by Joseph Kilasara

This year President Kikwete will unveil his third budget which one could say is entirely his own and uninfluenced by the previous legacy. Over the past two years the country has witnessed little or no difference in terms of government’s priorities let alone its approach in addressing our economic development conundrum. Maybe it is because the same political party has been in power since independence – TANU then CCM.

Mwalimu Nyerere listed four requirements needed for a country to achieve development – People, Land, Clean Politics and Good Governance. Interestingly, the last is belatedly a new phenomenon even in business circles worldwide which suggests that Mwalimu was way ahead of his time. In fairness, only two are actually needed to make a country i.e. Land and People. This may explain the countryless Antarctica (although some scientists are currently camping there). Through clean politics we get clean leaders who in turn with good governance formulate the right policies which guide the peoples’ interaction with land to achieve development. Malaysia is 50 yrs free this year while Tanzania is 47th and there perhaps ends their similarities. Of the four ingredients you may wonder which one has eluded our beloved land.

With Mwalimu our economic policy was based on “Ujamaa na Kujitegemea” – Socialism and Self Reliance – which gave the country a clear sense of direction. With Mzee Mwinyi it was Ruksa or liberalisation. Mr Mkapa coined the idea of ‘sell fast at any price’, while Mr Kikwete is taking a slow approach under his ‘new speed, new vigour and new zeal’ mantra.
Interestingly all this time CCM has continued to rightly believe in Mwalimu’s policy of Socialism and Self Reliance. This disparity between what the party believes and what its government is doing may be the main reason for our own undoing. Instead of the party creating clear policies with defined goals which the government should achieve, we have the government dictating party policies which have all but disappeared. In Mwalimu’s own words “Kazi ya chama ni kuweka Sera na kazi ya serikali ni kuzitekeleza” (The job of the party is to set policies and the job of the Govt is to implement them).
Socialism and self reliance as a vision remains as relevant today as it was in 1961. The difference lies in definition and approach. Socialism today means social justice and the right to social mobility while Self Reliance means social and economic empowerment. The privatisation process, major mining projects and energy procurement projects which ignore local ownership can hardly be said as targeted to achieve that. By allowing even up to 100% foreign ownership it goes even against the spirit of programmes like the Black empowerment programme in South Africa or affirmative action in America. The irony here is that our posterity cannot claim racism or apartheid to correct the anomaly. A political party is formed by a group of people with common beliefs and ideals who together sell them to the public to get a mandate to form a government to implement them. Their beliefs and ideals then become the basis of their policies. The difficulty here is that CCM has all but lost the meaning of a political party as it is difficult to see the commonality of beliefs among its members. That is why we see the Bank of Tanzania and Tanesco scandals, the purchase of a presidential plane, the Radar saga, Bujagali, government’s house sales, etc emanating from within. No wonder the president is talking about separating business from politics.
Now, as it appears that the government has halted the indiscriminate privatisation process it is imperative that they go back to the party and formulate clear policies on Socialism and Self Reliance. On protecting the national interest, Tanzania can borrow a leaf from China in its dealings with Mr Rupert Murdoch. He deployed all his capitalist sweets to penetrate the huge Chinese media market only to come out with a wife instead as the Chinese were only interested in technical know-how rather than selling their assets, believing strongly: “China’s profits are for China”. (read: Rupert’s Adventures in China: How Murdoch Lost a Fortune and Found a Wife). Again, China this year, through its state Company Chinalco bought a £7bn stake in Rio Tinto in an attempt to kill the potential merger between Rio Tinto and BHP Billiton’s which, if happened, would create a world steel mining monopoly (about 80% market share) which in turn would affect China’s sources of vital natural resources.
It is from this scenario that the role of the NDC (National Development Corporation) should be revisited to spearhead development and industrialisation of our economy by giving it the technical and financial capacity to invest in strategic industries both at home and abroad. This should be in line with the idea of creating sovereign-wealth funds for investment purposes. The stake to be built up by NDC could in future be divested to the public, while the sovereign funds become a front to earn a return on the country’s foreign reserve instead of letting Jeethu Patel & co find a scam way of utilising it.
The budget
In Mr Kikwete’s first budget one notable pledge was to reduce dependency on donors by increasing revenue collection. Though officially it is claimed that the fundamentals of the economy are strong, some key indicators paint a very different picture. With a 45% budget deficit in 05/06 i.e. 11.5% of GDP, the country is heavily dependent on donor’s generosity. The government tax revenue which in 05/06 was 13.6% of GDP is also heavily dependent on Dar es Salaam which contributed 83.2% with 12 regions contributing less than a percentage point. Of this revenue almost 45% came from import taxes, implying that the internally generated revenue is only 7.5% of GDP. By applying the revenue/GDP ratio, Arusha, which contributed 3.2% of revenue will have contributed 5.7% of GDP while Mwanza (2%) is 3.6%. In the other cities in the country the disparity is enormous! The actual contribution to GDP is however highly influenced by agriculture (30%) which again contributes little in tax revenue.
This gives us a snapshot of the level of economic activity in the country which renders the per capital income (US$319 in 05/06) almost meaningless as the majority of people are outside the economic mainstream. As the new Minister of Finance (Mr Mkullo) also aims to improve revenue collection, not only should he strive to reduce donor dependency but more so the dependency on Dar es Salaam, thus widening the collection net, improving productivity and reducing income disparity. His immediate work is definitely cut out. He will need clear guidance from the Central Bank the structure of whose governance defeats the spirit of corporate governance. The Governor is also chairman of the Board which includes his two deputies and the Ministry of Finance Permanent secretary (his boss), effectively overseeing himself while lacking independence from the government.
Hence the culpability of the government in the bank’s scandals. Granting the bank operational independence, separating the job of Chairman and Governor are key to ensure corporate governance. The Bank can also improve its own image by refraining from post-mortem approaches (reporting after the event) and instead adopt a forward looking approach as this will improve the bank’s credibility which is at an all time low.

In the capital markets the dividend yield on some of the leading shares e.g. Tanga Cement is 13% while the yield on a risk-free 364 days Treasury Bill was also 13% in December 2007. One cannot stop wondering whether the shares are overvalued or it may be the case of investor’s irrational exuberance driving the price upwards. The situation is not different in the case of other leading shares. The stock market needs to ensure investors are well informed about the companies’ performance which is not happening at the moment.