One year Magufuli: About the miraculous way to prosperity in Tanzania

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Balance: One year Magufuli

About the miraculous way to prosperity in Tanzania

[November 2016]
November 2015 was a turning point in the history of Tanzania. The special thing was not that the presidential candidate promised to fight corruption but that John Pombe Magufuli,  actually started tackling corruption immediately after being elected After one year, we can draw up the balance. Is Magufuli the same as most of his predecessors by mainly enriching himself and his family and revealing himself as a dictator, just like many other African presidents? Or do we see something that has never been done before and will Tanzania be one of the wealthiest states in Africa within a few years?

Booming Africa

East African countries like Uganda, Kenya and Tanzania, with growth rates of 7 percent and more are undergoing an impressing economic development. Countries like China are looking for resources and space, which they find in Africa and are making enormous investments to grab their chances. Tanzania also is hosting businesses like those of the Dutch flower growers and farmers who are well represented in Tanzania. Here they find the space and cheap labour which is not available in the Netherlands. Tanzania is altogether one of the fastest growing economies in the region. Furthermore, discoveries of oil, gas and minerals such as Helium accord Tanzania a respectable place on the economic map.

Until now, the advantage of resources such as oil, minerals, and foreign investors, not to mention huge amounts of aid funds, was doubtful for countries like Tanzania. A small corrupt upper class acquired a position through efficiently channelling resources into their Swiss bank accounts. The majority of the Tanzanian population stayed behind in their humble huts, far from the paved road, the source of water, electricity and other pleasures of a welfare society. Congo is another example of how "resources" can demolish a country causing millions of victims.

Democracy

In Western eyes the Tanzanian elections in 2015 did not go as they should have. There was hardly any distinction between the party programs. The ruling party (CCM) did successfully "all what God and human rights forbid" to bend the result in its favour and freedom of press was curtailed. It should be taken into account that democracy in Tanzania is still very young. Moreover, democracy became the playing field of the immense corruption, heavily fuelled by all charities, that intervened development with "easy money". So, for Tanzania it seems to be a blessing that finally a strong man is establishing law and order. Let us judge and talk about democracy after 10 years from now, when Magufuli has to give up his second term.

Even for the ruling CCM party it was a surprise that the nominated supposedly grey compromise candidate Magufuli turned out to be a real Robin Hood after being elected. Many prominent politicians might have pulled their hair out of their heads, but soon they had no choice but to endorse the now hugely popular Magufuli. Meanwhile, as many as 96% of the population is supporting Magufuli and his measures.

The opposition after the elections

The opposition, that is mainly concentrated in the urban areas, such as around Arusha, is in a difficult package. Magufuli does mostly what they were initially standing for but in a directive manner, without consulting the opposition and any form of protest is suppressed. It would adorn Magufuli if he would argue and collaborate more with the opposition. A missed opportunity which later may lead to unrest, but, yet has little impact, partly because the Tanzanians in general do anything to avoid conflicts.

So Magufuli makes his nickname as "bulldozer" more than worthwhile. Once decisions are made there is (almost) no turning back, and what he says or thinks is done immediately. Protest is not possible or has little effect. Maybe this might be a good way to change things in a country where issues remain unresolved in long discussions and committees. In these committees, one usually remains friendly to each other, allowing changes to be frustrated mainly due to private interests.

Balance

What we have seen over the past year could be the blueprint for a scenario how to reform a banana republic to a prosperous state. Key words like accountability, competence and fighting corruption come together in Magufuli’s Swahili credo "Hapa Kazi Tu" which means as much as "And Now At Work".

One of the most striking changes is that the measurements are really focusing on saving money from excessive spending and recovering money from fraudsters and that these savings are directly spent to public projects such as the improvement of infrastructure and health care.

Unfortunately, there are also almost inevitable side effects. Press freedom and democracy are under pressure.  Measures sometimes are introduced too fast, frustrating business and opportunities for more income and better education.

Let's make a list of achievements in the various fields:

Fighting corruption

Here we have witnessed various highlights over the past year which revealed various long awaited cases, that surpassed all imagination:

  • More than 16,000 (!) "Ghost workers" and "ghost students with a scholarship" were detected. These were teachers and other officials who were dead since long or who never appeared at work. Or "students" not studying at all. Annually more than $ 32 million went to accounts of people who sometimes had up to 10 different accounts to capture the salaries.
  • Corruption is addressed in the harbour. Highlight was an officer who appeared to own 30 houses of which one full of buckets with cash money. Also, several hundred containers were traced which were imported without paying tax and the respective companies rushed to pay their debts.
  • The infamous "sitting allowance" - a reward for attending a meeting or class - responsible for about 7% of the national budget, was abolished.
  • After the abolition of the sitting allowance, it became known that officials sometimes cashed triple: their salary, their sitting allowance and there income as owners or shareholders of the hotels where the meetings where being held. On average, these ancillary revenues represent more than 50% of the income of officials.
  • Candy Trips of civil servants abroad were abolished.
  • More than 1400 "charities" were removed because they could not prove what they did. These charities were mostly used as a cover for funds from donors or the government that were used for private purposes.
  • Officials and politicians are not allowed to have double jobs that can cause conflicts of interest.
  • Many contracts with the government have been revised because they mostly appeared to serve the private interests of individuals.
  • Civil servants and teachers who do not have sufficient qualifications have been dismissed.
  • More than 34 fraudulent judges, fraudulent directors of the PCCB (Anti-corruption Agency), NIDA (Identification Bureau), the Tanzanian 'telecoms regulator', various city councils and other organizations have been dismissed.
  • Smuggling of gems, tusks and other commodities is actively fought

Economics

  • Several investors and countries such as China chose to invest in Tanzania instead of their neighbours. Tanzania is chosen because its business seems getting better organized. Examples include the oil pipeline from Uganda to the ocean shore at Tanga, which was originally planned in Kenya, and the investment of China in the Tanzanian railways.
  • Substandard goods are refused at the border. A whole oil tanker already returned despite an impending shortage of oil at that time. Previously, the economy suffered from products, mainly from China, of poor quality.
  • It has been found that more than 30% of the Tanzanian capital accounts are abroad.
  • There is a budget made available which directly goes to the villages and towns to improve the infrastructure and economy.
  • Projects for rural energy and water supply have been initiated and / or strengthened.
  • The goal is formulated to transform Tanzania from the current low-income agricultural country to a middle-industrial state in 2020.
  • Donor Independence is elevated as being a target and the current government is less afraid of donors quitting for example because the elections were not fair. Moreover, several major donors such as the United States, returned to their initial withdrawal and have yet pledged large sums.
  • Agricultural land used by investors, who do not perform enough is recovered and distributed to local farmers.
  • There is a path to develop Tanzania’s own industry, for example by making import of second-hand goods more expensive.

Education

  • Free education for primary and secondary schools was set up, which has caused an enormous increase in the number of pupils.
  • Schools are ordered to create enough school desks for all students and have this sorted out.
  • Men who impregnate or marry schoolgirls are sentenced with 30 years of prison. The concerning girls may return, to school, unlike previously.

Health and environment

  • A medical insurance has been established for everyone.
  • Hospitals are encouraged to perform better and budgets of national holidays have been made available for the improvement of facilities.
  • Poaching of elephants for ivory and rhino for horns are seriously addressed.

State Housekeeping

  • The bureaucracy is being reorganized and made more efficient.

Law enforcement

  • An intensive inspection started investigating if employers have contracts for their employees and if hotels fulfil the necessary requirements. Previously, it was enough to pay for licenses and inspectors were willing to pocket money to turn a blind eye.
  • A special court is established, in order to act quickly on corruption and fraud cases.
  • A special telephone number (113) is established where corruption and fraud can be reported.
  • Judges are told to increase their production (number of cases per year) by 150%.
  • Traffic Agents, for years number one on all corruption lists, are no longer, or hardly any more for sale. One can continue driving or will be fined with an official receipt.
  • Rights of women and children have been improved. Women have the right to ownership of land and cannot marry too young.

Budget and Taxes

Concerning taxation, it is important to realize that only a small 5% of the population, including most foreign investors were paying taxes. These taxpayers generally are super excited because they finally see that their contribution does not disappear into a black hole, but is spent for the benefit of the country. The remaining 95% is not used to pay tax and is less willing to pay. People will have to get used and understanding has to grow before paying taxes can work well and fairly.

  • Tax revenues peaked. Previously, there was massive tax evasion. This is becoming increasingly difficult now.
  • The tax exemption of church institutions was abolished. These were massively abused for tax exemptions, for example when importing goods.
  • The collection of taxes and fees by private companies is abolished.

Side effects

Not all measures appeared to be positive. The urge for a rapid change and more tax income also has adverse side effects because the plans sometimes have not been well thought through or prepared. We are now starting to see a trend in which many laws, which have a positive effect, are introduced too quickly in principle. For example, exports of raw materials, such as tomatoes, are prohibited even before there is a factory that can make tomato juice. Or import of used goods such as clothing, are heavily taxed before the first clothing factory has been built. The short-term effects are sometimes dramatic:

  • Because new laws such as the Immigration Act (often retrospectively) are introduced rapidly, nobody knows (including officials) what to do and they mostly chose to do nothing, which is stalling everything.
  • Some measures, such as free education, are fantastic for the rhetoric and the setting, but sometimes also lead to wild imaginations. For example, parents in rural areas were no longer willing to contribute school for the school lunch, because, after all, education would become for free.
  • Due to the sudden introduction of VAT without transitional arrangements in the tourism sector, additional costs could not be charged to the clients anymore. It can also have a dramatic effect on tourism because tourists have suddenly have to pay an extra 18% to visit the already expensive wildlife parks. For entrepreneurs, this is often not too damaging because the system for the collection of VAT is not working well yet. Moreover, hotels also had to pay VAT in the past.
  • Introduction of VAT on goods in transit in the port caused a drop of as much as 42% in the flow of goods.
  • On top of all there is a false sentiment that foreigners "steal jobs" and "go off with the money". A new stringent immigration law which is expressing this was already introduced before the elections. Because of Magufuli’s desire for law enforcement this law turned out badly for many foreigners. For example over 5,500 Kenyan teachers were forced to leave the country because they could not get their visa or were no longer able to pay. Whereas these teachers master English very well and Tanzania copes with a nationwide shortage of more than 27,000 science and mathematics teachers.
  • Some laws that were set earlier sometimes for unclear or wrong reasons are being maintained. Examples include the sale of alcoholic beverages being permitted only between 18:00 and 24:00 and companies and organizations are not permitted to have websites other than with the extension - "tz.". Another is the criminalization of homosexuality by criminality contention of 30 years in prison.
  • Some measures are introduced too quickly, despite the loss to the economy and thousands of jobs. Businesses close and schools are left without teachers because visas for foreign experts and teachers are denied before local experts and teachers are trained. Second-hand goods such as clothes, inventory for schools and hospitals and cars put additional load on imports before there is a local industry. Export of wood carvings is made impossible before there is a good structure for the use of sustainable wood is in place. Volunteers are heavily charged before there are others to take over the work they were doing, etc. etc.

Is Tanzania now more attractive for investors and entrepreneurs?

The change from an agricultural country to an industrial nation might be a good idea. But is there also a good business climate that makes it possible? Undeniably the business climate improved, if only because the judges are not corrupt and therefore contracts have more value. However, apart from the lack of trained personnel, the legislation is still erratic and unpredictable. Promises and legislation can change, even retroactively today, being different without the State taking any responsibility for previous agreements and rules. You have sent a container of used goods and on the road suddenly there appears to be a new import tax of 80% on second-hand goods. There are increasingly complex and time-consuming registration procedures and many different taxes and charges, not to mention the outdated banking system checks, stamps and dysfunctional banks. All this is still discouraging entrepreneurs to invest in Tanzania, or Tanzanians to start a business because the costs and legal certainty are unpredictable and can easily get out of hand. China is investing heavily in Tanzania, but with entirely different ulterior motives. They can also afford to gamble. What makes Tanzania attractive for investors however are the many opportunities and underdeveloped sectors waiting for entrepreneurs and the expectation that the business climate will be better within some years like in Rwanda.

And what is not tackled yet

The list above is impressive and deserves respect. So much has already been addressed to in such a short period of time. It is therefore not surprising that some aspects are missing or deserve criticism. Yet we want to mention a few important things:

  • The press is handled spastically. Some newspapers and radio stations have been closed and five people have been charged with insulting through Facebook. They risk a prison sentence of 3 up to 20 years. Although the press in the past was certainly not blame-free: they asked for payment in order to place an article. Magufuli, having received much credit and positive news, has only a little to fear from some minor criticism or insults.
  • A number of powerful figures, including the former president, who sold the land in the past, still are walking freely around and have not (yet?) been addressed. Everyone can think his own of his, what also is happening widely.

Is the policy consistent?

Sometimes it looks like a scattershot policy of measures that have been taken quickly. For example, if you want to improve education but at the same time you are expelling 5,500 Kenyan teachers or when you want to reform the country into an industrial nation, but are annoying foreign investors and workers, who have the knowledge to make that happen, it seems to be consequent but not very consistent. It should also be noted that from the socialist past, there was always a deep distrust of anything commercial. Moreover, in the culture of Tanzania, with its emphasis on the extended family, where everything is shared, it is difficult to run a business. The frequently advertised slogan "Take but many children" certainly does not make things better.

Let's hope Magufuli, except the art of bulldozing, is also able to face the shortcomings to bend the policy, in order to make a more consistent policy.

Is Magufuli a dictator?

The opposition in Tanzania is accusing Magufuli to be a dictator, and that is not entirely unjustified, because the elections were not fair and opposing hardly is tolerated. But Magufuli’s dictatorship cannot be compared to that of the countries bordering Tanzania, where a culture of fear and own dynasties govern. As yet, in Tanzania, there are no known political prisoners – instead the prison is filled with fraudsters! Considering the earlier chaotic and paralysed society, Magufuli deserves all the credit in order to act firmly and he earns credits to violate some democratic principles.

Conclusion - the balance after 1 year

Although a pattern is appearing where a road to dictatorship is not inconceivable, the efforts Magufuli is making are deserving more than the benefit of the doubt. An important difference with others in history where it has gone wrong is that Magufuli is rather a popular president than a populist. He clearly demonstrated that his actions are real and lasting. Not only are rules being introduced and/or maintained, they are also followed-up. Tanzania is organizing and rapidly heading towards (literally and figuratively) prosperity for the majority of the population. That such a rapid development involves hick-ups and problems of transition is logical. If the extent of these problems is outweighing the advantages remain to be seen.

Concluding Magufuli’s government remains special and sustainable as far as we know now and might be an example for many other developing countries. Worthwhile to keep an eye on!

 

Read more
http://en.gotanzania.org/newsblog/details/reportage-the-miraculous-way-to-prosperity-in-tanzania/ April 2016

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