Tanzania and Illusions of Economic Sovereignty

by ROBERT GORDON

In 1968, Julius Nyerere, the first President of the emerging Tanzanian state, wrote a series of essays entitled Uhuru na Ujamaa or Freedom and Socialism that articulated a distinct vision of African socialism. He believed that even though Tanzania and other African nations had nominally broken the chains of colonialism they continued to be shackled by economic policies that limited their ability to achieve full liberation. He argued that traditional African villages organized around an extended family structure had existed prior to colonialism and would provide an effective model for economic organization after it had been eroded. Nyerere would later look back on his youthful idealism and remark, “never in life can you achieve your articulation”, it is always “easier to formulate an objective than to achieve it.”

The history of challenges that would emerge not just for Tanzania, but for the Third World as a whole from independence forward are vast and the subject of a good deal of scholarly literature. Authors like Vijay Prashad and Walter Rodney, former Third World politicians and countless economists have detailed both the internal and external constraints placed on the processes of decolonization. However, when one examines the state of the Tanzanian economy today there are some developments particularly in extractive industries that suggest exploitation now occurs on transnational grounds. Not only has Nyerere’s original vision of how Tanzania’s economy should be organized been eroded, but those who stand to benefit from Tanzanian wealth and resources have been expanded.

Under formal colonialism relationships of exploitation were determined by the direct control of resources and labor in a certain geographic space by people from another territory. Today, Tanzanian resources and development projects are shared by a collection of transnational corporations, foreign investors, local capitalists and lastly the Tanzanian state. For instance, contracts for basic projects like expanding the country’s electrical access were given over to the Russian company, Borodino Group, as recently as September 2010. The contract allows the corporation to take control of a 222-megawatt hydroelectric dam project in the Iringa region, about 500 kilometers west of the commercial capital, Dar es Salaam.

More importantly, projects that involve extractive industries like the mining and energy sectors are attracting the most attention from foreign investors. China recently signed a $3 billion deal to develop the Mchuchuma coal and Liganga iron ore projects in Tanzania. Under the deal the Tanzanian state would be a partial owner through the Development Corporation of Tanzania, or NDC, with a 20 percent share of ownership. Both projects aim at improving power output in the country and making Tanzania more favorable for international financial support. In 2010, donor countries slashed aid budgets by about one-third, cutting $220 million from their commitments, and the Tanzanian state has since made multiple efforts to demonstrate to the international community that it is committed to economic cooperation, government transparency and better governance.

Gold is the most profitable resource that is currently extracted in the country and because of fluctuations in the global economy the price has been steadily on the rise for the past five years. In Tanzania, gold exports have surpassed $1.5 billion annually, but what is particularly telling about how the central government approaches the sector is that government revenues have remained steady at $100 million annually. This means that while companies like African Barrick Gold, which is currently listed in London, are making record profits in their dealings with Tanzania the country itself reaps very little. The main countries that have gold mining operations in Tanzania currently are the United Kingdom, Australia and South Africa.

Recently the central government modestly noted that it was interested in raising taxes on gold exports, but that it was not rushing to do anything because it hoped to further discuss the issue with companies operating in the country. This is part of the reason that even though Tanzania faces some real difficulties with food security, water security, access to affordable medicine and meeting energy needs the International Monetary Fund (IMF), World Bank (WB) and other international financial institutions are often quick to praise the country’s cooperation with transnational business interests.

An additional testament to how complex transnational control of the Tanzanian economy is came recently with BP Tanzania’s apologies for refusing to meet government demands to cut fuel prices. BP Tanzania is interesting because it is considered a foreign company, owned by the controversial trading company Trafigura, but the Tanzanian state also technically owns half of it. In a recent dispute the Tanzanian energy regulator withdrew the wholesale fuel license of the company when it withheld supply after the regulator cut prices of petroleum products and the company sought clearance from shareholders to comply with the ruling. The company did not want to sell its product, which was fuel in this case, below cost even though the Tanzanian state was trying to advert major problems in the day-to-day lives of its citizens.

The Tanzanian state has since accepted the apology and is in the process reinstating BP Tanzania’s license, but in reality withdrawing the license in the first place was simply a threat. Not only does the Tanzanian state have a vested interest in BP Tanzania’s operations because it owns a significant share of the company, but BP Tanzania controls 11.9 percent of the Tanzanian market. During a fuel shortage it would be extremely difficult to shut down such a significant supplier without adversely effecting the market price of oil in the short and medium term.

While the largest investors currently operating in Tanzania are from Europe, Asia, Australia and South Africa it is important to point out that the United States also has big aspirations for private sector development in the country. U.S. Ambassador Alfonso E. Lenhardt welcomed senior General Electric (GE) executives to the country on May 26, 2011  to meet with Tanzanian officials and discuss potential investment opportunities in energy, healthcare, rail and aviation. Those in attendance included Felix Mosha, chairman of the Confederation of Tanzania Industries; Paddy Hoon, Vice President of the American Chamber of Commerce; Paul Hinks, CEO of Symbion Power; John Rice, GE Global Vice Chairman; and newly appointed CEO for Africa, Jay Ireland. After the meeting, GE publicly acknowledged, “Africa offers the next frontier of growth and Tanzania is well-situated as a partner.”

These recent developments in Tanzania are by no means unique and any country that sits upon valuable resources may be subject to similar exploitation and likely has some of the very same companies and investors operating there already. Globalization is often framed in abstract terms and to many people it does not refer to the extended history and expansion of capitalism, but rather a narrow historical moment that began in the last few decades. If we contrast Nyerere’s original vision of what Tanzania could have been as formal colonialism collapsed with what it has become one could argue that in many ways he hoped to reverse the history of capitalism all together.

We now know that he was unable to realize his original vision due to both domestic and external factors, but what remains significant is that much of Tanzania continues to exist outside the realm of the country’s most exploited industries. Even though mineral extraction may be the most profitable sector of the country’s economic portfolio there is still considerable room for rural Tanzanians to resist further integration into the market. The constraints are there and it is clear that for a majority of the Tanzanian population and for a majority of Africa as a whole there is considerable challenges to maintaining indigenous control of resources. With that said, if the brutality of formal colonialism was able to be challenged and overcome then this repackaged and stealthier version can also be confronted. The fundamental difference between the 1960s and the present is that there is no longer a singular empire to confront, but rather a transnational coalition organized along shared class interests.

Robert Gordon is a journalist in Berkeley, CA. 

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