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Economic reforms and theprospect for sustainabledevelopment in TanzaniaKassim KulindwaPublished online: 01 Jul 2010.

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Development Southern Africa Vol. 19, No. 3, September 2002

Economic reforms and the prospectfor sustainable development inTanzania

Kassim Kulindwa1

The objective of the Macroeconomic Reforms and Sustainable Development in Southern Africaproject was to facilitate the attainment of sustainable development objectives agreed at theUnited Nations’ Earth Summit held in Rio de Janeiro, Brazil, in June 1992, in which Tanzaniaparticipated. The two natural resource-based sectors of tourism and mining were chosen foranalysis. Despite the dif� culty of linking policy explicitly to particular economic activityperformance, macroeconomic indicators show that economic policies stimulated economicactivity resulting in, among other things, a signi� cant increase in economic growth, decliningin� ation, declining de� cits, and an increase in tax revenue collection. The mining and tourismsectors’ share of GDP increased signi� cantly, and both sectors have contributed greatly toemployment generation. However, these economic gains have come at the cost of environmentaldegradation, social hardship and the breakdown of social norms and values. Such resultsindicate that the country is not yet on a sustainable development path. While good policies existand are being improved, there has been a failure of policy implementation over the years. Withgood policies, appropriate integrative strategies, commitment and political will, the country mayattain a sustainable development path.

1. INTRODUCTION

Tanzania shares a similar policy climate of economic and political transformation withother developing countries as they each move towards greater involvement in theglobal economy. In most of these countries the economic downturn of the 1970s wasbrought about by oil price rises, unfavourable climatic conditions, external debt burdenand slow economic growth. This resulted in these countries pursuing ambitiouseconomic reforms in the 1980s and 1990s. Driven by international developmentagencies these reforms, however, often caused environmental degradation and socialcrises, while registering meagre economic successes (Reed, 1996). In most cases, theapproach used in economic development decision making has been top-down of acommand-and-control type. In this approach, technocrats are ‘omnipotent’ and tellpeople what to do without necessarily providing reasons for their decision or the meansfor implementing it. In decision making of this nature it appears that people’sknowledge, experience and wishes do not matter. Unsurprisingly, most of theseinitiatives, dependent ironically on these same people for implementation, failedmiserably. Governments in these countries and development organisations have, as aresult, recognised the need to solicit greater public involvement in policy decisions andto mainstream social and environmental issues in macroeconomic reforms in order toincrease the chances of success of their programmes. It is against this background that

1 Senior Research Fellow, Economic Research Bureau, University of Dar es Salaam, Tanzania. Theauthor would like to acknowledge the individual expert contributions during project implemen-tation from the Economic Research Bureau, the Institute of Resource Assessment and the Facultyof Law, all of the University of Dar es Salaam.

ISSN 0376-835X print/ISSN 1470-3637 online/02/030389-15 Ó Development Bank of Southern AfricaDOI: 10.1080/0376835022015018 9

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a project was initiated to study the mechanisms for, and possibilities of, sustainabledevelopment in Tanzania as a developing country.

The article is organised in the following way. Section 2 places the discussion incontext; Section 3 describes the rationale and objectives of the project; Section 4discusses the reform impacts, including the environmental and social effects. The � nalsection outlines lessons emanating from the project’s three components of research,training and advocacy and charts the way forward by indicating what could be done infuture.

2. CONTEXT

This paper is a brief summary of � ndings from a project initiated in 1997 by theMacroeconomics Programme Of� ce of the World Wide Fund for Nature (WWF/MPO)and implemented in Tanzania by the Economic Research Bureau (ERB) of theUniversity of Dar es Salaam. The overall project was known as ‘MacroeconomicReforms and Sustainable Development in Southern Africa’ and involved three othersouthern African countries: the Republic of South Africa, Zambia and Zimbabwe. Theaim of the initiative was to understand how economic reforms impacted on economicperformance, social welfare and the natural environmental status of these countries. Afurther aim was to contribute to raising awareness among stakeholder categories of theconcept of sustainable development through training and advocacy.

These activities were aimed at facilitating the achievement of the sustainable develop-ment objectives deliberated and agreed at the United Nations’ Earth Summit held inRio de Janeiro, Brazil, in June 1992. It was during this summit that Agenda 21, aprogramme of action for sustainable development, and the Rio Declaration on develop-ment were adopted by more than 178 governments, including Tanzania. The objectivesof Agenda 21 and the Rio Declaration are to bring about the necessary changes neededto halt and reverse the negative impact of human behaviour on the natural environmentand to promote environmentally sustainable economic development in all countries.

The concept ‘sustainable development’ is de� ned brie� y as development that meets theneeds of the present without compromising the ability of future generations to meettheir own needs. Within this de� nition three major pillars are found, integratingeconomic, social and environmental aspects. Thus, in order to attain sustainabledevelopment, economic activities should target the needs of people while maintainingthe ability of the environment to meet these needs.

It was noted during the Rio Summit that ‘humanity has reached a turning point’.Consequently, the challenge facing nations is the choice of whether to continue withpresent policies that deepen economic divisions within and between countries, and thatincrease poverty, hunger, sickness and illiteracy and cause continuing deterioration ofthe ecosystem on which life on earth depends. Or, alternatively, countries can changecourse by acting to improve the living standards of those who are in need, and throughbetter management and conservation of the ecosystem ensure that a better future ispossible for all.

To achieve the goal of sustainable development, it is necessary that capacity forimplementing the decisions and declarations is in place. Furthermore, effective im-plementation of the concept requires awareness of, and sensitisation to, the issues onthe part of concerned stakeholders.

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Economic reforms and sustainable development in Tanzania 391

3. OBJECTIVES OF AND RATIONALE FOR THE PROJECT

The overarching objective of the Macroeconomic Reforms and Sustainable Develop-ment project was to in� uence macroeconomic policy formulation processes in each ofthe partner countries, as well as of the donor fraternity through the integration of majortenets of the sustainable development concept in decision making. To achieve this, theproject focused on three key thrusts:

· The � rst was research aimed at establishing links between macroeconomic policiesand the state of the natural environment.

· Secondly, training was to be used to raise stakeholders’ awareness and understandingof issues related to the in� uence of macroeconomic policies on the natural environ-ment and the welfare of society.

· Thirdly, advocacy was to convey the message to appropriate in� uential stakeholders,thus informing them of the issues and potential outcomes involved. It is anticipatedthat such empowerment should result in improved decision making and betterdecisions.

The Tanzanian project was undertaken through a consultative process involving aNational Advisory Committee (NAC) made up of participants from governmentdepartments, private sector and civil society organisations, major stakeholders and theDonor Forum. The Donor Forum consisted of representatives of the donor organisa-tions contributing � nancial resources to the project. They also played an important roleby sharing expertise and experience during the project’s implementation. The casestudies focused on the mining and tourism sectors, which were selected by the NACbased on the emerging trends in Tanzania and the importance attributed to these sectorsfor economic development. Historically, agriculture was the leading economic sector,the backbone of the Tanzanian economy. Agriculture contributed up to approximately80 per cent of the national economic product during the 1960s and 1970s. However,in recent years, mining and tourism have shown great potential. Government prioritiesare now shifting towards these new growth sectors. The Tanzania Investment Centrehas identi� ed these sectors, together with agriculture, for further investment andpromotion.

The participation of stakeholders and bene� ciaries in decision making and planning isimportant. It is suggested that participation inculcates a sense of ownership in, andcontrol over, the process and commits these participants to act responsibly. Therefore,involvement of stakeholders holds out the possibility for successful implementation ofthe policies and programmes.

The rationale for undertaking the study in Tanzania is embedded in the country’sdependence on natural resource-based economic activities and its economic history ofthe past two decades. This history provides good case material that is useful forunderstanding the interactions between economic reforms and their relation to sustain-able development. Faltering economic performance in the late 1970s can be blamed onseveral events, including the global economic downturn of this period and the break-upof the East Africa Community in 1977. Others include the doubling of oil pricesbetween 1979 and 1980, the war with Uganda between 1978 and 1979, and two severedroughts. It can also be blamed partly on economic policy failures. For example,inef� cient state transport and market systems have caused the agricultural sector tostagnate.

By the early 1980s, the outlook was gloomy and the country had deteriorated in a

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392 K Kulindwa

number of ways. Economic and social indicators showed a net declining trend.Industrial production registered a massive drop from 1979 levels; there was also asubstantial decline in agricultural output. Growth in gross domestic product (GDP)dropped from 2,1 per cent per annum in 1981 to 0,6 per cent in 1982. Although duringthe 1980s of� cial in� ation was less severe than in some other African countries, muchof the Tanzanian economy operated underground and real purchasing power declinedtremendously. Earlier investment in social infrastructure resulted in Tanzania beingranked 34th in the United Nations Development Programme’s Human DevelopmentIndex, while by contrast it had the world’s second lowest GDP per capita. More than60 per cent of the population was living below the poverty line, a high proportion ofwhom were living in rural areas (Bagachwa et al., 1995; World Bank, 1996).

The natural resource base was also under threat. Poaching and habitat destructionduring the 1980s resulted in the loss of 290 000 elephants. Alarming rates ofdeforestation were driven by population growth, clearing for agriculture and a 90 percent dependence on wood fuel. Tanzania also suffered from coastal erosion, waterpollution, mangrove clearing, quarrying and coral reef damage from dynamite � shing.

In trying to grapple with the situation, Tanzania has since 1981 implemented severalmacroeconomic reform programmes, some of which are in collaboration with theInternational Monetary Fund (IMF) and the World Bank. After a dif� cult economicperiod the Tanzanian government responded to the economic crisis by implementingfour reform programmes based on free-market principles. Tanzania initiated the 1981National Economic Survival Programme (NESP) and the 1982 Structural AdjustmentProgramme (SAP). The World Bank and the IMF, in collaboration with the govern-ment, initiated the 1986 Economic Recovery Programme (ERP I) and the 1989Economic and Recovery Programme (ERP II), known otherwise as the Economic andSocial Action Programme (ESAP) (World Bank, 1995). Unlike the three previousreform programmes, the ESAP aimed to correct the inadequacies of the ERP I bysoftening the adjustment impact on social welfare. The effect of the ERP I on the socialsector in Tanzania, as happened elsewhere, was negative in that the once readilyavailable social services (such as the provision of water, health, education andagricultural subsidies, among others) were curtailed through reductions in governmentexpenditure. This resulted in severe conditions of hardship for the majority ofTanzanians (Mbelle & Kulindwa, 1995). Beyond these programmes, the Rolling Planand Forward Budgeting (RPFB) exercise has continued the reform process, using thesame principles initiated by the ERPs on an annual basis. This RPFB process wasinitiated in 1992 and established an annual budget process tied closely to speci� c goalsand implementation strategies. In general, these continuing efforts on economic reformsare designed to:

· Achieve and sustain macroeconomic stability· Create a strong and ef� cient private sector, and minimise the government’s direct

involvement in productive activities· Improve ef� ciency in the public sector, especially in the use of public resources· Achieve a sustainable development path· Combat poverty and improve living standards

The third RPFB of 1994 set goals that included economic growth, lower in� ation,privatisation and reduced bureaucracy. The plan supported economic development inagriculture, manufacturing, mining and tourism. The government’s goal for the miningindustry was to increase its contribution to GDP and to encourage the private sector to

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Economic reforms and sustainable development in Tanzania 393

take the lead in exploration and in the development of mines and markets. In adeparture from past practice, the government promoted private mining investmentthrough a new mining Act and related policy (Kulindwa et al., 2000b). The 1996 RPFBaimed to:

· Regulate and transform artisan mining activities· Ensure that bene� ts from the mineral sector supported sustainable economic and

social development· Minimise or eliminate negative social and environmental impacts of mining· Promote marketing for mineral and mineral-based products· Alleviate poverty for artisan and small-scale miners

The 1996 RPFB granted local and foreign investors tax holidays and exemptions underprovisions of the 1973 Income Tax Act, as well as the 1990 National InvestmentPromotion and Protection Act. These tax holidays relieved investors of tax obligationscompletely for speci� ed periods. Tanzania also began to develop its human capital bycreating multidisciplinary training programmes. Government representatives and non-governmental organisations (NGOs) organised courses to educate artisan miners aboutbetter production methods and government regulations. The 1996 RPFB institutedrequirements for environmental impact assessments (EIAs) and other measures to limitthe social and environmental impact of mining.

Mining policy, enacted in 1997, began the task of guiding activities of the sector,although implementation was severely limited by the lack of legal backing. Eventuallythe Mining Act was promulgated in October 1999, incorporating a very importantcomponent of facilitating sustainable development, namely the obligation to undertakeEIAs before considering any mining project for investment.

Tanzania’s Tourism Policy was developed in 1991, and later revised in 1999, toencourage greater private sector involvement and better environmental and consumerprotection (Kulindwa et al., 2000a). Its main objectives are to:

· Contribute to national development through foreign exchange earnings, employmentcreation and the development of rural areas and human capital

· Ensure conservation of tourism attractions, preservation of the environment andlong-term development of the tourism sector

The policy identi� ed Tanzania’s lack of basic social and economic infrastructure as apriority because it limited the potential contribution of the sector to GDP. Theenvironmental objectives of the Tourism Policy adhered to Agenda 21 committed to atthe Rio Earth Summit of 1992. It requires tourism developers to consider carryingcapacity, and recommends the development of cultural tourism and the promotion ofcross-cultural exchange.

The above reform chronology illustrates the concerted effort the government has madeto redress the economic situation in the country. However, these efforts, althoughdesirable and in the right direction, have been producing unintended and undesirableexternal effects on other sectors. These are revealed by the � ndings from the casestudies on mining and tourism, leading to the conclusion that the chances of attaininga sustainable development path for Tanzania are limited.

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4. REFORM IMPACTS

Notwithstanding the aforementioned, it is also true to say that the home-grown reformsof the early 1980s and later the IMF and World Bank programmes have broughtunquestionable gains. Although economic growth rates are up and in� ation andgovernment de� cits are down, overall gains have been modest. Economic activityshows little or no expansion; basic social and environmental indicators are down. Lifeexpectancy fell in the early 1990s, primary school enrolment declined, and thecountry’s natural resource base and environment are increasingly threatened. Evidencesuggests that Tanzania’s tenuous situation is due to shortcomings in policy design andimplementation.

Major targets for stabilising and stimulating economic growth have been the reductionof government � scal de� cit, correction of the overvalued exchange rate and deteriorat-ing external position and price stabilisation. Some of the measures taken includeexchange rate adjustments, trade liberalisation, government spending cuts and taxreforms for mobilising government revenues. Others include price deregulation, tradeand market liberalisation and divestiture of public enterprises. The outcomes of thesemeasures and others that have been implemented by the government are discussedbelow.

Various economic sectors registered a mixed performance during the reform periodstarting in 1986 with the � rst Economic Recovery Programme (ERP I). Market reformsnever led to improved marketing margins for farmers because of private traders’monopolistic rent-seeking practices. Credit also continued to be extended to certainmarketing institutions, thus undermining efforts to control money supply. Exceptionsare the Cashew Authority of Tanzania, the Tanzania Cotton Marketing Board and theNational Milling Corporation, which ceased receiving credit from NBC since 1990,1993 and 1991, respectively.

Real growth of the economy averaged 3,3 per cent annually in the post-reform period(1987–98), compared with 1,6 per cent prior to 1987 (1980–5). The impressiveperformance of the economy was spearheaded by agricultural activities and theexploitation of natural resources (Ndulu & Wangwe, 1997). The agricultural sectorregistered a real annual growth rate of 5,7 per cent during the reform period, againsta 3 per cent growth rate during 1980–5.

The � scal balance improved rapidly during the period 1986–98, compared with theperiod 1980–5 (Table 1). The de� cit fell from more than 11 per cent of GDP in 1986to only about 1,5 per cent in 1996, only to rise again to approximately 4,6 per cent in1998. Cash budgeting was introduced to curb excess expenditure over revenue in a bidby the government to operate within its means. This has, to a large extent, restored� scal discipline and has helped control the government de� cit. On the other hand, theprioritised payment of the collected revenue does hurt local business and weakens thecapacity of the government to meet its other obligations. For instance, the monthly cashpayments have external debt as a � rst priority (40 per cent), followed by wages andsalaries (50 per cent) and the remainder (approximately 5 billion Tanzanian shillings)for other recurrent expenditures, including maintenance, counterpart funds for donor-� nanced projects and administration (Danielson & Mjema, 1999). External debt stoodjust below US$8 billion in mid-1998 (Danielson & Mjema, 1999), which wasequivalent to approximately 105 per cent of the 1998 GDP at current prices. Domesticdebt payment has been accorded low priority, and as a result is accumulating swiftly.

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Economic reforms and sustainable development in Tanzania 395

Table 1: Selected macroeconomic indicators: Tanzania 1980–98

Economic indicator 1980 1985 1990 1995 1996 1997 1998 1999

GDP real growth (%) 3 5 6,28 3,6 4,2 3,3 4 4,6

GDP per capita $ (1998) 245 299 157 171 210 240 256 270

Rate of in� ation (%) 30,3 33,3 35,9 28,4 21 16,1 12,8 6,3

Tax revenue/GDP (%) 30,3 33,3 35,9 28,4 21 16,1 13,6 13

Government de� cit/GDP (%)* 2 13,25 2 8,76 2 7,66 2 4,3 2 1,5 2 3,3 2 4,6 2 4,0

Exports/imports (%) 49,97 29 29 56 65,23 61,36 53,4 36,5

Investment GDP (%)) 29,52 16,9 27,6 21,3 18,1 16,4 16,3 15,5

Exchange rate** 8,2 17,4 195,0 574,7 579,9 612,1 666,7 800

Notes:* Excluding grants; **annual averages.

Source: Computed from economic surveys and Bank of Tanzania bulletins and monthly economic reviews

(various issues).

As a consequence, local businesses are denied operating capital by tying up theirincome in receivable accounts.

In� ation remained over 30 per cent on average prior to 1991, but has since fallen to12,8 per cent (BOT, 1998) and is still falling – in June 1999 in� ation fell to 7,7 percent (BOT, 1999). Although the set target of 5 per cent for 1997 was not achieved, itis still a remarkable achievement and a clear indication of the positive impact thecurrent tight monetary and � scal policies pursued by the government is having.

The trade balance de� cit grew rapidly. In 1980 the ratio of exports to imports indicatedthat exports were 49 per cent of import value, while in 1985 exports fell to 29 per centof import value. During the reform period this situation did not improve, until theperiod 1995–8. During the period 1986–98, imported capital goods were on averagemore than 45 per cent of total imports. This is an indication of the extent to whichinvestment activities are stimulated in the now liberalised economy. Together withintermediate imports, the proportion averaged 75 per cent for the same period.However, together with the rapid growth rate of imports between 1986 and 1998, aslower rate of export value growth (owing to, among other things, the unfavourableterms of trade), a slower rate of export volume growth and the changing compositionof exports may help explain the disparity.

Despite this state of affairs tourism has shown consistent growth in its contribution tototal exports. Its share increased from 12 per cent in 1990 to 36 per cent in 1998.Mineral exports increased from US$92,81 million in 1997 to US$103 million in 1998,while the sector’s contribution to GDP in 1998 was 2 per cent (in 1992 prices),compared with 1,7 per cent in 1997 (URT, 1999: 125). Gold exports almost doubledbetween 1997 and 1998. Diamonds and gold continued to be the leading minerals in1998, contributing 63,9 per cent of total mineral exports. The growth in mineral exportswould have been greater were it not for illegal cross-border trade. Despite substantialtariff reductions and an attractive business environment, an estimated 76 per cent oftotal gold production and 80 per cent of total gemstone production were traded illegallyin 1998 (URT, 1999: 125).

During 1993, the Bank of Tanzania introduced several changes that further facilitatedthe liberalisation of foreign exchange. For example, bureaux de change were estab-

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lished, which render an important service to the tourism industry. The Bank alsointroduced certi� cates of deposit as part of a contractionary monetary policy. A foreignexchange auction as a way of managing liquidity and determining a market-basedexchange rate, as well as treasury bill auctions as a tool for � nancing short-termgovernment debt, were introduced in the same year. This also served to manageliquidity and facilitate the determination of market-based interest rates. The number ofprivate banks increased during the reform period. The sale of the National Bank ofCommerce has been � nalised and the intention of the government to sell the remainingpublic bank, the National Micro-� nance Bank, has been announced.

Despite the implementation of � nancial sector reforms, which are aimed at strengthen-ing the banking system by supporting investment and business through lending andfacilitating � nancial transactions, insuf� cient credit has been available to the tourismindustry. For instance, between 1986 and 1990 the proportion of lending to the tourismindustry was a mere 0,4 per cent of the total lending by local banks, while during1991–4 the proportion improved to 1,8 per cent before deteriorating to 0,9 per centduring 1995–8. Obviously, these are higher rates than that of 0,2 per cent of thepre-reform period of 1980–5 (BOT, 1998: 29). Owing to the signi� cance of the sectorin the growth of the economy, more funds should be made available to investors, bothlocal and foreign. This sector should be accorded its due importance and hence helpedin realising its potential.

Other measures taken include the implementation in 1996 of the cash budget systemfor relating expenditures to revenue generated, which helped to arrest the growth of thegovernment de� cit and controlled in� ation. In the same year, the Tanzania RevenueAuthority was established to improve tax administration in the economy.

The mining sector’s share of GDP increased absolutely from 0,8 per cent between 1980and 1989 to 1,3 per cent between 1993 and 1998. It increased from 1,4 per cent in 1994to 2 per cent in 1998. After years of decline, tourism’s share of GDP increased from1,5 per cent in 1990 to 7,4 per cent in 1998, thus underscoring its growing importanceto the national economy. On the island of Zanzibar, for example, tourism’s shareincreased from an average of 10,9 per cent between 1993 and 1995 to an average of14,1 per cent between 1996 and 1998.

Despite the expansion of tourism and mining, tax revenues declined during the reformperiod. The country’s tax system prior to 1997 may have encouraged tax evasion andgrowth of the black market, because it set high tax rates and was seen as corrupt,inef� cient and easy to evade (Davies et al., 1997). While the tax system has since beenimproved, the mining industry is still fairly non-compliant and the government makeslittle effort to collect from small-scale operations. The tourist industry is somewhatmore compliant compared with small-scale mining operations. Overall tax revenues asa percentage of GDP rose signi� cantly in 1997 to 14 per cent from 12,88 per cent in1996, owing to pressure placed by donors on the government to improve tax collection.

Tourism and mining have created many employment opportunities in Tanzania, eitherdirectly or through supplementary activities. Mining is believed to employ more than200 000 people, but estimates vary widely. The Federation of Miners Associations ofTanzania set its estimate at 550 000 in 1997 and more than a million in 1999(FEMATA, 1998). Employment in the tourism sector was also increasing. However,hard data are not readily available. Suf� ce it to say that there has been a considerable

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Economic reforms and sustainable development in Tanzania 397

increase in tourism training institutions, high-standard restaurants, tourist hotels andtour companies as indicators of a buoyant tourism sector.

Although many people are employed directly in mining and tourism, many others (suchas shopkeepers, farmers, automechanics and artisans) are employed in closely relatedsecondary activities. Mining communities and tourist facilities support a wide range ofother jobs that provide the range of services that any community needs. This is anatural ripple effect in any local economy, and it can be seen developing spontaneouslyin rural Tanzania.

Increased tourism has its roots in the economic liberalisation of 1986, which led togreater private sector investment in tourist infrastructure. Around this time the govern-ment also began the rehabilitation of hotels and facilities, and Tanzania’s foreignmissions began to promote the country’s attractions actively. Since 1988, the numbersof tourist visitors have increased. Tourism in Zanzibar rose 136 per cent in the 1980sand 105 per cent between 1990 and 1997. On the mainland tourism rose 82 per centin the 1980s and 215 per cent between 1990 and 1998.

Mining and tourism earnings have shown consistent growth. For example, in 1997gemstones generated US$7,9 million and US$8,1 million in the following year.Tourism earnings increased from US$27 million in 1986 to US$570 million in 1998.This was due to a combination of greater numbers of tourists and increased fees forservices. The majority of tourists to Tanzania were attracted to high-value activitiessuch as game hunting and photo safaris. Earnings from game hunting increased fromabout US$5,2 million in 1993 to US$8,6 million in 1998.

Small-scale miners and mine workers have long had poor access to markets, exceptthrough local brokers and, to a lesser extent, mineral dealers. Because travel to urbanmarkets is dif� cult and risky, miners are at the mercy of these buyers. Buyers oftenwithhold accurate information about current prices and further cut the miners’ share.

Macroeconomic and sectoral reform programmes have clearly had several bene� cialeconomic results, as discussed above. However, the macroeconomic reforms have alsoresulted in negative outcomes – mainly for the natural environment and for socialwelfare status.

4.1 Environmental effects of reform

The focus of the analysis is on the environmental implications of mining and tourismpolicy reforms. Owing to favourable investment conditions in tourism and miningbrought about by the reforms, these two sectors have seen a large increase in activitiesduring the last half of the past decade. As a result of this rapid expansion in tourismand mining activities, both of which are natural resource based, the environment hassuffered. Both mining and tourism have led to deforestation and biodiversity loss. Landclearing at a mine site is only the � rst part of the problem. Small-scale mining activitiesbring large concentrations of people who � rst clear land for settlement purposes,followed by clearing for building material and fuel, and lastly for subsistence agricul-ture. This deforestation, in turn, leads to erosion and diminished water quantity andquality.

Coastal tourism development can have similar ripple effects. Often it starts with thedestruction of mangrove forests, estuaries, beaches and coral reefs, which are importanthabitat and breeding areas. This can have a serious impact on a region’s � sh stocks and

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industry. Most hotels in Zanzibar and Bagamoyo were built with mangrove poles.Demand for wood in Ngorongoro and Serengeti is growing rapidly owing to increasingpopulation pressure and tourism demands for wooden handicrafts.

Even parks and other protected areas are under threat. While poaching for trophies hasdecreased with the help of the international environmental community, poaching forsubsistence (meat) and commerce (trophies) remains a major problem. Moreover, bothlegal and illegal mining still continue in many sensitive, protected areas. In Mgusu, forexample, mining activities took place within a forest reserve, while in another example,the government nearly granted a mineral exploration permit in Serengeti National Parkto a private mining company.

Tourism and mining activities also lead to the contamination of surface and groundwa-ter. Mining activities often release silt, oil, fuel and chemicals directly into waterways,or allow them to leach into groundwater. Deposits of overburden, tailings and othermine wastes create long-term contamination problems, as they deliver a constant andhighly toxic trickle into water supplies. In addition, mine workers and miningcommunities are exposed to high levels of toxic substances. At Mererani, exposure tographite powder and tailings has led to a high incidence of lung diseases. Miningcommunities themselves contribute to water pollution because many do not have basicsanitary facilities and release raw sewage into local waterways.

The greatest source of water pollution is the discharge of untreated sewage, whichaffects drinking supplies, recreational resources, human health and aquatic life. Thiswas observed at most beach hotels, with the exception of Serena in Zanzibar. Coralreefs and sensitive breeding areas are especially prone to damage from sewage. A goodexample is the municipal waste from Zanzibar town being discharged directly into thesea, endangering coral life and therefore tourist attraction.

Small-scale mining and processing activities for gemstones and gold have been foundto occur near rivers and streams in Umba Valley. These can create serious erosionproblems through the weakening, destruction or collapse of embankments. In the rainyseason, rivers wash tailings and pollutants downstream. In the dry season, water usedfor processing is held in sumps and ponds where pollutants such as mercury accumu-late. These high concentrations of pollutants often � nd their way into the rivers duringrainy season � oods, where they enter the aquatic food chain and are bio-magni� ed.Abandoned mining pits and their erosion deface hillsides, destroy habitat and ruinpotentially arable land.

Tanzania has lagged behind other countries in requiring that EIAs be undertaken forspeci� ed projects. The recently promulgated Mining Act requires that such assessmentsbe made for new mine development. However, there is inadequate local capacity, littleenforcement of the Act and no evidence that the few EIAs completed so far have hadany in� uence on project design and implementation.

4.2 Social effects of reform

Mining and tourism have led to a number of social problems in Tanzania (Kulindwaet al., 2000a, 2000b). First, projects have caused changes in social cohesion, attitudesand values. In general, tourism and mining projects affect the cohesion of communitiesand families, and change attitudes about life, relationships and religion. These changescan have both harmful and bene� cial aspects. For example, traditional rituals are often

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practised for the bene� t of tourists, and while this cannot help but change communityattitudes towards these rituals, it reinforces their value and may help sustain theirpractice. For some communities, such as the Maasai, interest from outsiders has createda heightened sense of cultural identity, rejuvenated handicraft traditions (which havebecome an important source of livelihood) and helped them maintain traditions of foodand dress. The negative aspect of this is that traditional rituals are exceedinglycommercialised to the extent that they lose their meaning. Today one may � ndimitation Makonde carvings and also non-Maasai masquerading as Maasai in order towin market access.

Policy reforms have caused con� icts between private sector agents and local communi-ties. Con� icts arose, for example, between foreign investors and local operators in themining sector because of inef� ciencies in enforcing legislation and in processingmining permits. Policy reforms have also led to land tenure disputes in the tourismsector. For example, in Bagamoyo the competing land uses of agriculture and touristdevelopment have created a scarcity of land for the majority of ordinary people. InBagamoyo and Zanzibar, some � shermen have lost access to � shing areas and beachesas a result of the poor implementation of new policy directives for tourism expansion.

Crime, violence and corruption have also become more commonplace. Prostitution isprevalent, and the incidence of HIV/AIDS is on the increase in mining areas andelsewhere. Despite government efforts, child labour has increased as mining activitieshave proliferated. This problem has also been identi� ed in tourist areas. The use ofdrugs, such as cocaine and heroin, is increasing.

Although bene� t sharing is an explicit goal of tourism policies, local communities oftensee little change in employment and incomes. New laws have given priority to localcommunities for employment – in some cases, however, research has found thatalthough new economic opportunities have been created, many hotel owners and touroperators do not engage local communities suf� ciently in their activities. Incomeinequality is, in fact, increasing in many tourist areas.

Mining and tourism have increased dislocation and migration both by evicting peoplefrom traditional land and by attracting people to new areas with the prospect ofemployment. Mining permits are often granted without regard to land tenure, and whilepeople are not necessarily driven away by force, the disruptions of mining and ofincoming migrants often leave them little choice but to leave. ERB research found thatpeople were moving to mining areas at a rapid pace and that during the period 1985–95nearly 80 per cent of the population of Mererani, in Arusha, were immigrants. Some70 per cent of the population of Geita in Mwanza had moved there during this sameperiod.

Finally, health problems have been severely exacerbated by migration into areas wherebasic social services and facilities are inadequate. Medical services are usuallyinsuf� cient and often non-existent, and because miners are exposed to severe physicalhazards and toxic chemicals such as asbestos, cyanide and mercury, they are particu-larly at risk. Although the government assumed that economic development wouldimprove health and other social services, this has seldom been the case. Water supplyis a problem in all mining areas. In Kigwasi, for example, people draw water directlyfrom the Umba River for household use. This is a common practice throughout ruralTanzania and results in a host of attendant problems and health risks.

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5. CONCLUSIONS

5.1 Lessons learnt and challenges identi� ed

It is concluded that the mixed outcomes can be explained by inappropriate policydesign and implementation failures:

· First, negative outcomes, such as declining government tax revenues, underdevel-oped market structures and inadequate infrastructure can be attributed to policyfailures. For example, policy makers did not alter the inef� cient tax regime until late1997. In addition, they expected revenues to increase despite distortionary taxincentives, such as tax holidays. Policy makers also failed to develop policy reformsthat would improve marketing structures for small-scale miners and strengtheninadequate infrastructure.

· Secondly, other negative outcomes, including illegal cross-border trade and decliningtax revenues, can be attributed to implementation failures. For example, the mainreasons for illegal cross-border trade of minerals include differences in tax ratesbetween countries, the absence of a well-de� ned market for minerals and a rampantbureaucracy, leading to corruption in the processes for obtaining the necessaryservices.

· Thirdly, inadequate capacity within government departments in terms of humanresources, capital equipment and recurrent expenditure for monitoring and enforcingregulations has been exacerbated by reform policy cutting government expenditure.This has contributed to the inef� cient implementation of projects and execution ofgovernment responsibilities.

Notwithstanding the aforementioned negative effects, reforms have produced somevery desirable economic gains. These need to be consolidated and pursued tostrengthen the potential for sustainable development.

The mixed success of macroeconomic policy reforms can be attributed to severalcauses. Instead of being supported by adequate and appropriate sectoral policies andlegal instruments, the macroeconomic reforms were implemented in a non-integratedpolicy framework. In particular, policies did not integrate environmental and socialconcerns adequately, nor did policy makers develop these policies with a unifyingstrategic vision in mind. A key example is the failure of the tourism policy to includeconsideration of social and cultural factors adequately, such as community conservationof natural resources. For a long time people have looked on forest reserves, nationalparks and other public resources as government property simply because of the way inwhich the relevant departments entrusted with their management have carried out theirresponsibility. Poachers who are members of the communities believe they are stealingfrom the government, while in fact they are stealing from themselves. Another exampleof policy failure is that of the non-consideration of small-scale miners and their speci� crequirements for effective participation in national mining activities. As a result,small-scale miners have been conducting their enterprises in a haphazard manner, infrequently dangerous conditions and without enjoying adequate bene� ts for theirrisk-taking behaviour.

In many cases the policies were fairly well conceived; however, they were not wellimplemented. This was often caused by a lack of political will and insuf� cientinstitutional capacity and resources. As both the tourism and mining policies aregenerally considered to be basically sound, implementation failure is blamed frequentlyfor the continuing problems.

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Economic reforms and sustainable development in Tanzania 401

Tanzania exchanged its long-term development vision, Ujamaa, for capitalist market-orientated macroeconomic reforms. Whereas the former was opposed to capitalism andexploitation, the latter has resulted in signi� cant negative social outcomes. Thestructural reforms were mainly intended to correct macroeconomic imbalances andstrengthen traditional economic sectors. They were never intended to serve as anoverall guiding vision for long-term economic, social and environmental progress norsustainable development over the short to medium term. In short, Tanzania entered thereform process with no vision of what it wanted to become, and thus an importantrequirement for designing effective policies and legislation was foregone.

5.2 Policy implications and the way forward

In the previous discussions positive as well as negative outcomes of the reform effortwere identi� ed. It is, however, the negative impacts that are of greater concern. In orderto direct useful and desirable economic activity, several necessary measures have to betaken. ‘Sustainable development’ is a concept requiring a cross-sectoral approach.Integrated planning and well-coordinated implementation are necessary prerequisitesfor achieving a sustainable development path. This is a great challenge to a capital-con-strained economy such as that of Tanzania.

Despite these obvious constraining factors it is imperative that the sustainable develop-ment concept be well understood and internalised by policy makers. The � rst step willbe to establish a planning framework focused on, and structured around, elements ofsustainable development. During implementation, high priority will need to be given tominimising opportunities for imbalances in resource allocation and use. This wouldreduce the possibility of one sector � ourishing at the expense of another. Clearchannels of coordination and monitoring may help facilitate the achievement of thisgoal. Line ministries, although funded from the same national treasury, have noincentive to collaborate when developing their individual plans. Thus, they are sectorspeci� c and more interested in meeting � scal targets rather than enhancing interdepart-mental cooperation. Targets should be considered that include intersectoral and depart-mental collaboration. This should enhance innovation and the possibility of technocratsbeing more � exible when considering suggestions and views from other areas ofcompetence and expertise. These decisions will not necessarily always reduce costs;sometimes extra funds may be required. This could be overcome by a fund to whichall concerned parties contribute. An example of such collaboration is the joint effort bythe Ministry of Natural Resources and Tourism (MNRT) and the Ministry of Works onrepairing the Makuyuni to Mto wa Mbu road after the El Nino rains. The road is animportant tourist route in the northern tourism circuit of the country. The MNRT alsocollaborated with departmental traf� c police in the Ministry of Home Affairs to curbmotorists killing wildlife in the Mikumi National Park. The Ministry provided thetraf� c police with equipment for checking the speed of motorists in the Park.

For this changed approach to planning and implementation to be successful, appropriatetraining and capacity-building programmes should be provided to select civil servantsand other key stakeholders. In order for effective participation to take place withoutstakeholder groups, government agencies and other relevant stakeholder categoriessuch as universities being unnecessarily uncertain, awareness of laws and regulationsneeds to be increased and two-way communication between the government and theprivate sector improved. The development of operational plans in collaboration withstakeholders, together with increased staf� ng for enforcement and monitoring, is also

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necessary. The creation of a resource depletion fund for mining activities would go along way to foster sustainable development. Funds could be used towards environmentrehabilitation and mitigation, health services and education.

In order to correct implementation problems, efforts to clarify institutional responsibil-ities and reduce overlap should be made so that agencies can minimise con� icts. Basedon its decision to involve communities in wildlife conservation, the government shouldbe encouraged to extend this conservation approach to other resource-based activitiessuch as forestry and � shing. Another important ingredient facilitating the attainment ofa sustainable development path is the preparation of educational programmes inenvironmental protection, marketing and sustainable technologies. These should betargeted at local government of� cials, business owners and operators in general, andparticularly in the mining and tourism sectors. Private involvement in the marketing ofminerals needs active encouragement. As a short-term measure, banks should beencouraged to support mineral-buying activities in order to correct dysfunctionalmarkets and poor access to information. For economic activities to take place in asmooth, timely and ef� cient manner, the improvement and extension of economic andsocial infrastructure (including roads, seaports, airports, water and electricity supply,telecommunications facilities, railway services and � nancial services) are essential. Theimmediate enforcement of child labour laws and a long-term effort to addressunderlying issues, such as poverty and limited economic opportunities, are urgentlynecessary.

These are only some of the many challenges of policy and implementation the countryfaces in its quest to achieve the desirable goal of sustainable development. In summary,the message emanating from the aforementioned challenges is that sustainable develop-ment is a multifaceted endeavour requiring various sectors and players to cometogether and work collaboratively in order to achieve it. The study concludes with therecommendation that a Commission for Sustainable Development be established inTanzania to oversee, coordinate and facilitate the integration of policies, strategies andactivities for achieving a sustainable development path.

REFERENCES

BAGACHWA, MSD, SHECHAMBO, FC, SOSOVELE, H, KULINDWA, KA,NAHO, AA & CROMWELL, E, 1995. Structural adjustment and sustainable develop-ment in Tanzania. Dar es Salaam: Dar es Salaam University Press.BANK OF TANZANIA (BOT), 1998. Economic bulletin for the quarter ended 31March, 28(1). Dodoma: BOT.BANK OF TANZANIA (BOT), 1999. Economic bulletin for the quarter ended 30June, 29(2). Dodoma: BOT.DANIELSON, A & MJEMA, GD, 1999. Tanzania 1998: cost sharing in developmentprojects – principles, practice and problems. Tanzania Country Report. Stockholm:Sida.DAVIES, J, VEHORN, C, MCMORRAN, R & ISAAC, J, 1997. Tanzania: strengthen-ing the tax system. Fiscal Affairs Department. Washington, DC: International MonetaryFund.FEDERATION OF MINERS ASSOCIATIONS OF TANZANIA (FEMATA), 1998.Tamko Rasmi la tatu la Shirikisho la Wachimbaji Madini Tanzania. Of� cial Statementto the Minister of Energy and Minerals, Dar es Salaam.

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