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The World Bank, IMF and Tanzania`s high growth, high poverty economy

20th May 2012
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President Jakaya Kikwete

When a country is scoring very highly by all growth indicators but desperation is written all over the faces of its people, and its language in politics is increasingly unpredictable, does the blame rest with its leadership or with the foreign supervisors of each sector of its economy?

Since Tanzania receives huge amounts of foreign aid for various development programmes, such support would not be forthcoming unless it was part of a wider understanding concerning policy, and this is where the blame needs to be directed. Tanzania seems to be passing global exams of economic growth, but neither itself nor its tutors seem able to diminish poverty, and if there are formulas to that effect, they completely ineffective.

This sentiment is so ingrained among governmental organizations such as regional economic commissions, for instance the United Nations Economic Commission for Africa, according to which Africa is among the best performing economies in the world, for many have GDP growth rates of up to between 6 per cent and 7 per cent per annum.

They thus compare such growth with the sluggish sub 1 per cent in Europe, and sub-zero growth for many years in Japan – though lately it has registered a 4 per cent annual growth rate on account of a building boom to replace damaged housing, infrastructure and industrial machinery destroyed during last year’s earthquake and tsunami.

Large amounts of assets were swept away in the huge tsunami, in which case the rare 4 per cent growth rate was singularly a replacement of the damaged assets.

As a matter of fact, it is hard to say that any African country has rapid economic growth because the 7 per cent rate often attained by some of the leading economies in sub-Saharan Africa is just enough to start scratching at poverty, as if with a stick.

The sort of growth rates that can actually halve poverty and cut it further were paradoxically the sort of policies that existed at the time of independence, that is, those of the outgoing colonial regime, which promised high rates of growth so long as they lasted.

In our case, for example, the rate of growth in agriculture stood at 13.5 per cent per annum for all the pre-Arusha years; that is, all of 1962 to end the of 1966, after which it fell drastically to 3.0 per cent until President Nyerere left office late in 1985. It crept up to 3.5 pe cent during the second phase, and back to 3.0 per cent from 1996 onwards.

It is clear that what distinguished the second phase from the third phase was that during the second phase there was the hope of returning to a proper market economy in agriculture, and a measure of freedom for producers to raise production and seek the best markets.

The third phase administration returned the bureaucratic ethos of governing agriculture, where exports are banned for grains, thus dampening prices for farmers so that town dwellers have it rather easy, in which case the political tinderbox of high grain prices is kept well in check.

At the same time investment declined in the sector as expected shifts in land lease policies did not take place, and two decades were lost until the biofuels global search started recently.

Part of Tanzania's ability to impress in foreign countries is the fact that it has taken up in earnest a commodity market approach to things, though it has a huge problem managing that orientation.

State planning begins with the idea that only 3 per cent of the land is under agriculture, and in theory the rest of the land is empty, but whenever a portion of land is given to an investor – as investors don't purchase land from farmers – there is soon a crowd of claimants to the land.

As politics is about popularity, and CCM has proved incapable of defending investment on land, violence upon those acquiring land is set to rise.

A clear example was the recent Arumeru East parliamentary by-election, where the two leading parties more or less agreed about one point: that President Jakaya Kikwete should remove horticultural farmers from the area as they occupy prime land as well as water sources, to give the land back to the local peasants – as retired President Mkapa said he would advise JK so to do.

The peasants expected that the message would have arrived by the time the former president was back in Dar es Salaam and JK took action immediately, and when three days had passed they started invading the farms, only to be met by riot police. In sum, Mkapa failed to defend investments, leaving the issue to the riot police to 'explain!'

What thus is missing is not just in local economic analysis but also in

regional economic blocs like the East African Community Secretariat and the UN-EAC and the African Union Commission and others, is the lack of sufficient realism on what sort of policies are about rapid economic growth, especially in agriculture.

The data about pre-Arusha levels of growth and what happened subsequently shows that the more cherished notions of socioeconomic foundations of nationhood are abject foes of development as such, namely refusal of long leases of land for locals and foreigners alike, the ability to purchase land from peasants (and not just expansion of towns when people purchase semi-urban land plots to build living quarters).

The regime on land is closely or viciously guarded in all of Africa, and it is only that portion located to the private sector, which is commercial in nature and can be mortgaged, that helps growth.

What thus causes poverty is the land regime, that first it doesn't attract credit as it cannot be transferred at will to another person, and such person have exclusive rights over such land, say for 99 years, where any government interest in the land would be met with market levels of compensation.

Nor is it feasible to extend specific rights or assurance of security for investors, for their rights and security only make sense when the locals have the same rights and security; that is, from arbitrary in the acquisition of land by the state for whatever purpose. Some activism has started of late in that direction but it is by and large misdirected, as it seeks altering the Village

Land Act so that it is given more or less exclusive control over land, with the purpose of ruining government ability to place such land for use by some investor.

Put differently, it is clear that Tanzania isn't at the threshold of high economic growth because it is yet to learn its basics, and its sentimental outlook isn't pro-1962 in structural terms but pro-1967.

A recent spat of protocol between the South African ruling party and their bosom friends, CCM, illustrated the problem, as the local UVCCM (ruling party’s youth wing) vocally supports ANC dissident Julius Malema, until recently chairman of the ANC Youth Wing, in his outspoken policies of nationalisation of mines and land held by white farmers.

This is a line of thinking which is adhered to by the quasi-totality of the country's intelligentsia, for instance in social media like Jamii Forum or the more familiar Mwalimu Julius Nyerere Professorial Chair, which has few critics in its avowed radical posture.

More significantly, it is evident that the lack of comprehension of the requirements of economic growth that is depicted in Tanzania and many other countries has its roots in the sort of training that economists and other learned people have undergone in the past half century.

The world has been dominated by the welfarist thinking of British economist and long time British Treasury adviser John Maynard Keynes, to which can be added decades of 'economic planning' despite its lamentable failure in Russia, China, Cuba and other countries.

But it lasts for reasons of nationalism - the control of the economy by indigenous people, preferably by the state, as we don't have local investors who can take over TRL, Tanesco, etc.

This is indeed the basic philosophical outlook that guides economic thinking in Tanzania, and it is hard to say the World Bank or the International Monetary Fund have ever insisted on anything else, but 'quickening licensing,' what used to be called the 'climate of doing business,' and now all probing eyes are on procurement disputes.

It is the Keynesian outlook which sees high poverty in an economy as a problem of distribution, and in recent years it has more or less come to be identified with climate change, which is only true in part.

The question is why does North Africa, the Mediterranean belt and the Middle East thrive on desert land but sub-Saharan Africa faces collapse while it is irrigated by countless rivers?

The idea that the rivers are drying up is a non-issue as, in the final analysis, the problem is that Africa's farmlands are not credit-based as they aren't private properties, so the land merely tires out due to unscientific farming – and the problem there isn't the 'spread of technology.'

It is altering land ownership so that those best suited to farm the land can take over, whatever racial or national origin of such people; Africa prefers lending the farmers via cooperative unions, or modernising farmers via agro-related banks, most of which are non-performing.

SOURCE: GUARDIAN ON SUNDAY
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