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TanzaniaA Political Economy$

Andrew Coulson

Print publication date: 2013

Print ISBN-13: 9780199679966

Published to Oxford Scholarship Online: September 2013

DOI: 10.1093/acprof:oso/9780199679966.001.0001

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Parastatals and Workers

Parastatals and Workers

Chapter:
(p.319) 23 Parastatals and Workers
Source:
Tanzania
Author(s):

Andrew Coulson

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199679966.003.0024

Abstract and Keywords

The years after the Arusha Declaration saw a proliferation of parastatals, or government corporations, in almost every sector, including industry, agriculture, banking, trade, transport and housing. The Government negotiated compensation with the owners of the banks and large factories that were nationalized, and run as parastatals––Government-owned arms-length bodies. Many new factories depended on protection provided by tariffs on imports. But transfer pricing, which provided a mechanism for international companies to take money out of Tanzania, was an issue from the start. The State Trading Corporation, which in 1970 took over the import of all consumer goods, building supplies and agricultural inputs encountered many problems, as did the Mwananchi Engineering and Construction Company (MECCO), the state-owned construction parastatal. The chapter also explores the dilemmas faced by the Party when it encouraged worker and Party involvement in the management of industries, at the same time crushing workers’ initiatives in particular factories.

Keywords:   compensation, parastatals, protection, transfer pricing, workers’ initiatives, State Trading Corporation, MECCO

Tanzania has seen and shall continue to witness the creation of public business institutions as centres of initiative and dynamism in our economic activities.

CLEOPA MSUYA, Minister of Finance (1974)1

In the years after the Arusha Declaration, parastatals, or government corporations, were set up in almost every sector: industry, agriculture, banking, finance, trade, transport, and housing. There were even a few in education, health services, and public administration. In 1967, there were sixty-four parastatals. By 1974 there were 139 and the number was still increasing (Nyerere 1977: 38).

A parastatal is distinguished from a civil service department by its accountancy. In government departments, estimates of the expenditure allowed on different activities, and the amount of revenue expected, are voted for a year at a time in the annual budget. The procedures and record keeping are designed to prevent corruption and to ensure that money is spent for the purposes for which it is voted, rather than to assess how well it is spent. Parastatals, on the other hand, like private companies, produce profit and loss accounts, which show the profit and return on capital in a financial year. The government is a shareholder, often the sole shareholder, although there may be other partners; as such it is entitled to appoint Directors, who sit on a Board of Directors which meets from time to time to (p.320) approve the policy of the parastatal.2 But many Board members are busy people, with other concerns, and in practice parastatals which report profits can normally expect considerable freedom in how they spend money, whom they employ, and what prices they set. When, however, they fail to perform well financially, when scandals publicize abuses of their freedom to buy or sell, or when their wage or price policies have implications for the country as a whole, governments may take a closer interest in their affairs.

In Tanzania, parastatals have a long history. The German East Africa Company, which administered the colony between 1885 and 1891, could be described as a parastatal, set up by the German government to avoid the necessity of direct government involvement in administration. Under British rule railways and harbours, posts and telecommunications, and East African Airways were run by corporations on an East African basis. Electricity generation, originally privately owned, passed into public ownership in the 1950s, and was expected to be profitable. Water supply, on the other hand, was regarded as a public service and remained a government department, even in cities like Dar es Salaam where many individuals had private connections to their houses. Marketing Boards were parastatals created to take the marketing of peasant production out of the hands of Asian traders, and to cream off surpluses. These surpluses were invested on the London market, where they earned low rates of interest; other parastatals that wanted investment funds could borrow on the same London market, at considerably higher rates of interest (Loxley 1973: 102–4).

The colonial government also acquired shareholdings in a few parastatals directly concerned with production, including the Tanganyika Agricultural Corporation (created to make money on the land cleared for the Groundnuts Scheme), 81% of the shares in the Nyanza Salt Mine, 51% of Williamson’s Diamonds (accepted by the government as part payment of death duties), and 51% of Tanganyika (Meat) Packers. In the two latter cases, however, it was scarcely involved in management, which was left in the hands of the private-sector partners, De Beers and Liebigs.

(p.321) Even before Independence, TANU was determined to be involved in profit-making enterprises; the Mwananchi Development Corporation, owned by the Party, was set up for this purpose, and invested in the National Printing Company (which printed the Party newspapers Uhuru and The Nationalist) and the Mwananchi Engineering and Construction Company (MECCO) among other ventures. At the same time, the co-operative unions were purchasing or building cotton ginneries, edible oilmills, hotels, transport companies, farms, and other small businesses. In 1964, the National Union of Tanganyika Workers Act allowed NUTA, from that date the only legal trade union, to collect workers’ contributions from their employers, but it also required that 60% of this income be invested in social or economic enterprises; so the Workers’ Development Corporation was created and was soon involved in ‘a mixture of small sound and sick enterprises’ (Msuya 1974: 3).

The idea of a holding company to manage government shareholdings was suggested for African countries generally by Lord Hailey in 1952, and for Tanganyika specifically in the report of the 1960 World Bank mission. But it was not until 1962 that the Tanganyika Development Corporation was created, with an initial capital of £500 000. There was no clear idea of how it would operate: according to Coe (1964: 26–31), the initial capital was entirely invested in the Tanganyika Development Finance Corporation, one of two foreign-controlled investment banks which lent money to the private sector.3 Early in 1965, the National Development Corporation (NDC) took over the assets of the Tanganyika Development Company, the Tanganyika Agricultural Corporation, and the various government shareholdings. The government shareholdings gave the NDC an income approaching 20 million shillings a year, and it quickly diversified its interests, investing in agriculture, manufacturing, trade and tourism.

After the Arusha Declaration of February 1967, it became clear that the parastatal sector was to play three roles. It was, first and foremost, to limit the transfers of profit out of the country. It was to invest in productive sectors, especially manufacturing, but also agriculture and tourism; And it was to strengthen the productive infrastructure, (p.322) especially in transport, construction, and power generation. We now consider each of these in turn.

In order to limit transfers of profit out of the country, it was necessary to control a wide range of financial institutions, as well as the import and export trade. This was achieved in a single-minded way, unique in Africa at the time (Loxley 1972; 1973). The colonial monetary system was effective in ensuring that most of the surplus gained in the colony was transferred to Britain. For most of its life the East African Currency Board issued local currency only if an equivalent amount of foreign exchange was deposited in London. This meant that an expansion of the domestic market, or a greater use of money in transactions, would not be accompanied by more coin and notes in circulation unless exports also rose. It also implied that funds that could have been available for long-term investment were instead locked up in London. Insurance companies, building societies, and the commercial banks were all branches of foreign organizations which invested their deposits in London or Nairobi. The pension funds of government staff were invested in government stock on the London market. It is hardly surprising that the 1960 World Bank mission concluded that 90% of the investment funds for the period 1960–6 would have to come from abroad.

Although the currency board system was beginning to change before Independence, it had no power to prevent the capital outflow which followed the 1960 (Kenya) Lancaster House conference. It was not until 1965 that exchange control was imposed on transactions with countries outside East Africa. It was extended to include transfers within East Africa in 1967, but this was suspended during the negotiations which led to the creation of the East African Community a few months later, and not reimposed till 1971. Meanwhile a Central Bank, the Bank of Tanzania, was created in 1966. It issued currency, performed the function of banker to government (which meant that it could lend to the government), policed the exchange controls, and (somewhat later) operated a strict system for licensing imports.

Nationalization of commercial banking took place in stages. In 1962, a Co-operative Bank started lending large sums of money to the co-operative unions to finance their purchases of crops—highly profitable business previously handled by the commercial banks. In 1965, the government purchased a 60% holding in a small commercial bank, and renamed it the Tanzania Bank of Commerce. Then in the days after the Arusha Declaration, the government announced (p.323) the nationalization of all commercial banks and the creation of the National Bank of Commerce to replace them. This was taken as an unfriendly act by Barclays Bank DCO and the Standard Bank, who immediately withdrew their European staff (nearly sixty) and froze 40 million shillings of investments outside the country, expecting that the new bank would collapse. If this was indeed the calculation, it was misjudged. With the aid of staff who were left (including non-citizen Asians who were promoted to branch managers), economists from the university, and twelve expatriates, including a number of volunteers from Scandinavia, the new bank survived its first three months. By the end of the year its credit procedures were operating smoothly, and foreign exchange transactions were resumed. By cutting overhead costs, and restricting the numbers of branches where previously two or more had competed, costs were reduced, and the new bank was soon making large sums of money available to the government and to other parastatals. Eventually Barclays and the Standard recognized that it was there to stay, and negotiated compensation terms.

The National Insurance Corporation was set up as a small agency in 1963. In 1967, it was suddenly made responsible for all the insurance business in the country. Since the other insurance companies were merely branches of Nairobi companies, there was virtually no insurance expertise in the country, and yet considerable sums of money were involved, especially for life insurance. The NIC did not gain a reputation for efficiency, but it made large sums available to the government.

There were other new institutions. The National Provident Fund was set up in 1965 as a compulsory savings scheme for both employers and employees (Loxley 1973: 105). It soon became the single most important purchaser of government bonds. The building society which had effectively gone bankrupt with the departure of expatriates in 1960 was reconstituted with the help of the Commonwealth Development Corporation in 1967, and eventually became a government-owned Housing Bank, lending on a mortgage basis for house-building or purchase, and mobilizing savings by offering interest on deposit accounts.

It was recognized that financial control would not be complete unless foreign trade was also controlled. The purchasing of cotton and coffee from co-operative unions was largely under the control of marketing boards even before Independence, and after Independence cashewnut purchase was also confined to a marketing board. Sisal was (p.324) brought under government control after 1967 when the government nationalized 60% of the sector. Another plantation crop, tea, was largely left alone. The attempts to control the import and distribution of consumer goods were not so successful. In 1967, eight of the largest foreign-owned import-export houses were nationalized and merged with a co-operative trading company (INTRATA) to form the State Trading Corporation (STC). Then in early 1970, the President announced that all importing and exporting would be confined to national organizations by the end of that year. The story of what followed is told in Appendix 1 of this chapter. There was considerable disruption and shortages, and yet STC, which eventually split into twenty-three separate parastatals, did enable the state to take control of importing, and in particular to divert purchases away from Kenyan producers and to ensure that the Chinese commodity credit associated with the Tanzania-Zambia railway was used.

The second broad role of the newly-created public institutions was to channel investment into productive activities. To achieve this, three types of institution were created: investment banks, parastatals that were holding companies for productive enterprises, and parastatals directly involved in production. There were three investment banks: the Tanzania Rural Development Bank, which inherited the staff and some of the commitments of earlier rural credit agencies and was responsible for lending to the rural sector, especially for small-scale rural production; the Tanzania Investment Bank, for larger investments in any sector, but particularly in manufacturing; and the Tanganyika Development Finance Company, an investment bank lending in the main to medium-scale industrial ventures in the private sector. All three proved suitable vehicles for the receiving and channelling of foreign funds into Tanzania. The Rural Development Bank inherited a close relationship with the World Bank, and was used in the 1970s to allocate and monitor the credit components of a series of World Bank projects intended to stimulate agriculture.4 It also received funds from Sweden, the United States, and some other bilateral donors. The Tanzania Investment Bank negotiated lines of credit with the Canadian, Swedish, and other governments, and with the World Bank; several of these would have found it difficult to transfer funds to industries owned by the Tanzanian government, but (p.325) were willing and able to transfer them to an investment bank which could on-lend to both parastatal and privately-owned projects. The Tanganyika Development Finance Company was itself a joint venture between the National Development Corporation (NDC) and Government investment agencies from three European countries—Britain, France, and Germany.5 Its capital was added to several times, and provided a reliable source of investment funds for the Asian- and expatriate-owned private-sector companies which were not otherwise encouraged by government policy after the Arusha Declaration.

The second type of parastatal involved in productive investment was the holding company. The model for these was the NDC, created at the beginning of 1965, and at the time intended to be the sole national agency of government investment in business (Msuya 1974: 3). In 1966, it received a cabinet instruction to adjust its investment policy so as to ensure that major investments were under national control (Pratt 1976: 230; Svendsen 1968). It was thus logical that the NDC should take over the government shareholdings in the six subsidiaries of multinational corporations nationalized after the Arusha Declaration in 1967. These, together with its holdings in Williamson’s Diamonds and Tanganyika Packers, gave it a net income of about 20 million shillings annually. It commissioned architects and consultants to produce feasibility studies in a wide range of sectors, built an extravagant headquarters in Dar es Salaam, and hired the McKinsey management consultancy to give it an appropriate management structure.6 Its general manager, George Kahama, cultivated the image of Tiny Roland, the creator of the successful and expanding multinational holding company Lonrho. Cabinet ministers and civil servants soon felt that it was too powerful, so in 1969 it was divided into four; the NDC retained responsibility for mining and industrial investments, but agricultural projects, tourism, and construction were (p.326) placed under newly-created holding companies. Subsequently there was further division, with new companies for mining, textile production, livestock, forestry, and fisheries.

The subsidiaries of these holding companies were the parastatals directly involved in production. They can be divided into those which existed before the Arusha Declaration and those founded after it. Since the managerial resources of the holding companies were limited, it was perhaps inevitable that most of the new enterprises were created by means of turnkey projects (i.e. a foreign partner was responsible for all aspects of the investment) and managed by foreigners employed under management agreements.7

The third and last role of parastatals was one traditionally associated with government corporations, the provision of infrastructural or other services. Railways, Harbours, Posts and Telecommunications, and East African Airways continued as parastatals under the East African Community until its break-up in 1977, when control passed to the three national governments. The Tanzania-Zambia Railway Authority, responsible for the new railway to Zambia, was just one of several transport parastatals established in the 1970s.

In 1976, the co-operative unions were replaced by Crop Authorities—parastatals which combined the functions of marketing boards with involvement in extension, crop processing, and transport. The new authorities took over the cotton ginneries, processing factories, and the transport operations of the co-operative unions. Hotels, farms, petrol stations, and other small investments were handed over to District Development Corporations, set up in most of the sixty or so Districts from 1971 onwards, and expected to make money in small-scale production or trade. The parastatal form seemed so convenient to administrators frustrated by government regulations (e.g. about salaries and accounting procedures) that even educational establishments such as the University of Dar es Salaam, some foreign-aided integrated projects (for instance the Kibaha Educational Centre and the Lushoto Integrated Development Project), and Muhimbili Hospital in Dar es Salaam, were allowed to become parastatals.

Table 23.1 shows the rapid increase in the value of parastatal assets between 1964 and 1971, and their distribution. Of the assets owned (p.327) by parastatals in 1971, 17% had been owned by them in 1964, 25% was obtained by nationalization, 28% was investment in completely new ventures, while 30% was in parastatals in which the government already had a shareholding in 1964, the largest single amount going to the electricity supply company. Table 23.2 shows regular wage employment doubling between 1969 and 1974; yet employment in the private sector was almost stagnant and the increase came from the public service and parastatal sectors.8

The expansion of the numbers of parastatals, and of their responsibilities, meant an explosion in managerial positions. Many able Tanzanians were attracted away from the civil service and into parastatals

Table 23.1. Growth of parastatal assets 1964–1971 (millions of shillings)

Sector

Value of assets in 1964

Investments in existing parastatals 1964–71

Nationalizations 1964–71

New companies 1964–71

Value of assets in 1971

Manufacturing

25

211

324

549

1109

Mining

241

70

311

Construction

25

137

162

Electricity

231

294

525

Transport

80

288

368

Tourism

15

13

1

128

157

Commerce

13

142

347

12

514

Agriculture

56

60

120

14

250

Finance

4

67

96

16

183

Total

610

1074

888

1007

3579

Per cent of total in 1971

17

30

25

28

100

Source: Clark (1978: 109).

Table 23.2. Regular wage employment 1969 and 1974

1969

1974

Parastatals

42 522

90 220

Private sector

107 614

101 132

Public services

75 444

171 289

Source: Bureau of Statistics (cited by Collier 1977: Table 3).

(p.328) which could offer higher salaries, more attractive fringe benefits, and more satisfying jobs. And yet, as we have seen in Chapter 20, the performance of the parastatals gave cause for concern, from 1967 onwards. They seemed to exercise little control over the resources available to them, or over their expatriate managements. This concern is supported both by studies of the parastatal sector as a whole and by studies of individual parastatals.

Edmund Clark found that in 1971 parastatal firms in manufacturing were more capital intensive than private-sector firms, and yet each employee in a parastatal firm contributed less to production than his opposite number in the private sector. Clark also found differences between parastatal firms established before the Arusha Declaration and those established between 1967 and 1971: the post-Arusha firms were more capital intensive (both within each sector and because of the sectors chosen), very much more intensive in their use of imports (74% of their inputs were imported, compared with 30% for the older firms), and each unit of labour contributed only half as much to production as in the older firms (Clark 1978: 117, 135–6; see also Chapter 20).

Similar findings were reported by Barker, Bhagavan, Mitschke-Collande, and Wield, who in 1975 studied twenty-eight factories, including several of the largest parastatal firms. They too found significant differences between firms started between 1961 and 1967 and those started between 1967 and 1975 (most of the latter being parastatals). In 1973, the older firms generated domestic savings valued at 32% of their capital stock, while the newer firms saved less than 4%. Nearly 80% of the value added in the older firms was retained within the country, but only 50% of the value added in the more recent firms. ‘The conclusion is that the post-Arusha period is characterised by industrial investments which are efficient vehicles only for transferring surplus outside the national economy’ (Barker et al. 1986: Chapter IV, p. 3). This is odd at first sight—since one would not expect parastatal firms to be taking surplus outside Tanzania. It is, however, supported by another study (Van Hall 1979) which identified transfer pricing in at least ten parastatal companies. Either the Tanzanian managers knew what was going on and were party to it, or, more probably, they were so distant from the actual decisions about buying and selling that they were ignorant that it was occurring.

(p.329) In many instances, the low productivity of capital and/or labour can be documented directly. Clark claims that the automated bakery built in Dar es Salaam was more capital intensive than the oil refinery (Clark 1978: 143, fn. 10). The problems that faced the Tanga fertilizer factory, the country’s most expensive investment in manufacturing, have been well documented. The plant, a turnkey project, was small and inefficient by world standards. It used only imported inputs (a total of 167 000 tonnes of imported raw materials per annum to make 105 000 tonnes of various fertilizers), and was built with an expensive supplier’s credit which had to be paid back in German marks. After it opened, a series of problems kept production down to 50% of its designed capacity (Coulson 1977a).

Cement production at Wazo Hill outside Dar es Salaam declined from a peak in 1973, but there was an increase of 40% in the number of workers employed there. Investment in new pans for producing salt from the brine springs at Uvinza had to be largely abandoned; the new pans were built on the top of a hill in the unproven (and mistaken) belief that this would speed up the evaporation process. A cashewnut shelling plant in Mtwara had to be abandoned because the process would not work. A factory to make bags at Moshi was to use kenaf grown on a nearby irrigation project, but only a few agricultural trials had been carried out. The Italian ‘partner’ sold bag-making machinery that did not work well, and far more kenaf seed, of an unsatisfactory variety, than could possibly have been planted in one year. After some years, kenaf growing was abandoned, and the irrigation farm turned over to sugarcane. A bicycle manufacturing plant not only polluted streams in the surrounding residential area, but manufactured bicycles that were twice the price of equivalent imported models.

A final illustration from the many that could be considered is provided by the nationalized textile mills. As noted earlier, the first textile weaving factory opened in 1959 using imported yarns. The first factory spinning local cotton opened in 1966. In the late 1960s the government built two large-scale integrated spinning and weaving mills, based on the local cotton crop. The Friendship Mill, built by the Chinese in Dar es Salaam, opened in 1968; the Mwanza Textile mill, opened in 1969, was designed by Sodefra, a French company who also took a minority share in the equity. Some relevant comparisons are shown in Table 23.3. ‘Friendship’, with the largest factory work-force in East Africa, was, at the time, a triumph for appropriate technology. (p.330)

Table 23.3. Friendship and Mwanza textile mills

Capital Cost up to 1969 (millions of shillings)

61.5

106.5

Production of woven fabrics in 1975 (millions of linear metres)

24.0

22.5

Number of employees in 1975

5057

2486

Profit in 1975 (millions of shillings)

2.8

2.3

Cost of carded cotton in 1973 (shillings per tonne)

2512

2910

Labour hours per tonne of carded cotton in 1973

247

98

Sources: NDC; TEXCO; The Daily News, 17 July 1976; Williams (1975).

Using two and a half times as much labour per tonne as Mwatex, and only 40% of the capital, it still managed to produce at lower cost. Mwatex, a ‘modern’ plant, had most of the faults of partnership ventures undertaken with Western multinationals. Yet in 1975, when the government decided to expand textile production, it chose a 30% expansion at Friendship, a 100% expansion at Mwatex, and a complete new copy of Mwatex, to be built in Musoma. It is true that it was advised by the World Bank, who lent most of the money; but it was also (separately) advised that the specifications could have been written so that machinery comparable to the Chinese machinery in the Friendship Mill, but manufactured in India or Brazil, could have been purchased with World Bank money.

Such misallocations are sufficient to explain the decline in the performance of the manufacturing sector in the 1970s discussed in Chapter 20. There were suggestions that corruption underlay some of these projects, such as the fertilizer factory (Coulson 1977a) though this was difficult to prove. This is not to say that ministers and civil servants were unaware of what was going on, but they had no answer to the fundamental problem posed by parastatals: they could sack the managements but would still have to operate the poorly-conceived investments. They therefore devised procedures to limit the freedom of parastatal managements, but in so doing they got close to undermining the ideal of commercial freedom with which parastatals were set up in the first place.

The first government attempt to limit the power of the parastatals was the aforementioned 1969 division of the NDC into four. Since the profitmaking subsidiaries all stayed with the NDC, this did not restrict that parastatal’s freedom, until in 1973 a separate mining parastatal took away Williamson’s Diamonds and the cement factory, two of the most profitable NDC subsidiaries. The agricultural, tourism, and construction parastatals created in 1969 were, however, all (p.331) inherently unprofitable, and therefore much more accountable to the government.9

The next initiative, following a 20% expansion of the money supply in 1970, and a balance of payments crisis, was exchange control and import control. There was, however, little restriction on imports classified as ‘capital goods’, however undesirable and costly they might be.10 Moreover, it was difficult for the government to deny the import licences needed to keep factories operating, however import-dependent they were. At about the same time a ‘credit plan’ was introduced in order to limit lending, and a ‘standing committee on management agreements’ was set up, with legal representation, to examine management agreements before they were signed. A ‘price commission’ was created, which required documentary evidence to show that costs had risen before it would approve price rises. Last, but not least, the General Superintendence Company, a Swiss firm, was employed to give a valuation of all imports into Tanzania before they left their ports of departure, in an attempt to prevent transfer pricing. Four hundred contracts—including many in the parastatal sector—were suspended within three months of it being employed. In theory this set of controls should have controlled most of the abuses. But taken together they involved a mass of paperwork, discouraged initiative (e.g. to export), and made it difficult for managements to take quick decisions.11

Workers and Management

The introduction of one other form of control was attempted, and is worth considering in some detail because of its significance for an understanding of where power lay in the Tanzanian state; this was (p.332) control of managerial abuses by the workers. The formation of trade unions has been described in Chapters 12 and 13, and their restriction in the years 1962–4 was discussed in Chapter 16. In October 1969, the President announced the formation of Workers’ Councils, with management and worker representation, which would ‘bring the workers close to the management of industries and promote better industrial relations while giving the workers more say in formulating policies.’12 Workers’ Committees already existed, with trade union (i.e. National Union of Tanganyika Workers) representation, created in 1964 as part of a new code for disciplining or sacking workers. There were also TANU branches in many factories, whose functions were never clearly defined, but which were supposedly concerned with the ideological commitment of their members and the country (Mapolu (ed.) 1976: 203–6).

The new Workers’ Councils were slow to meet, and proved to be dominated by the management representatives, who, insofar as they were prepared to accept the Councils at all, did so in the hope that they would serve as a means of raising productivity. This slow action was to be overtaken by the sudden approval by the Party, in February 1971, of the TANU Guidelines, or Mwongozo13 in which key clauses were as follows:

The responsibility of the party is to lead the masses, and their various institutions, in the effort to safeguard national independence and to advance the liberation of the African. The duty of a socialist party is to guide all activities of the masses. The Government, parastatals, national organizations, etc., are instruments for implementing the Party's policies. Our short history of independence reveals problems that may arise when a Party does not guide its instruments. The time has now come for the Party to take the reins and lead all the people’s activities.

(Clause 11)

There must be a deliberate effort to build equality between the leaders and those they lead. For a Tanzanian leader it must be forbidden to be arrogant, extravagant, contemptuous and oppressive. The Tanzanian leader has to be a person who respects people, scorns ostentation and (p.333) who is not a tyrant. He should epitomise heroism, bravery, and be a champion of justice and equality.

Similarly, the Party has the responsibility to fight the vindictiveness of some of its agents. Such actions do not promote Socialism but drive a wedge between the Party and the Government on the one side and the people on the other.

(from Clause 15)

If development is to benefit the people, the people must participate in considering, planning and implementing their development plans. The duty of our Party is not to urge the people to implement plans which have been decided upon by a few experts and leaders. The duty of our Party is to ensure that the leaders and experts implement the plans that have been agreed upon by the people themselves. When the people’s decision requires information which is only available to the leaders and the experts, it will be the duty of leaders and experts to make such information available to the people. But it is not correct for leaders and experts to usurp the people’s right to decide on an issue just because they have the expertise.

(from Clause 28)

The conduct and activities of the parastatals must be looked into to ensure that they help further our policy of socialism and self-reliance. The activities of the parastatals should be a source of satisfaction and not discontent. The Party must ensure that the parastatals do not spend money extravagantly on items which do not contribute to the development of the national economy as a whole.

(Clause 33)

The Mwongozo was prepared and approved by a Party Conference, called in the wake of the coup in Uganda, when Idi Amin toppled Milton Obote. A few months before, the Portuguese had invaded Sekou Toure’s Guiné. These events demonstrated two dangers facing the Tanzanian state: subversion within, and invasion by white armies without. Yet the Portuguese had been driven out of Guiné. The lesson drawn from Uganda and Guiné was, therefore, that even with external support, a fully prepared revolutionary state could only be overthrown if there was internal conspiracy and dissatisfaction.

Most of the Mwongozo was concerned with security and defence, but particular paragraphs which dealt with the role of the Party, the failures of many leaders ‘in their work and in day-to-day life’, and which argued that the time had come for ‘the Party to supervise the conduct and the bearing of the leaders’, were used against ‘arrogant and oppressive managers’, and enabled it to become—briefly—a (p.334) workers’ charter. There were several strikes, many of which took the managements concerned by surprise. Thirty-one were reported in the newspapers in the period from the promulgation of the Mwongozo (February 1971) to September 1973. Under the 1962 and 1967 Acts, these were illegal unless sanctioned by the NUTA General Council. Moreover, they were not, at least on the surface, about pay:

These strikes … were directed mainly against the commandism and abuses of the managers and bureaucrats. The promulgation of Mwongozo in 1971 with a penchant clause on commandism armed the workers with a potent weapon with which to deal with the bureaucracy. For the first time in history, we had in Tanzania numerous strikes not concerned at all with wages and other remunerations. The age of docility and humbleness at the oppression and humiliation of the petty bourgeoisie had passed for the Tanzanian workers. (Mapolu 1973: 32)

Mapolu puts the end of this ‘first phase of the workers’ movement’ as August 1972, when the government crushed a strike at the Sungura Textile Mill outside Dar es Salaam by dismissing thirty-one workers. Other employers began mass dismissals, and it was clear that they could count on government support to suppress ‘illegal’ strikes. So the tactics changed:

From then on the tactic of strikes generally faded; in its place the lockout technique came to the fore. Instead of striking because of the commandist or abusive practices of a boss, the workers would simply lock out the boss in question until their grievances were solved satisfactorily. … At times the workers have made it a point to step up production during that period just to ward off any accusation that they are causing damage to the ‘national economy’ …

Increasingly, the lock-outs stemmed from managers misusing public funds, squandering resources, failing to uphold national policies and so forth. The clauses in Mwongozo referred to often became no longer solely clause 15, which deals with commandism, but clause 33 which says, in part, ‘the Party must ensure that the parastatals do not spend money extravagantly on items which do not contribute to the development of the national economy as a whole’. (Mapolu 1973: 33)

The climax came between May and July 1973, when the 900 workers at the British American Tobacco (BAT) factory in Dar es Salaam (in which the government had taken 51% of the shares in 1967) locked out their personnel manager. The case was argued before the Permanent Labour Tribunal in July 1973. The officer was accused of (p.335) wasting company resources, and of favouring his own tribesmen in his recruitment policies. He was defended by the (British) General Manager of the company, but the case went against him, and he was dismissed. The accusations highlighted the differences in lifestyle and eating habits between a member of the management and the workers, and the way in which a company like BAT made possible parties, trips, expensive meals, and other extravagances. The workers were threatening the new bourgeoisie in the parastatal sector created by the Arusha Declaration (Shivji 1975: 140–2).

In the public sector, the tactics involved locking out salaried staff—usually general managers or personnel officers. In the private sector, owners were locked out as well, so that the private ownership of means of production was threatened. Three private company takeovers received widespread publicity. The first, Rubber Industries Ltd, was owned by a group of Asians, with financial support from Industrial Promotion Services (created by the Aga Khan to invest in manufacturing). The second, Night Watch Security Company, was owned by an Asian who had already left the country. The third, Mount Carmel Rubber Factory Ltd was to break the workers’ movement (Mapolu 1973: 37–40; Mihyo 1975: 72–84). The company had been started by an Iranian business man and engineer in 1952. By 1965, the Tanganyika Development Finance Company (TDFL) had invested 460 000 shillings in it, more than half its value at that time, and as late as 1973, the expatriate General Manager of the TDFL was Chairman of the Mount Carmel Board.

Mount Carmel was a profitable company, and an innovative one, producing rubber spare parts for motor vehicles, roller printer sheets for the textile industry, and the rubber solution used in retreading car tyres. Working conditions were harsh, and of the seventy workers about thirty were employed on a day-to-day basis, and paid less than the minimum wage for Dar es Salaam. A Workers’ Committee should have been started in 1964; but no steps were taken until January 1971, when some NUTA officials visited the factory. They seemed more interested in getting a list of all the workers’ names (so that the employer could be instructed to deduct union dues from their wages) than in meeting the workers, but at least a Committee was started. It achieved little. A collective agreement drafted by NUTA officials was lost before it could be signed by either workers or management. In February 1972, the workers threatened to strike if the agreement was not signed. The Ministry of Labour failed to sanction the strike, or to take any steps to discuss the grievances.

(p.336) After another year’s delay, in March 1973, the workers next door at Rubber Industries Ltd, took over their factory, and on 17 June 1973 the Mount Carmel workers followed suit. The Commissioner of Labour visited the factory, but was refused admission because he arrived on site with the employer. On 19 June he returned with the Dar es Salaam Regional Commissioner; the workers told him that they would accept any leadership other than that of their Iranian owner. Meanwhile the production manager of Aluminium Africa (probably the largest manufacturing firm still in private hands, owned by the Chandaria group) had been locked out, and the workers at the Hotel Afrique (also Asian owned) were preparing to take over the hotel. The government position suddenly changed. Whereas on 6 June the Regional Commissioner had ‘hailed the workers for their revolutionary action in fighting against exploiters in the country’14, on 20 June

an official from the Ministry [of Labour] accompanied by a number of policemen called at the factory in Chang’ombe and issued to all the workers what he called a Government Order. He said that those workers who were not ready to work under Mr. Yadzani [the owner] should stay apart from those who accepted his leadership. All workers who refused to accept their employer's leadership were ordered to enter parked vehicles. Sixty-two were driven away to the Central Police Station leaving the industry with only fifteen workers. … At the Central Police Station the held workers said that although they did not know their fate they still stood by their refusal to work under Mr. Yadzani, whom they described as an exploiter and an oppressor. ‘We are members of TANU and it would be a sin for us to work under this man, whose character contradicts TANU policies’. (The Daily News, 21 June 1973).

The government issued a statement that ‘it could no longer tolerate such unruly action on the part of the workers’. The fact that two firms had been taken over ‘did not mean and shall not mean that TANU and the government have now permitted anew the workers to invade industries or that it should now be the method of nationalizing industries.’ After a few days in the cells, the workers were ‘repatriated’ to their ‘home areas’. The government newspaper, The Daily News had on 9 June carried a piece by its influential columnist Chenge wa Chenge which included the following encouragement:

(p.337) Workers have been seizing capitalist property and converting it into people’s property. How good! How revolutionary! There is no need to justify the seizure of capitalist property by workers. The issue is as clear as day. In any case the time for justifying our actions to exploiters has long passed. … Capitalists in Tanzania and elsewhere in Africa must tremble at what is taking place. They must gnaw their teeth and groan …

By 22 June it was justifying the government action in arresting the workers which ‘in the final analysis was for the benefit of the workers themselves’. On 26 June the Dar es Salaam Regional Commissioner who had received such contradictory publicity was transferred to Dodoma, where he now had a powerful incentive to make a success of his new job of organizing the population into villages (see Chapter 22).

Why was the about-turn so sudden? In the final instance it was probably the behind-the-scenes activity of the TDFL—whose four shareholders were government-supported development corporations in Britain, West Germany, the Netherlands, and Tanzania itself. The TDFL had been an investor in most of the medium sized import substitution industries that had sprung up since Independence. A dispute with the TDFL meant taking on the capitalist world, especially once it became clear that to allow the Mount Carmel workers to take over would lead to workers’ control of many other factories. The government, and the interests entrenched in the parastatals created since 1967, were not prepared to allow socialism to develop in this way.

In the months which followed, elected workers’ leaders who stood up to management were dismissed. It became necessary to have official Party approval before any mass action could be taken, whether or not it would affect production. Shop floor initiative was crushed, and the control of factories remained firmly with management. Workers would not control their factories, and they would have little or no power over the Tanzanian state.

(p.338) Appendix 1: The State Trading Corporation 1967–197215

In 1961, the government commissioned a study of wholesale and retail trade from the Economist Intelligence Unit (Hawkins 1965). It concluded that overall the margins obtained by traders were not high, and that, considering the difficulties of distances, small markets, and seasonal fluctuations, the average costs of distribution were remarkably low.

The study also pointed out that prices rose rapidly as soon as there were shortages of goods, that bargaining in shops meant that the consumer constantly felt cheated, and that short weight was widespread. In the Southern Region a cartel of wholesalers limited competition, while credit was often used to bind farmers to particular traders.

By 1961, the role of the Asian or Arab trader as buyers of agricultural produce was threatened by the co-operative movement, although in the southern and central parts the co-operatives were still in their infancy. During the next few years the co-operatives in these areas were expanded with government support, and the Consumer Supply Association of Tanganyika (COSATA), a consumer co-operative association, began opening co-operative shops. In 1963, a European import/export house was taken over and renamed INTRATA, and it was hoped that it would work closely with COSATA. But by 1965, both COSATA and INTRATA were in debt, the former mainly through failure to control sales on credit, especially to people in high places, and the latter mainly through overstocking. It was decided to restrict retailing to a few carefully managed shops, while INTRATA’s debts were paid off by making it the only legal importer of khanga and kitenge (the printed cloth worn by Tanzanian women) on which it was given a 12% commission in the price structure.

In 1967, following the Arusha Declaration, eight of the biggest foreign-owned import/export houses were nationalized and combined with what was left of INTRATA to form the State Trading Corporation (STC). Many small Asian importers remained, and manufacturing companies often ordered their requirements directly, (p.339) so that the STC was responsible for only a fraction of total imports. Moreover the companies taken over retained their existing clients, agencies, and specializations, so that there was only the beginning of an attempt to rationalize the process of importing. However, in 1969 the complete takeover of wholesaling, importing, and exporting was included as policy in the Second Five-Year Plan.16 Expatriate advisers had pointed out the manpower required for this task, and the difficulties in other countries, such as Ghana, which had tried to socialize all trade; the plan, therefore, was for the STC to increase its range of imports by gradually ‘confining’ new categories to the STC (making it the only legal importer of those items).

In February 1970, however, President Nyerere suddenly announced that all importing, wholesaling, and exporting would be socialized by the end of the year. The STC was not expected to do this entirely alone, since the NDC subsidiaries and other parastatals would import their own input requirements, as well as finished products in the product areas in which they were involved (e.g. the Tanzania Fertilizer Company, an NDC subsidiary, was to become responsible for all imports of fertilizer into the country, including types of fertilizer which it did not produce itself). Nevertheless, the main task of importing small quantities of a wide range of processed foodstuffs, household items, consumer durables, drugs, building supplies, and industrial and agricultural inputs was left with the STC. Some 65 000 different items were involved, with a turnover of about 600 million shillings a year, about a third of the country’s imports by value (Resnick 1976: 76). The decision was taken for three reasons. First, because the method of confining groups of items to the STC was not working well; in particular, it was disrupted by importers who managed to import large stocks of the goods concerned just before they were confined to the STC. Secondly, it had become clear that it was not possible to prevent capital flight while importing remained in the hands of many small importers who could inflate their invoice prices on imported items. The third and most pressing reason was that the arrangement agreed upon for the Chinese loan for the TAZARA railway required Tanzania to purchase approximately 250 million shillings of goods from China in each of the five years that it took to build the railway. It would have been difficult to redirect (p.340) trade to China to this extent if it had not been controlled centrally by a nationalized corporation.17

In the months which followed there were more shortages of consumer goods than at any time since the years immediately after the Second World War, and the performance of the STC caused more complaints than any other nationalization, or indeed than any other political initiative since Independence. What happened makes a classic study of bureaucratic reaction to events. In February 1970, an Implementation Committee was set up, consisting of four senior Principal Secretaries and the Heads of the State Trading Corporation, the National Development Corporation, and the National Bank of Commerce. One of its first moves was to invite McKinsey’s, the firm of management consultants who at the time were preparing management systems for the NDC, to do the same for the STC.18 The McKinsey consultancy was not completed until July, and in the meantime the Implementation Committee had a series of complex problems to solve. No one knew the size of the Tanzanian market in more detail than the broad categories of the Annual Trade reports. In particular, there was little information about the markets in northern Tanzania and the Lake Victoria areas, which had been supplied mainly through Mombasa. There was a possibility that the whole Asian community would shut its doors, causing nearly all business in the country to grind to a halt—a fear increased by the nationalization of buildings in 1971.

It seemed more important to keep people’s confidence than to risk shortages. So, without much knowledge of quantities, the STC started buying, and if there was any doubt, it over-ordered. Its overdraft at the National Bank of Commerce rose quickly to 100 million shillings, and then to over 150 million by November 1970, and to over 200 million shillings by May 1971. There was a corresponding drain of foreign exchange, but this was not detected in the statistics of the Bank of Tanzania until October 1970. In November a credit squeeze was started, but the overdraft continued to rise. Eventually, in the budget of May 1971, an overdraft ceiling of 160 million shillings was imposed. The attempt to keep within this figure caused the shortages, as bills were not paid, goods were ordered in smaller and smaller quantities, and many essential items for industry were purchased after long delays, so that local production as well as importing was affected.

(p.341) A stock check supervised by the auditing firm Cooper Brothers in July 1971 established that there was a high proportion of what was generously called ‘slow-moving stock’. It also revealed failures of accounting in the organization which made control or management almost impossible, and enabled staff to steal money or goods. The financial controller, chief accountant, and credit controller were all dismissed in January 1972.

The corporation was bureaucratic and centralized. Every individual had been issued with instructions detailing exactly how to perform but, for example, it took eighteen administrative steps for a branch office to add a salesman to its payroll (Resnick 1976: 78). There were also some vital omissions. No guidance was given as to what to do if the government imposed a credit squeeze, and, even more surprisingly, there was no procedure for introducing new goods to customers—a serious omission when many new items started arriving from China. The McKinsey system separated importing from selling: eighteen specialist ‘product divisions’ imported the goods, but the Sales Division, with its up-country branches, was separate from these. Procedures were laid down to determine the quantity of each item that should be ordered, and the stock level at which the item should be reordered. McKinseys did not prepare any manuals for accounting, so the success or otherwise of a branch was to be judged by whether goods were in stock. There was no means of telling whether a particular item was selling at a profit or a loss. If the system failed to work (and it was hardly ever possible to use it as designed) there was no way of allocating the blame.

The first problem was to select the items to order from the bewildering variety of brands and makes available. An identical item was often found with different descriptions, or was being ordered separately under different product numbers by different parts of the system. The STC was ordering 65 000 different products, but it never managed to make out a satisfactory list of all these items. The next problem was where to put goods when they arrived. Many of the old importers had used small stores, or space in their shops. The McKinsey system was designed to work with just four or five huge stores. Instead, the STC found itself with about forty stores, many very small, in different parts of Dar es Salaam. Moreover, when goods were ordered from China, a whole year’s supply often turned up at once, and had to be stored. Soon no one knew precisely what was in many of the stores. By the time the position was at least (p.342) broadly known (July 1971), the overdraft was being cut, and orders from product divisions were being cut or refused in head office on an arbitrary basis.

The accounting system hurriedly improvised in 1970 provided little information. Branch and product division accounts were produced late or not at all, and Cooper Brothers refused to certify the 1970 accounts as correct. Without accounts, financial ceilings could not be used to control the overdraft, and there was no incentive for branches or divisions to control stock levels, vehicles, or the use of staff. The resort to direct bureaucratic intervention was inevitable. All orders for goods had to be approved in head office, for a time by one man who was arbitrarily cutting orders in order to reduce the overdraft. The management hoped that their problems would be solved by their computer. In 1971 they ordered a bigger computer with the intention of computerizing stock control, ordering, and the accounts; almost at the same time the staff responsible for the computer, writing in the 1971/2 corporate plan, made it clear that a computer could not begin these tasks until many other aspects of pricing and ordering policy had been settled. They never were, and the computer was eventually recognized as an expensive white elephant.

The obvious solution was decentralization, as was recognized by early 1972 and implemented between then and early 1973. Six specialized importing companies were created, together with seventeen wholesaling companies (one for each region), with the STC remaining as a holding company for these twenty-three subsidiaries. Paradoxically, this was almost the same solution that was evolving before the McKinsey plans were implemented in 1970, as the various companies taken over were gradually specializing in particular product areas. Instead, three million shillings were spent on a foreign management consultancy which delayed rationalization by two years and, more than any other single cause, was responsible for the shortages.

Even with all the problems described, the STC had its successes. It managed the importation of the Chinese goods. It reduced the prices of whole ranges of goods, such as pharmaceutical products. And on many individual items it was able to use its monopoly position in the Tanzanian market to strike hard bargains with overseas suppliers. The decentralization did not solve all problems. But it did make the results of corruption and fraud visible locally. Thus, after the very shaky start described here, the Tanzanian state succeeded in taking control of importing. Without this control, any form of planned industrialization would be impossible.

(p.343) Appendix 2: The Mwananchi Engineering And Construction Company (MECCO)19

In 1963, the Mwananchi Development Corporation (the economic arm of the National Union of Tanganyika Workers) purchased a minority share in a building company started and run by a Mr Tara Singh Dogra, an Asian who had been in the building business since the 1920s. In 1966, the assets of the Mwananchi Development Corporation were transferred to the NDC, and not long afterwards the NDC purchased Mr Singh’s shares, to become sole owner of the company. In February 1967, 40% of the shares were sold for two million shillings to a Dutch company, the Overseas Construction Company (OCC), a member of the Nederhorst group. An agreement was signed under which the OCC would provide management for the company: expatriate staff would be recruited by the OCC and paid salaries comparable to those they would have received as employees of the OCC; in return the OCC would be guaranteed an income of 100 000 shillings per year together with a management fee of 1% of the turnover of the company. The agreement also required the company to train craftsmen and technicians at all levels in the industry, to keep its accounts up to date, and to set up financial control systems on its building sites.

Two and a half years later (November 1969) the company was making losses. The accounting system was confused, and each site manager was using his own method of controlling costs. There was no training programme, but there were twenty expatriate staff in the company, and the management was trying to bring in more (they had advertised for a foreman carpenter in Holland); meanwhile the best local staff were leaving. This situation might have continued for some time without government intervention, since the NDC was often willing to use profits from profitable companies to cover losses on companies such as MECCO. But in August 1969 the NDC was split up, and MECCO became an independent parastatal under the Ministry of Lands, Housing and Urban Development, with no other organization (p.344) in a position to reduce its rapidly growing overdraft at the National Bank of Commerce.

Economy measures were taken in November that year. The General Manager and nine other expatriates were transferred out of the company, and five others brought in (thereby reducing the expatriate team by five). Steps were taken to establish some kind of cost control. The (more or less non-existent) training programme was officially ‘suspended’ in the interest of economy. But the government concern continued, not least because while MECCO was losing money, the OCC was benefiting. In addition to the 1% of turnover, 100 000 shillings, and payment of expatriate salaries, there was evidence that goods were being imported from Holland that could have been purchased more cheaply elsewhere. There was one particular contract, a factory building for General Tyre (an NDC subsidiary in partnership with General Tyre of America), where MECCO had not been the lowest tenderer. The Americans asked the OCC (not MECCO) to redesign the project, and arranged to pay it directly in Holland. The OCC subcontracted the construction work to MECCO, but there was no control over the price paid to MECCO, and it looked very much as if the OCC was using MECCO as a means of winning contracts and taking money out of the country.

It was not, however, easy for the government to remove the OCC. An attempt to persuade it to leave voluntarily failed. The company was technically bankrupt; but when the National Bank of Commerce threatened to foreclose if the overdraft was not repaid within a certain time, the OCC appealed to the Dutch ambassador and put pressure on Tanzanian leaders and officials, arguing that other foreign companies would not be safe if the Tanzanian government acted like this. The Bank withdrew its deadline, and pressed instead for an auditor to be appointed and for an individual nominated by the Bank to report on the operation of the company. The OCC accepted these terms.

In October 1970, the workers of MECCO petitioned the NUTA. They claimed that the management was not sympathetic to the aspirations of the country, brought allegations of racial discrimination, and argued that worker management relationships had reached a critical state. Their particular grievance was that the company continued to depend on casual labour and was not training a permanent labour force. In November the government threatened to purchase the OCC shareholding, in the interests of securing greater (p.345) control over the economy, and on 12 December it announced that it had agreed to purchase the shares for the same price at which they had been sold to the OCC, and that the management agreement would be terminated at the end of the year. The announcement stressed that the termination had been mutually agreed, and that no compensation would be paid to the OCC. Nevertheless, by paying the company two million shillings for shares which by then were virtually worthless, the government paid it to leave.

With hindsight, it is clear what happened. The initial justification for bringing in outside management was to enable the company to compete for complex building and engineering contracts, hitherto taken by foreign contractors. The OCC, like the government negotiators, probably thought that it would be easy to make profits. But in any case its equity investment was relatively small, it was well protected in the management contract (based on turnover rather than profit), and it may well have perceived other potential benefits from a partnership involving the Tanzanian government. But by the end of 1969 it was clear that it was easy to make losses in the Tanzanian market. There were a limited number of contracts, a number of well-established firms, and the rate of profit was insufficient to absorb MECCO’s overhead costs swollen with the expatriate salaries (MECCO’s overheads were approximately 13% of its turnover, compared with about 5% for the Asian firms). The government Central Tender Board was not prepared to allocate work to MECCO if another contractor would carry it out more cheaply. After November 1969, the OCC replaced its general manager and cut the overheads, but by then it had lost the confidence of the government. When the company realized this it concentrated even more on protecting its interests in Holland: it maximized turnover (taking on large contracts even when it expected to lose money on them); it over-invoiced (a tower crane was purchased in Europe for much above its cost price); and it sought means of transferring money from MECCO to the OCC (on a project involving the construction of new berths in Dar es Salaam harbour, where the OCC was the main contractor, MECCO accepted rates for earthmoving which were so low that they did not even cover the running costs of the machinery).

The Operations Division of the NDC and the Tanzanian members of the Board of Directors were slow to act, but there was no way in which they could have controlled a management that was unable to run the company profitably and yet was willing to go to considerable (p.346) lengths to cover its tracks. When bankruptcy was suggested, a wide range of individuals supported the OCC; they included the lawyer who had drafted the original agreement, the Board of the NDC, various government officials, bankers and economists who pleaded that if too much publicity was given to this case Tanzania’s reputation would be spoilt so that it would be difficult to attract other foreign firms, and the Netherlands ambassador backed the OCC management. Their opposition inhibited the government, and prevented it taking the most forceful line of action, which would have been to bankrupt the company (while allowing the receiver to keep an organization intact to complete the work in progress). The treatment of the OCC would have become an example of what might happen to other firms who attempted to manipulate management agreements to their own advantage. But instead the government announcement terminating the agreement indicated an intention to sign another agreement with another agent, and shortly afterwards the OCC was allowed to be part of a consortium of Western firms which was awarded the 234 million shilling contract for the Kidatu hydroelectric project.

It took more than two years for MECCO to complete the loss-making projects that had been tendered for by the Dutch before they left. By then the overdraft was no smaller, and the vehicle fleet was in urgent need of replacement. A shortage of working capital was restricting rapid progress on some projects and contributing to labour problems. And yet progress was being made. The Dutch team had been replaced by an individual who was sympathetic, hardworking, and who knew the local scene; training of Tanzanians was proceeding, and work on some of the biggest projects (for example the 30 million shilling National Insurance Corporation building) was directed entirely by Tanzanians; a cost control system was in operation; and the labour situation was under discussion. Without the complication of foreign management, it had become possible to consider the problems of setting up a nationalized construction company, and the contribution that realistically it could make.

Notes:

(1) C. D. Msuya, MP, Minister of Finance, ‘Proliferation of Public Institutions in Tanzania: its Impact on the Economy’. Speech to the Economic Society of Tanzania, 22 February 1974, mimeo, p. 12.

(2) In Tanzanian official statistics a parastatal is defined as a corporation in which the State owns a majority of the shares. Edward Clark in Socialist Development and Public Investment in Tanzania (University of Toronto Press, 1978) rightly extends the definition to include smaller shareholdings.

(3) The other investment bank, Investment Promotion Services (Tanzania), was controlled by the Aga Khan. By 1971 it had 15 investments, mostly for medium sized industries owned by members of the Ismailia community. (C. Barker and D. Wield, ‘Notes on International Firms in Tanzania’, Utafiti 3, 2 (1978). p. 338).

(4) See Chapters 22 and 24.

(5) Its shareholders were the Commonwealth Development Corporation (British), Deutsche Gesellschaft fur Wirtschaftliche Zusammenarbeit (West German), Nederlandse Overzeese Financierings-Maatschappij (of the Netherlands), and the NDC.

(6) For notes on McKinsey’s Tanzanian consultancies see Chapter 22, fn. 14. Reg Green comments: ‘Tanzania’s NDC under George Kahama had a clear revealed preference for maximizing group size and the scope of new ventures and a very low one indeed for raising internally generated group cash flow.’ (‘Public Directly Productive Units/Sectors in Africa and Political Economy’, typescript n.d. (?1975), p. 13).

(7) Turnkey projects and management agreements can prove very expensive if the holding company concerned is short of expertise. They are also obviously vulnerable to corruption. See below.

(8) For an in-depth study of this period and of the basic industry strategy which followed see Skarstein and Wangwe (1986).

(9) For a study of the agricultural parastatal see P. Packard ‘Corporate Structure in Agriculture … : A Study of the National Agricultural and Food Corporation’, (1972), in Coulson (ed.) African Socialism … , pp. 200–13. For the construction parastatal see Appendix 2 to this chapter.

(10) For example an automatic car-washing machine was imported, and electronic control equipment in new grain mills and the automated bakery. There was little evidence of a ‘technology policy’.

(11) The 1977 World Bank mission recommended dismantling many of the controls, but their advice was contradicted by the 1978 ILO Mission which produced the report Towards Self-Reliance: Development, Employment and Equity Issues in Tanzania.

(12) The Nationalist, 9 October 1969, quoted in H. Mapolu (ed.), Workers and Management (Tanzania Publishing House, 1976) p. 208. The proposals were put in concrete form in Nyerere’s Presidential Circular No. I of 1970, issued in January 1970 and reprinted in Mapolu (ed.) Workers and Management, pp. 153–9.

(13) The Mwongozo, English version in Coulson (ed.) African Socialism …, pp. 36–42.

(14) The Daily News, 7 June 1973.

(15) See also I. Resnick, ‘The State Trading, Corporation: A Casualty of Contradictions’, in Mapolu (ed.), Workers and Management, pp. 71–89.

(16) Government of Tanzania, Second Five-Year Plan, Vol. 1, p. 142.

(17) See also Chapter 21, Appendix 2.

(18) For more information on McKinseys, see Chapter 22, fn. 14.

(19) An earlier version of this appendix formed part of an article headed ‘Blood-Sucking Contracts’ which appeared in Mapolu (ed.), Workers and Management (Tanzania Publishing House, 1976), pp. 92–7.