AID and African Capacity Building: TANZANIA: A Report for The Bureau for Africa, Agency for International Development, September 1990         P. 1 of 2

Tanzania has an air of optimism about it. Conversations in Government offices and the University are decidedly upbeat. There is a sense of renewal that reminds one of the confident immediate post-independence era. The reasons for the optimism lie in the U-turn Tanzania is making in its philosophy of government.  But most agree the policy change will not be complete until leadership of the Party and the Government are again unified and can speak with one voice. Until then, there is concern that the ideological forces governing the country since the Arusha Declaration of 1967 will continue to constrain actions aimed at liberalizing the economy. 


Courtney A Nelson - Beirut 1973

Hama, Syria 1973


A. Introduction

B. Background

C. Current Situation

D. Structure of Economic Decision-Making in the Government

          1. Executive Decision-Making

          2. The Planning Commission

          3. Department of Statistics

          4. Points of Economic Analysis in Government

                   a. Economic Research Department of the Central Bank

                   b. Marketing Development Board, Ministry of Agriculture

E. Sources of Economic Analysis Outside of Government

          1. Faculty of Economics and Economic Research Bureau at USDM

          2. Pattern of Relationships Between Government and University

          3. Role of Donors in Providing Policy Advice

F. Training Priorities

          1. Macro-economics

          2. Economic Management Skills

          3. Computer training as a Strategy for Developing Analysis

          4. Training in Computer Systems Design and Management

          5. Women in Development

          6. Business School Training

G. Supply of Economic Analysts

          1. Staffing of Government Offices

          2. Staffing of ERB and the Faculty of Economics

H. Policy Implementation

I. Conclusion


          Tanzania has an air of optimism about it. The streets are badly pot-holed, buildings run-down, and offices clearly overcrowded. In the Planning Commission, the same dog-eared files seem to be in the same wooden racks in the old German buildings along the port entrance that they were in 25 years ago. Computers and other even less modern office equipment are not in evidence (except in the University).

          Yet conversations in Government offices and the University are decidedly upbeat. There is a sense of renewal that reminds one of the confident immediate post-independence era. Demand for policy analysis is high in Government, and economists at the University have a variety of research and consulting opportunities open to them.

          The reasons for the optimism lie in the U-turn Tanzania is making in its philosophy of government. Gradually, economic policy-making is coming under Government control, with less ideological dictation from the Party and more consideration of market forces. Some say the turn began with the budget message of 1984, others look back three years to when University economists became more involved in policy-oriented studies for the Government, others think changes only began in earnest in the past six months.

          But most agree the policy change will not be complete until August at least, when leadership of the Party and the Government are again unified and can speak with one voice. Until then, there is concern that the ideological forces governing the country since the Arusha Declaration of 1967 will continue to constrain actions aimed at liberalizing the economy.


          The policy process in Tanzania, perhaps more than other African countries, needs to be viewed through an historical lens. This background section is therefore a bit more extensive than would be appropriate in other cases.

          Tanganyika, which joined with Zanzibar to become Tanzania in April 1964, was exploited for slaves and ivory for centuries, but nothing that could be called economic development occurred until after the Germans claimed the territory in 1884. They introduced sisal, coffee, tea, cotton and rubber grown on estates but did not encourage smallholder cultivation of cash crops.

          Following World War I, the United Kingdom received a mandate to administer the country. Crop production expanded gradually between the wars, but little new capital was invested. The Second World War brought a spurt of production of cash crops and foodstuffs, and primary production continued to expand at a healthy rate after the War. From 1948 to 1963, only six countries expanded crop output at better than a 5% rate per annum, and one of them was Tanganyika.

          At Independence, in December, 1961, Tanganyika had a population of around 9.5 million and a gross national product of around 103 million pounds sterling, of which 53% came from agriculture. Only 480 of its African citizens had completed secondary school, and fewer than 100 were university graduates.

          Shortly before Independence, the World Bank issued an analysis of the country’s development potential, which had a major impact on President Nyerere and his Government. While noting the admirable rate of increase in agricultural production over the previous 15 years, the Bank report found the increase to be largely due to expanded acreage and warned that this expansion could not be sustained with traditional African farming methods. These methods would lead increasingly to depletion of soil fertility and to erosion. Instead of gradually improving these methods, the Bank report recommended a “transformation” approach, with the dual aims of making more productive use of land while protecting its fertility, and of instituting the type of farming which would justify the injection of capital.

          Transformation implied villagization, a gathering together of hitherto scattered rural inhabitants, which would encourage more efficient farming practices as well as permit more efficient delivery of social services. A year after Independence, a large-scale village settlement program was launched, and regional leaders began organizing settlements at a rapid rate, often with little regard for soil fertility or cropping feasibility. For many reasons, most of these ill-planned ventures quickly failed, and a Village Settlement Commission was set up to do proper planning. Sixty village settlements were to be set up with heavy capitalization beginning in 1964, but within a year it was clear that this approach too would fail.

          Other disquieting post-independence developments included a rapid escalation of urban wages while the number employed fell by a sixth, a drop in foreign aid because of diplomatic disputes with the Germans and the British, the fall of sisal prices by 50%, and the rejection by a third of the students of the University of a national service scheme. These events contributed to Nyerere’s growing belief that class divisions were arising in Tanzania and that foreign sources of financial support, public or private, could not be relied upon.

          The Arusha Declaration, a policy pronouncement that would shape Tanzania’s development, or lack of it, for 20 years, was announced in early 1967. The Declaration, stressing that there was no room for class divisions in Tanzania, set down severe limits on sources of income for party leaders, Government ministers, and civil servants down through the middle ranks. None of these could hold directorships in private companies, have more than one salary, or own houses for rent to others. Any surplus funds could only legitimately be invested in state banks for the going rate of interest.

          The Declaration also included the nationalization of banks, life insurance companies, and selected milling and import-export firms.  This produced the most comment at the time, but it was the limits on incentives and rewards imposed on all official Tanzanians that probably had the greater impact on the course of the country’s development.

          One of the more remarkable things about the Arusha Declaration was that it was articulated by the President and endorsed by the Party Executive Committee without consulting the Government departments that would be called upon to carry it out. The economic planning process had never really achieved influence in Tanzania, as it had in Kenya, and the absence of economic analysis in policy-making was never more clearly demonstrated than in the proclamations at Arusha.

          Tanzania was less favored than Kenya from the start. It came to independence with a per capita income only half that of Kenya, with but a fraction of the trained manpower, and with a much less developed set of institutions. The common market and common service arrangements in the colonial era had generally favored Kenya in the location of industry and the siting of head offices of the various services.

          Despite differences, the governments of Kenya and Tanzania went about dealing with their economic problems in rather similar ways, initially. Each issued a rudimentary economic plan shortly after independence, and then constructed a more professional plan soon thereafter with the assistance of economic advisors.

          In Tanzania, the 1964 Five Year Plan (superseding the initial three-year plan) was a good technical document, but in less than a year its projections had been seriously distorted by the international economic forces mentioned above. The advisors who worked on the plan departed shortly after its completion, so no revision was forthcoming, and clear diagnoses of the economic problems were delayed.

          The planning process was revived in the period 1967 to 1969 while the second five-year plan was being prepared. Even though planners were not consulted in the drafting of the Arusha Declaration, the Ministry of Development Planning (DevPlan) had the major task of working through the macroeconomic implications of the sharp policy shifts announced, and was instrumental in helping other ministries reshape their plans to meet the new conditions.

          During this period, DevPlan built up to a total of 16 competent economists, all supplied through foreign assistance. It was Tanzanian policy to avoid becoming overly dependent upon a single donor, and at one point advisors from 13 countries were working on the plan. A number of these advisors were concerned about the absence of Tanzanian counterparts, but at the time Government’s interest in training economists was curiously low.

          Then in 1971, the Party issued an important policy statement, called Mwongozo, which sought to decentralize decision-making from the center to regions, and to emphasize social and political objectives over economic ones. In part this policy reflected the Party’s interest in lessening the influence of the foreigners in DevPlan, as shown by speeches attacking the notion that outsiders could successfully plan for the accomplishment of Tanzanian aspirations, most of which they could not understand. In part, as well, Mwongozo reflected Nyerere’s strong conviction that the people must be more directly involved in shaping the decisions that affect their lives.

          In any case, Mwongozo, and the decentralization plan drawn up by an American management consulting firm, spelled the end of any real influence of DevPlan, and in 1976 it was merged with the Ministry of Finance. The villagization program, decentralization, and the tendency to favor social and political objectives over economic ones reduced the usefulness of the economists’ tools; and the almost exclusively expatriate tinge to the planning process led to its early demise.

          One other important element must be added to this mosaic of the historical context for improving economic policy capacity in Tanzania. This element is the Tanzanian, or more precisely, the Mwalimu’s, or Teacher’s, definition of African socialism. All three East African states proclaimed themselves to be African socialists, but their definitions of the term diverge widely. Nyerere’s definition can’t be captured in a single quotation, but the following excerpt from a speech he made in 1968 contains an argument still of concern to policy-makers on the continent:

          “The choice is between foreign private ownership on the one hand and collective ownership on the other. A capitalist economy means a foreign-controlled economy. The only way in which national control of the economy can be achieved is through the economic institutions of socialism.”

          Disillusionment with the economic institutions of socialism is by now, in Tanzania, fairly complete. But the concern over foreign economic control, or undue control by an indigenous group, is likely to remain and affect the policy context for some time to come.

          Tanzania’s economic difficulties in the 1970s and 1980s cannot, of course, be ascribed entirely to domestic economic and social policy choices. The oil-price shocks of the 1970s were heavy on Tanzania, as on other African countries. A border war with Uganda led to sharp increases in defense spending. A decade of bad weather forced massive importation of foodstuffs in the mid-1970s.

          The economy scraped bottom through much of the 1980s. A rural population never far from subsistence levels was perhaps less adversely affected than it would have been had production and consumption levels been higher initially, but any structure or technology utilizing capital has tended to deteriorate. Tanzania, after proclaiming self-reliance as one of its highest objectives, became one of the most dependent countries in the world on foreign assistance.

          Sporadic efforts at economic recovery have been made throughout the 1980s, and some of these are beginning to bear fruit. In the early part of the decade, a National Economic Survival Program (1981) and a locally designed structural adjustment program (1982) failed to arrest the decline, in part because of a long-running dispute with the IMF over conditionality.

          The Economic Recovery Programs (ERP) of 1986 and 1989 show more promise of success. Working closely with the Bank and the Fund now, the Government set out to increase food and export crop production, to rehabilitate physical infrastructure, to increase the rate of utilization of industrial capacity, and to restore internal and external balance by following prudent fiscal, monetary and trade policies. During the three years of ERP I, agricultural production responded well, increasing by an average of 3.9% per year, after averaging only 1% growth per year for the previous five years. Foreign exchange availability increased with rising exports and increased foreign support, but foreign exchange continues to be a major constraint on growth. In short, the economy made a modest turn-around under ERP I, enough to offer hope for continued progress in the second phase of the Recovery Program.  


          The economic progress of the past three years offers some encouragement to Government policy-makers that they have reached the turning point and Tanzania is on an upward trajectory. To the short-term visitor, returning after years of absence, some positive factors appear which support an optimistic outlook, including the following:

          1.  Tanzania now has large numbers of trained people, compared with the early days of independence. Skill shortages still abound in fields like accounting, which we will discuss in more detail later, but one is more impressed with the numbers trained than with the estimates of continued need. Tanzanian training institutions have continued to perform throughout the economic crisis, although they have been desperately short of teaching materials and technology. Education and human resource development generally has always had a high place in the Mwalimu’s lexicon of values, and the number of people who have received literacy and vocational training may be his most enduring legacy.

          2.  There is a sense of realism concerning the road ahead. In the past, Tanzanians tended to adopt a tone of moral superiority, the poor but proud syndrome, based perhaps on the high moral tone of the Mwalimu’s pronouncements. Now, there is a more realistic appreciation of human motivations, seemingly complete disillusionment with the efficacy of state ownership, and an understanding of the difficulties of the road ahead.

          3.  Another of the Mwalimu’s positive heritages appears to be personal honesty and the integrity of institutions. Dire circumstances have led to petty graft and moonlighting, michuzi and miradi, as noted in the Country Development Strategy Statement (CDSS) of the Mission, but this seems to be relatively minor, readily eliminated once the country can afford living wages. The overall impression the brief visitor gets is of hard-working officials laboring against heavy odds in an extraordinarily poor and ill-equipped setting. This impression might disappear on closer inspection; after all, our interviews were with high-level people, but the time warp sensation is there, reminiscent of the age when life was simpler and problems more manageable.

          Against this rosy vista, a few lingering clouds remain. The CCM is still a powerful force, and it isn’t clear that the ideological orientation of the Party will automatically change with the change in leadership from Nyerere to Mwinyi in August. The position of the Party relative to The Planning Commission, and to the Cabinet and the Parliament, shown in Figure 1, is taken from an official publication, “Profile of the Planning Commission of the Union Government,” issued by the President’s Office in July 1989. The diagram is more eloquent than words in portraying the pre-eminent position of the Party, at least as it was a year ago.

Figure 1.        Position of the Planning Commission Relative to Other Organs on Matters of Planning and Economic Management

          Apart from ideological rigidity, the level of understanding of economics among Party officials and some senior government officials is limited. The Economic Research Bureau (ERB) and the Faculty of Economics at the University of Dar es Salaam (UDSM) hold an annual workshop on economic issues, attended by many senior officials. This very valuable event was supported last year by USAID; more informative and educational activities of this sort would be useful.

          Ideological bias and economic naivete add to the negative potential of a third factor, the strong inclination of Tanzanians to want to shape their own solutions. Tanzania has always proudly carved its own path, even when the path led to increased economic dependency, and Self Reliance is right up there with Socialism as a national priority. The David and Goliath struggle Tanzania had with the Fund and the Bank in the early 1980s is an example of their principled defiance of external forces. Admirable as this trait is, its exercise in the past has been costly and may be again if the technocrats in Government lose sway.

          Another cloud lurking on the horizon concerns ethnicity and free enterprise. At independence, the retail distribution system of the country was largely in the hands of Asian shopkeepers. They were greatly resented, despite studies showing them to be very low-cost distributors, and in time were squeezed out. To some extent the Wachagga, an energetic tribal group from the slopes of Kilimanjaro, have replaced them in the retail business. If the country turns increasingly to free enterprise, as the senior people in Finance and Planning seem determined to do, ethnic resentment may rise again against the Asians, or the Chaggas, or whoever seems to do well from the system.

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