The united republic of tanzania story

The United Republic of Tanzania was created by the union of two East African
sovereign States of Tanganyika and Zanzibar, united in 1964 to form one country.
Located in the East coast of Africa, Tanzania is bordered by Kenya and Uganda in
the North, Rwanda and Burundi in the North-West, Democratic Republic of Congo to
the West, Malawi and Mozambique to the South and Zambia to the South-West. (US
Department of State, Feb. 25, 2010). Tanzania is united by a shared language
Kiswahili and a strong sense of national community.

After 20 years of economic decline in Tanzania partly as a result of the government's

ambition to implement a socialist program of development, there are increasing
signs of an economic improvement as the country moves away significantly from the
inward-looking, socialist policies established by the famous Arusha Declaration of
1967. In this essay, it will be argued that the liberation of the Tanzanian economy in
the last two decades has greatly benefited the Tanzanian population, compared to
the inward-looking collective approach orchestrated by Julius Nyerere.

The 1967 Arusha Declaration set forth principles of self-reliance, collective

agricultural production and equal opportunity and the introduction of free healthcare,
education and water services. The declaration outlined the government's
commitment to development from a socialist perspective and a reduction in its
dependency on foreign aid. Nyerere, the first president of Tanzania stressed that
foreign aid is a problematic source of ongoing assistance and that fostering an ethos
of self-reliance is the only guaranteed basis for advancement (Lewis, 1970)

The Arusha Declaration also revealed the takeover of banking and industry by the
government, it restricted foreign direct investment stating that the government
would produce substitutes for imported goods by investing in manufacturing
enterprises (Kim et al, 1979). Land was to be common property managed by the
state, as the government was resolved to provide every child with free education.
School children were taught to recognize themselves proudly as Tanzanians with a
common language (Swahili) irrespective of the over 200 ethnic groups within the
country. According to Coulson (1982), Tanzania became a one-party state in 1965
after the Tanganyika African national Union (TANU) voted to scrap the multiparty
model of democracy bequeathed by the British.

From 1970 to mid 1980 was a period of UjamaaSocialism in Tanzania which was a
model of communalist society characterised by self-reliance, freedom and
familyhood (Ujamma), this was also a part of Nyerere's vision for Tanzania set forth
in the Arusha Declaration.

Nyerere's Ujumaa Socialism proved to be quite a success in coherently building a

post-independence country, a politically unified nation while promoting Swahili as
the common national language. Also, the income and quality of life of the population
improved as school attendance and literacy rates increased. However, Nyerere's
policies were followed by economic decline. Coulson (1982) argue that the
performance of the economy was undermined by widespread state intervention and
ownership, large budget deficits and loss-making public enterprises were financed
by the printing press, leading to inflation in the first half of the 1980s rising above 30
percent annually.

other issues involved includes high oil prices, an exchange rate which was
overvalued, an increasingly scarce foreign exchange, arrears mounted as foreign
suppliers and creditors went unpaid. The government could not afford free services
anymore as the economy was in critical condition. Also, a costly war with Uganda in
1977 to oust Idi Amin the dictator attributed to the rapid decline of the economy.

‘Villagisation' was perhaps the most disputable government policy adopted post-
Arusha. This policy adopted in 1967 was a part of the government's strategy for
development. It entailed the resettlement of households to villages from areas of
dense settlements.

As the Arusha Declaration envisaged agriculture at the heart of economic growth

and a majority of the population in Tanzania lived in the countryside; a rapid increase
in production was to be achieved via communal farming (Pratt, 1999). As such, in
1967 the people of Tanzania were advised to regroup themselves into communal
villages to work together on the fields for the growth and development of the nation.
Just a handful of communities cooperated voluntarily.

The forcible relocation of about 80% of Tanzanians in 1974 by the government

created severe disruptions and chaos in national agricultural production (Ibhawoh
and Dibua, 2003).The project suffered from a plethora of problems, from infertile land
to unavailability of essential equipments. Besides, people were not keen on working
communally, they would rather first provide for their own families. There was a sharp
decline in revenues from cash crops exports and national agricultural production.

As the Tanzanian economy plummeted in the late 1970s and early 1980s, the
International Monetary Fund (IMF), World Bank and aid donors advocated for severe
economic reform to structurally adjust the economy of which was opposed by
Nyerere. Dissidents began to emerge within the government as the economy
deteriorated. Nyerere resigned in 1985 and the new government under Ali Hassan
Mwinyi in 1986 agreed to the terms advocated by the IMF, the Tanzanian African
Socialism came to an end as the economy gradually began to open up.

The recovery and reformation of the Tanzanian economy was in two stages. The first
stage reflect the gradual liberalization of the Tanzanian economy from 1986-1995.
According to Nord et al (2009), under the 1986 Economic Recovery Program,
exchange rate and prices were adjusted to market levels and gradually restrictions
on economic policies were lifted as government intervention and state ownership
were curtailed. However, economic growth and stability remained somewhat weak.

In the mid-1990s, the reforms began to yield results as the private sector could trade
freely due to the liberalization of imports, the foreign exchange reserves of Tanzania
was restored fuelled by an export boom. The financial sector was restructured and
many foreign banks were licensed, thereby financing private investments (Nord et al,
2009). As such, inflation began to reduce. As part of the reform process; nearly all of
Tanzania's foreign debt was eliminated by a comprehensive debt relief and foreign
aid provided financing for government projects.
President Mwinyi the second president of Tanzania from 1986-1995 was politically
mandated to implement economic reforms. He set the stage for institutional and
structural reforms as he commenced the free market era while reversing the drop in
per capita GDP of the early 1980s.However, there was a decline in his commitment
to macroeconomic stability during his second term in office.

President Mwinyi was succeeded by president Mkapa as the third president of

Tanzania who had a personal commitment to the reform process. The National
website of Tanzania (2010) highlights that president Mkapa stressed the need for
macroeconomic stability and managed the enforcement of the Enhanced Structural
Adjustment Facility (ESAF) and the Poverty Reduction Growth Facility (PRGF). Also,
he organised series of education missions nation-wide so as to create a feeling of
national ownership, to inform and educate the Tanzanian population on the need for
economic reforms as well as get feedback from the people.

A large section of Tanzania's population has profited from a gradual reduction in

poverty since the era of economic reforms in Tanzania, triggered mostly by a stable
improvement in the performance of the economy, structural reforms implementation
and more focus on public service delivery. The long-term trend of poverty has
declined post 1986 led considerably by the growth in per capita income as various
researches on poverty in Tanzania conducted between 1976 and 1996 reveal an
improvement in real incomes (DFID, 1999). According to the 2007 Household Budget
Survey, it was estimated that between 1994 and 2002, poverty declined by
approximately 28 percent as per capita income increased after the reinforcement of
reform progress in 1995. The survey also highlights that poverty reduction in urban
areas especially in Dar es Salaam is faster compared to rural areas.

Despite Tanzania's enormous achievements, there is still the issue of efficiently

delivering growth in terms of reducing poverty on pro-poor growth. To achieve this,
an increase in agricultural growth and the development of the rural sector is
pertinent. These are necessary to attain the Millennium Development Goals by 2015.

The opening up of the Tanzanian economy in terms of education has also been of
great benefit to the population when compared to the inward-looking approach of
earlier years. Donor efforts and the government have reversed the reduction in
school enrolment through the abolition of school fees in 2001, building new
classrooms, and programs that enhance school nutrition. Nord et al (2009) state that
the Mkapa administration improved access to quality primary school education
through budgetary allocations aimed at reducing poverty within the framework of
Primary Education Development Plan (PEDP). Another government initiative to reform
the education sector was in the education grant for children from poor backgrounds.
The idea behind this scheme was to empower people to become relevant in the
society.

In contrast, the education system of Tanzania during the period of Nyerere's African
socialism was characterised by Nyerere's Education for self reliance (Nyerere, 1967).
The intention of the curriculum was to furnish students with the skills necessary for
rural livelihood and self reliance rather than to gain knowledge and pursue further
academic education. According to Smith (2009), the focus of post-primary education
was in the quantity of graduates so as to produce enough people to cater for the
needed manpower. Education for self reliance until the 1990s put graduates in a
position whereby the major provider of employment, goods and services was the
state, with limited avenues to establish any business.

The financial sector has been transformed into a vibrant and competitive sector
through liberalisation, which was hitherto dominated by a commercial bank publicly
owned. As a result of the opening up of the economy, the financial sector comprise
of foreign owned commercial banks, insurance companies, pension funds, foreign
exchange bureaus and nonbank financial institutions (Muganda, 2004). Furthermore,
the sector includes microfinance institutions and the Dar-es-Salaam Stock
Exchange.

Technological advancement like the use of card payments, electronic funds transfer
and the installation of Automated Teller Machines (ATMs) has been on the increase
for the sake of convenience. According to the National Website of Tanzania (2010),
the electronic clearing house established by the bank of Tanzania has reduced the
clearing period of cheques drawn on banks in Dar-es-Salaam from 14 days to 2 days,
while upcountry cheques i.e. cheques drawn on banks in other parts of the country
has reduced to 7 days from 30 days in 1998. The liberalization of the banking
industry has further resulted in a rapid increase of FDI inflows in the banking sector,
almost 80% of the total assets in the banking industry can be attributed to the
opening up and liberalization of the Tanzanian economy (Muganda, 2004).

Tanzania just like other African countries in the last two decades has engaged in the
privatization of its assets, it is a measure of reform to reduce the role of the
government in the economy and increase the involvement of the private sector.
Privatization supported by the IMF and World Bank involve the transfer of property
rights - operating rights, ownership rights and development rights- from state to
private sector.

Benson, (2001) is of the opinion that privatisation is beneficial to the economy

because it serves as an inflow of capital from foreign investors; it enhances
technological advancement and brings about experiences needed for the
improvement of performance. Taxes paid by industries in the private sector are a
source of revenue to the government.

In May 1993, a program for the comprehensive privatization of parastatals

commenced, more than 400 loss-making organisations were for sale, with several
commercial parastatals out of government control (Benson, 2001). Significant
progress was made in the privatization of the National Bank of Commerce and the
Tanzanian Harbour Authority as it moved from being controlled by the government.
The privatisation of government controlled entities could also be a source of
employment to the population.

In terms of foreign aid, approximately 35% of the government's expenditures in

Tanzania depend on foreign aid (Africa in World Politics, 2010); as such Tanzania is
one of the largest foreign aid recipients in Sub-Sahara Africa. This greatly contrasts
with Nyerere's belief on foreign aid, Nyerere was of the opinion that foreign aid,
loans and gifts could be a source of danger to a country's independence as the
saying “he who pays the piper, calls the tune” is applicable. Rather, a country should
rely on what it has, its resources such as its people or agriculture through which a
nation can make progress.
However, resources from foreign aid have flooded Tanzania through the liberalization
of the economy. The USAID is actively working to treat and prevent the spread of
HIV/AIDS and malaria in Tanzania, to improve education and reduce corruption while
maintaining economic growth. It appears that recent achievements in terms of
agriculture and healthcare in Tanzania can be linked to foreign aid. Statistics show
that through the USAID, over 25,000 people received HIV/AIDS treatment in 2008,
support services was given to more than 215,000 vulnerable and orphaned children.
Also, deaths caused by malaria have declined by half from 120,000 in the year 2005
to 60,000 in 2008 (USAID, 2010). The USAID is geared to elevate agricultural workers
from poverty as agriculture is a major means of livelihood in Tanzania and the
highest employer of labour.

However, it is pertinent to note that foreign aid could also be problematic as

Tanzania is increasingly donor dependent with a massive foreign debt taking up to
40% of its budget.

In conclusion, there are increasing signs of an economic improvement as Tanzania

moves away significantly from the inward-looking, socialist policies established by
the Arusha Declaration of 1967. The opening up of the Tanzanian economy has
brought various reforms to sectors like health, education, banking, governance and
in poverty reduction. It is important to recognise that despite these reforms,
Tanzania is still behind in accomplishing a rich private enterprise economy.
However, noting how far Tanzania has come in terms of economic achievement in
the last twenty years of reform is encouraging; as there is every reason to believe
that the transformation process of the economy in years ahead will gain greater
momentum.