Coming out of the shadows
Radical reforms are transforming what was once a regional backwater, but tough challenges remain, write Mark Turner and Michael Holman
There cannot be many countries that have composed a privatization song. In Tanzania, however, Captain John Komba's jangly tune on how the sale of national companies is benefiting the ordinary citizen has been shown several times on national television. It can even be found on the internet.
It is a point of pride for the parastatal sector reform commission (PSRC) - and symptomatic of the transformation being undertaken by one of the world's poorest countries. This east African nation that, under its socialist founding president, Julius Nyerere, turned its back on capitalism, has now espoused the private sector.
The change has placed Tanzania, yet to realise the potential of its abundant arable land, natural gas reserves, gold and other minerals, game parks and beaches, in the forefront of the African development debate.
For the World Bank and the International Monetary Fund, still looking for an African success story, Tanzania is a test case for their promise to pay greater attention to poverty alleviation while pursuing economic growth.
Yet, for critics of the Bretton Woods institutions, led by Harvard economist, Jeffrey Sachs, their record is so bad that the best thing they could do is to admit past mistakes, write off outstanding debt, provide more assistance to combat Aids and malaria, and let Tanzanians set the development agenda.
There is a crippling legacy to overcome. Julius Nyerere, who died earlier this year, left behind a unified nation. But he also bequeathed a cumbersome bureaucracy riddled with corruption.
With its culture of conformity, suspicious of innovation, and distrustful of the private sector, Tanzania was unable to put to constructive use the $16bn of aid received from indulgent foreign donors in the first 30 years of independence.
After a slow start, reform is gathering momentum. The government has sold two-thirds of its public companies, albeit initially in a somewhat undisciplined manner. Private investors receive generous tax breaks, profits can be repatriated, foreign banks are welcomed and labour unions' powers have been tempered.
The results are striking. Dar es Salaam, once not so much sleepy as comatose, now boasts cybercafés and satellite dishes. Mobile phones have become essential business tools and new hotels are opening to cope with the foreign investors now responding to the new business climate.
South Africans are in brewing, the British in banking, Canadians in mining, Japanese in cigarette making, Germany in telecommunications and a Philippines company is about to take over the port's container facility.
There is more to come. A British consultant is advising the government on outsourcing public services, and says that, within five years, all government security, messaging and cleaning contracts should be in private hands.
The sale of the electricity utility - whose high prices are a drag on growth - is going much slower than hoped, but should be completed in about three years.
The privatisation of Dar es Salaam's water company has also run into problems, but should be completed in less than a year, according to the PSRC.
All this comes on top of a boom in the mining sector and big gains in tourism, with visitors topping 600,000 last year.
President Benjamin Mkapa still frets that the investment road map needs more attention and acknowledges the need for further changes to a system which leaves land in state hands.
But when President Mkapa and the Chama Cha Mapinduzi (CCM) party, which has ruled Tanzania since independence in 1961, go to the polls in October, they have a lot of explaining to do.
The alleged government rigging of the 1995 poll on the island of Zanzibar has not been addressed, and 18 opposition members remain held on treason charges. Mainland politics is less tense, but legacies of the one-party socialist state remain, including heavy-handed powers to limit freedom of expression.
Four decades after independence, between 15m and 18m of the 32m Tanzanians still live below the World Bank poverty line of 65 US cents a day. Of these, nearly 12.5m live in abject poverty, spending less than 50 cents on consumption daily.
Primary school enrolment is 75 per cent, while secondary school enrolment is only 6 per cent.
Had Tanzania grown at the same rate as neighbouring Kenya, the World Bank estimates its GDP per capita would have doubled during the past four decades instead of only increasing by less than 30 per cent.