first time since 1961, except for a few upward adjustments in starting salaries. No further change has been introduced since that date. However, in view of the exceptional hardships imposed on the urban civil servants in the lowest ranks – messengers and the like – by the prices explosion, the basic starting salary was increased for wage earners from sh. l80 per month (shs.2,160 p.a.) in 1970 to shs. 270 per month (shs. 3,240 p.a.) in 1972 and shs. 340 per month (shs.4,080 p.a) in May 1974. This represents an increase of 88.9%. In the same period the index for wage earners rose by 55% and so also did the group index for food. Thus, in the middle of 1974 wage earners were more than compensated for price rises since 1970. The salaried grades, on the other hand, received an increase of only 15%, while the index for middle grade civil servants rose by 43% and the group index for food by 39%.

This adjustment was in line with the general policy of the government to reduce salary differentials; it also had the effect of reducing differentials in real income by making the upper grade civil servants in real terms poorer and the lowest grades richer. Unfortunately this did not last. The subsequent steadily upward trend in prices, especially the sharp upturn in the index in the first three months of 1977, must have caused serious difficulties for families in the middle grades, but its effects on the lowest grades must have been particularly severe. Since 1974 the basic starting rate in the civil service rose to shs. 380 per month (shs 4,560 p.a.), an increase of ll.8% while the price index for wage earners rose by l24.5%, the food index rising by almost exactly the same amount. It is clear, therefore, that the March 1977 level of food prices, 243% above the 1970 figures, must have produced serious hardship among the lowest paid in Dar es Salaam, whose incomes had risen only 111% in the same period.

Food prices in Dar es Salaam may recover from the sharp upturn in the first quarter of 1977 which may have been caused by some temporary problem with supplies. It is likely, however, that any permanent upward shift in price levels will not be continued for long without a corresponding upward adjustment of salaries in the lower ranges.

Roger Carter