ECONOMIC CHANGE, GOVERNANCE, AND NATURAL RESOURCE WEALTHThe political economy of change in southern Africa

By David Reed

EXECUTIVE SUMMARYPrepared by Pamela Stedman-Edwards

The essays in this publication examine the relationship between macroeconomic change and the natural resource patrimony of three countries, Tanzania, Zambia, and Zimbabwe, in sub-Saharan Africa. The protracted implementation of macroeconomic stabilization and adjustment programs in the region, and their disappointing economic outcomes, have preoccupied African rulers and the international development community for two decades. And with good reason. The region continues to experience economic difficulties unlike any other, despite a continuing commitment to implementation of adjustment programs in pursuit of ever-illusive macroeconomic stability.

The role of the natural resource patrimony in the economies of these countries, however, has seldom been addressed in the design of stabilization and adjustment programs, either by national policy makers or by the Bretton Woods institutions. In contrast to that approach, we believe that natural resources are central to the difficulties encountered in reforming the economies of many African countries. The appropriation of natural resource rents and mismanagement of natural resource wealth have provided the foundation of statist economic regimes and authoritarian political regimes from which countries of the region have yet to thoroughly extract themselves.

These essays analyze many of the challenges encountered as economic reforms were implemented in the 1980s and 1990s and examine the distribution of benefits and losses as societies underwent structural change. We hope this analysis sharpens understanding of the role that systems of governance, notably those marked by authoritarianism, play in determining how natural resources are (mis)used in the development process of resource-based economies.

The essays take a political economy approach to deciphering the complex interactions among the economic, political, and social actors involved in the process of change on national and international levels. This approach requires that we try to understand the actions and impacts not only of individual actors but also of social groups and the state as they compete with one another in pursuit of wealth and power.

I. The Political Economy of Natural Resource Wealth

Economic structures and systems of governance in sub-Saharan Africa are tied directly to the region’s natural resources in a variety of ways. This relationship dates back to the colonial period when, throughout sub-Saharan Africa, the European colonial powers

constructed economic relations dependent on, and explicitly limited to, extraction of natural resource wealth.

When the colonies gained independence in the post-World War II period, the resource-based economies of the newly independent nations lent themselves to statist economic regimes and authoritarian political systems that became entrenched in subsequent decades. In all three countries, these statist economies, one-party political regimes, and the reliance on natural resource wealth, shaped the economic reforms that acquired greater momentum in the 1980s, often generating unanticipated results. Rather than promoting economic and political democratization, the ostensibly neoliberal economic reforms have too often created a new basis for collusion between economic and political elites through control of natural resource wealth while diminishing access of the rural poor to environmental assets on which their livelihoods depend.

The Colonial Period European interest and investment in Africa surged in the second half of the 1800s when African colonies became part of the battle for geopolitical preeminence on the continent. Long-standing commercial ties allowed the French, Portuguese, and British to establish colonial claims that crisscrossed the African continent, although effective control was limited to coastal and riverine areas. The 1884 Conference of Berlin established the terms under which European powers, including newcomers Germany and Belgium, organized their colonial expansion deeper into the continent. For the 30 years preceding World War I, the colonial powers erected economic regimes predicated on extracting ivory, rubber, cocoa, other agricultural products, and seemingly unlimited mineral wealth through a colonial regime reliant on coerced labor and military control. While the colonial powers had hoped that expansion in Africa would pull the stagnant European economies from the depths of the depression of 1873-96, it was not until the beginning of the 20th century that the colonial system experienced a 15-year period of steady economic growth.

The pattern of trade established between Europe and the African colonies was “one of exports of raw materials and imports of a wide range of manufactured goods and fuels. Without any industries of their own, the tropical colonies remained a buoyant market for the industrial exports of …Europe” (Havinden and Meredith 1993). This pattern of trade would persist until independence and beyond. Private and public investment by the European powers in extraction of resources was substantial, but the colonial powers strongly resisted the development of any local industry in Africa. As a result, the fate of the African economies remained closely tied to the terms of trade for natural resources, which were determined largely by events in Europe. The two world wars, for example, increased demand for inputs for war materiel, but terms of trade for foodstuffs declined, as did investment in the colonies. The depression of the 1930s led to falling demand for most commodities and increased the colonies’ debt burden.

Reconstruction of Europe after World War II led to a rise in export values and trade volumes for the colonies. The resulting period of dynamic growth increased competition between the colonies and their European sponsors, as the colonies sought to open

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opportunities for economic diversification and industrial development. This conflict was an important catalyst in the struggle for independence that marked the next 20 years in Africa. As 17 African countries gained independence in 1960, decolonization altered political dynamics across the continent, including in Tanzania, Zambia and Zimbabwe (Comeliau 1991).

Authoritarianism

African countries shared many characteristics that strongly marked the post-independence period, most notably their economic dependence on natural resource wealth. Because the European powers had limited the African colonies to commodity production and raw material extraction, their economies remained fairly simple structures dependent on export of a handful of commodities to the developed world. A second common feature was the lack of a dynamic entrepreneurial class that could respond quickly to the removal of colonial era political and economic constraints and drive the economic diversification of the new nations. The African economies depended on foreign mining and agricultural companies for export earnings, and on small-scale farmers to satisfy domestic demand. Moreover, the legal and institutional infrastructure inherited from the colonial period created obstacles to market development in most countries.

In this context, four principal forms of wealth accumulation predominated: Rent-seeking state capitalism: By expanding state control into natural resource

sectors, governments ensured a steady flow of revenues to finance development priorities.

Monopoly production: Along with pervasive rent seeking, monopoly production involving both parastatals and national and foreign companies dominated other sectors, production lines, and markets.

Smallholder commodity production: The state, by setting prices, controlling marketing systems, regulating the flow of information, and organizing credit-making institutions, determined the terms and manner by which small and medium farmers were linked to national and international markets.

Large-scale commercial agriculture: The one economic sector that escaped the control of state-driven economies was large-scale or plantation agriculture, which was tied directly to international markets.

Given the lack of entrepreneurial foundations for economic development, the new political elites in these countries assigned responsibility for economic planning and development to the state. The state became the repository for rents from natural resources, which were to be used for development and public welfare. Decision-making processes internal to the government determined how rents and revenues were redistributed. Under these conditions, ruling groups felt little need to create transparent political processes. Without public accountability, graft and corruption became entrenched mechanisms used by rulers who could distribute resource rents for private or public benefit in keeping with personal interest or political need.

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Whether the authoritarian regimes that sprang up in sub-Saharan Africa necessarily had to accompany the establishment of statist economic systems in the region is debatable. Clearly, however, the prevailing development strategy wherein the state drove the centralized accumulation process, owned and managed the nations’ enterprises, and had the right to distribute wealth according to its own criteria, lent itself to centralized political control. The ease with which natural resources could be controlled by state corporations strengthened the impetus to place the state in charge of environmental assets of all kinds, ranging from forests, water, minerals, nature reserves and biodiversity, to the land itself (Ghai 1991 and Sandbrook 1985). With most productive assets and economic decision-making under state control, the political elite easily extended its control to social and political life as well. While regimes varied from country to country and in different time periods, some basic features characterized them all, including the regimes in Tanzania, Zimbabwe, and Zambia:

domination of political life by a political elite and highly centralized decision-making bodies;

suppression of civil society, political parties, and workers’ organizations; marginalization of the peasantry from political processes except for specific

political uses; distribution of benefits (economic and other) through a system of patronage and

clientelism that required fealty to the political elites; and use of nationalist or socialist ideology to unify the public against external threats

and “internal enemies.”

Structural Adjustment

The World Bank and the International Monetary Fund (IMF) have dealt with the political dimension of economic reforms in Africa and elsewhere in a variety of ways. When structural adjustment programs were first introduced in Africa in the early 1980s, the Bank heralded the reforms as a neutral set of instruments crafted to create more efficient economies, increase productivity, and enhance competitiveness. These programs failed, however, as they collided with the political complexities and frequent social upheavals associated with implementation of reforms in Africa’s statist, resource-based economies.

As these countries took a democratic turn in the early 1990s, the Bank wrestled with the relative merits of working with democratic regimes to implement reforms. For example, the failure of reforms under such autocratic regimes as that of President Kaunda of Zambia, and the rise of public opposition in these countries, suggested that democratic regimes might have a stronger mandate for implementing reform. However, the complexities of working with new democratic regimes often led to equally disappointing economic outcomes. Amidst these vacillations and uncertainties stretching over two decades, the Bank remained unwavering in its exclusion of the growing number of groups from civil society seeking to influence development strategies for their respective countries.

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Resistance to the first generation of structural adjustment policies took two basic forms in sub-Saharan Africa, including the three countries in this study. First, elite economic and political groups saw their positions of power and control of resources threatened by reforms that would deny access to resource rents, cut subsidies, disrupt oligopolies, and introduce competitive markets. They often succeeded in slowing or interrupting program implementation through their control of political processes and institutions. Second, poorer social groups opposed the reforms because they suffered falling standards of living as social services were eliminated or fees rose, price supports were removed, and rural services in credit, marketing, and extension were cut. While the urban poor opposed reforms through direct street action, the rural poor were often left without an effective means of protest except when the political elite used them to strengthen their own opposition to reforms.

Implementation of the second generation of structural adjustment programs was more successful in large part because the Bank was able to transfer ownership of the programs to the country governments. Economic technocrats who understood the rationale for the reform programs had slowly but steadily replaced the politicians who had resisted the reforms in the African governments. These new technocrats wrote the economic policies along the lines required by the Bretton Woods institutions from within the national governments and then requested the support of the international lenders.

With this increased support for the reform programs from the technocratic elite, the World Bank and other international development agencies began addressing the political dimensions of economic change through promotion of ‘good governance.’ The principles of good governance promoted by the World Bank and IMF focused on maximizing government financial transparency and impartiality of decision-making on economic efficiency criteria. The World Bank expected to foster good governance by creating market-based economic structures that, in turn, would facilitate the transition to more democratic societies. These objectives included ending monopolistic control of key economic sectors; diminishing public rent-seeking and encouraging market-based wealth accumulation; eliminating the capture of rents by government agencies and individuals by dismantling marketing boards, opening markets to private investors, and other reforms; and altering the internal terms of trade to increase the importance of rural areas relative to the urban sector. These economic changes should have increased competition among many economic agents and groups and required that political leaders create more transparent mechanisms for resolving conflicts among competing groups and interests.

The “good governance” perspective of the Bretton Woods institutions, however, established the state in a subordinate position vis-à-vis markets. That is, in the context of the Bretton Woods institutions’ neoliberal policies, the state’s overriding purpose was to create conditions in which the market could flourish and, thereafter, help adjust society to new market dynamics. Gone from this perspective was the independent functioning of the state that would help establish broader societal goals to which market development would contribute. Gone was the reciprocal complementarity of the state and markets, each contributing to fulfillment of broader, socially agreed-upon goals.

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Natural Resource Wealth: Old Challenges in the New Millennium

Several critical issues related to natural resource wealth have remained outside the scope of the reform process although they nonetheless influence the outcomes of the reforms and future prospects for national development. Those issues include the continued dependence on exports of natural resources, the generally declining terms of trade and price fluctuations for these resources, and the close ties between natural resource wealth and rent-seeking.

Despite decades of reforms, the countries of sub-Saharan Africa remain heavily dependent on resource wealth. In Tanzania, agricultural production comprises 47.6 percent of GDP, in Zimbabwe 19.5 percent, and in Zambia 17.3 percent (World Bank 2000). Natural resources remain the primary source of export earnings throughout the region. Zambia relies on copper for 99 percent of its export earnings. Zimbabwe relies on tobacco, nickel, and cotton for the bulk of its export earnings. Tanzania, though equally reliant on commodity exports, has a somewhat broader range of minerals and agricultural commodities from which hard currency earnings are generated.

A more complete picture is provided by adding data on trends in actual revenues generated by commodity exports. Terms of trade, an index used “to measure a commodity-exporting country’s ability to pay for capital goods manufactured in developed countries,” have worked consistently against the countries of sub-Saharan Africa (Akiyama et al. 2001). While export volumes have increased significantly, often doubling relative to 1980 when adjustment programs began, prices have declined steadily. These price declines have caused an annual income loss of approximately 1 percent per year, a 20 percent deterioration over the two-decade period (World Bank 1994).

While disadvantageous terms of trade have been a constant problem, commodity price increases that generate substantial, but short-lived increases in government revenues are also problematic. For example, windfall profits led African countries, including Zambia, to embark on substantial investment programs, which later were abandoned when commodity prices fell. Political and social problems, as well as the insurmountable debt overhang of some African countries, are the result of these boom-and-bust cycles of commodity prices.

Natural resources, particularly mineral wealth, lend themselves to monopoly production and state rent seeking. Economic rents are above-average benefits accruing to sellers of goods and services. Rent-seeking activities often go hand-in-hand with corruption. While structural adjustment programs made an effort to dismantle state rent-seeking activities and to develop market-based economies, they did not address rent seeking by private agents and often created conditions under which private rent seeking proliferated. Without adequate structural and institutional changes to reduce rent-seeking opportunities, removal of the state from economic activities simply opens rent-seeking opportunities to private sector actors. A strong regulatory framework and competitive markets are needed to prevent rent seeking by private companies. The adjustment

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programs prescribed by the Bretton Woods institutions, however, frequently promoted incentive structures designed to attract foreign capital by providing exceptional opportunities for monopoly rents. They failed to ensure that competitive markets and adequate institutional scaffolding were in place to regulate new investors when they helped to design fiscal incentives programs, exchange rate policies, and tariff regimes to attract foreign investors. Moreover, institutional capacity, including in natural resource sectors, was further weakened by reductions in government spending under adjustment programs.

Beyond the question of rent-seeking, however, the basic issue not addressed by the reform process was how resource rents were to be managed so as to raise living standards of the country as a whole and, specifically, to reduce poverty. Simply replacing an inefficient public monopoly with a more efficient private monopoly did not and will not respond to the needs of resource-based economies trying to increase overall public welfare through economic reforms.

Challenges for Civil Society and the Rural Poor

One of the central challenges for civil society in sub-Saharan Africa is to address the use and distribution of natural resource wealth. As the three country cases summarized below demonstrate, the dynamic between economic restructuring and political reforms is volatile and unpredictable. Opportunities for abuse and collusion likewise abound. Amidst that volatility and uncertainty, control over environmental assets plays a central role in shaping both economic and political outcomes. The issue of whether the reform process has increased public transparency and accountability becomes paramount. The systematic exclusion of civil society by the Bretton Woods institutions in the reform process has impeded the growth of forms of public oversight and accountability needed to tame corruption and mismanagement.

Moreover, one of the most important criteria for measuring the success of structural reforms is whether the reforms increased or eroded the control and access of the poor, particularly the rural poor, to environmental assets. We focus on that criterion not because the rural poor are necessarily the best custodians of natural resources, although in many societies around the world traditional systems of resource management have proven superior to those employed by modern approaches. Rather, it is our view that unless the rural poor have control over adequate resource wealth, they frequently are driven to exert excessive pressure on their resources, contributing to declining productivity and environmental degradation. As evidenced by the three studies, this dynamic creates economic, social, and environmental problems with profound consequences at the national level. On that count, the reform process in sub-Saharan Africa has created increasingly adverse conditions for the rural poor that today shape the challenges facing civil society as it tries to use the region’s extensive natural resource wealth to improve living conditions and promote sustainable development.

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II. Tanzania

In the 25 years following independence, Tanzania’s ruling party attempted to control the country’s economy to an extent greater than in any other African country. The Tanganyika African National Union (TANU) transformed Tanganyika into a one-party state that allowed little political dissent and little room for economic initiative or entrepreneurial experimentation. That effort to control and direct the economy necessarily extended to the country’s natural resource base and to comprehensive measures to fragment and dominate the country’s civil society. Although the proclaimed goals of Tanzanian socialism or Ujamaa – equity, participation, and self-reliance – generated domestic and international support in the years immediately following independence in 1961, the failure to improve the welfare of the country’s poor in ensuing decades ultimately led to the collapse of that model of African socialism. By the 1980s, the country was forced to embark on an economic restructuring process that has lasted over a decade and a half but, to date, has failed to alleviate pervasive rural poverty.

TANU, becoming the Chama Cha Mapinduzi (CCM) in 1977, established agriculture as the leading sector to drive its national development strategy and constructed an economy that virtually excluded private initiative in agriculture and other sectors. Smallholders were grouped into Ujamaa villages through which state institutions managed all aspects of their economic and political lives. Large and medium agricultural enterprises were nationalized. Economic institutions dominating the agricultural sector included a three-tiered marketing system controlled by the government, credit-making institutions managed by the central bank, input distribution systems, fixed prices, and a tightly regulated foreign exchange system. The land tenure regime recognized customary titles and allowed for village jurisdiction, but neither villages nor individuals were granted ownership of the land. Villagization efforts did not generate positive economic results (Sarris and Van den Brink 1994).

While agrarian socialism was at the center of government policy, neither mining nor tourism was accorded importance in the country’s development strategy. The mining sector was nationalized following independence and the few large-scale mining activities soon stagnated from poor management and lack of investment. Despite formation of the Tanzania Tourist Corporation, created by the new government to promote tourism in the post-independence period, tourism also was largely disregarded.

Structural Change and the Natural Resource Sectors

Tanzania’s gross domestic product (GDP) declined steadily in the late 1970s, and by the 1980s policy makers could not escape the need for sweeping economic change. While adverse external conditions played a significant part in the country’s economic collapse in 1980, the failed policies of Ujamaa had sapped the economy of its post-independence vitality and deepened policy makers’ inability to respond to adverse external conditions. Sixty percent of the population was living below the poverty line, most in rural areas. The country’s natural resource base had experienced serious degradation since independence. Government attempts in the early 1980s to implement a national program of economic

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reform did little to staunch the country’s economic problems and, in 1986, the government accepted an IMF stabilization program focused on currency devaluation and trade liberalization. A World Bank structural adjustment program soon followed and focused on liberalizing foreign investment regulations and deepening reforms in the agricultural sector. A third phase of the adjustment program gave priority to reforming the civil service and privatizing the public sector.

Natural resource wealth lies at the center of Tanzania’s economic reform program. First and foremost, the reform program has sought to remove the state from its commanding position in agricultural production in order to provide new incentives and opportunities to both small farmers and agribusiness. Complementing agricultural sector and land reforms, mining and tourism sector reforms have placed emphasis on attracting foreign capital to drive sectoral expansion. This approach has unleashed many new economic agents in these natural resource sectors. The new dynamics have created economic gains but also environmental, social, and political difficulties for the country.

The key issues that Tanzania’s experience raises, as discussed below, regard the regulatory framework and institutional mechanisms that have accompanied the economic reforms. First, the experience highlights the effects of a deficient regulatory system, a system that has little authority or will to staunch rampant rent-seeking behavior. Second, the experience underscores the social and environmental costs of conflicts between local communities and the new economic agents unleashed by the reform process. Third, it illustrates the links between these problems and a set of institutional arrangements under which the actions of an economic and political elite lie well beyond public scrutiny.

The overarching objective of agricultural sector reform was to dismantle state control of production and marketing in order to, first, encourage private initiative and create opportunities for small farmers and, second, to attract national and foreign investment in medium and large commercial farming. Success in replacing the government’s administered price regime with a market-based pricing system was steady. However, increased productivity resulted largely from expansion of cultivated areas, not from intensification, and consequently exports grew only slowly. These problems led the government and World Bank to shift priorities from deepening liberalization to addressing the structural constraints that inhibited productivity gains, particularly among small farmers. Those constraints included limited rural infrastructure, limited educational opportunities, and limited capacity to provide technical inputs that could encourage crop diversification and increase access to export markets (Shechambo and Kulindwa 1995 and World Bank 1997a, 1997b).

In this vein, the new National Land Policy, adopted in 1995, aims to reshape the land tenure regime so as to increase local ownership. The new policy allows individuals to hold titles to land not dedicated to communal use, land conservation, or other village activities. Priority is being given to ensuring that the country’s 3.5 million smallholders secure access to their land. Planned redistribution of 2.0 million hectares of state-owned agricultural lands will also be vital in improving economic prospects for the millions of rural poor.

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The CCM recognized early on that reforming the mining sector offered prospects for attracting desperately needed foreign investment. A series of laws promulgated since 1979 have established a framework for granting licenses to private ventures for prospecting and mining activities, giving priority to attracting large-scale foreign investment, as well as providing additional opportunities for small-scale miners. Incentives are provided to foreign investment by ensuring repatriation of revenues and deregulating markets.

It took little over a decade for these new incentives and liberalized economic relations to make mining one of the most dynamic sectors of the Tanzanian economy. However, development of the mining sector did not follow the path anticipated by the government of Tanzania or the World Bank. Initially, few large-scale mining companies moved into the sector despite the attractive regulatory framework and financial incentives. Instead, hundreds of thousands of rural and urban poor found work in mining camps. Medium-sized mining companies and gemstone merchants occupied dominant positions in the industry, taking full advantage of the new incentives. Those changes have brought only modest capital for direct investment, have done little to raise the technological level, and have contributed minimally to improving government revenue captured from the sector. Recently, however, some of the world’s largest gold and diamond mining companies have begun operating in Tanzania, so dynamics in the sector are set for change.

While prospects may be improving, expansion in the mining sector has been seriously marred by a weak regulatory framework that has allowed rent seeking by private mining and marketing companies, smuggling of gold and semi-precious stones, and evasion of taxes to become the norm. Entrenched rent-seeking behavior has deepened opportunities for collusion between the mining and marketing companies and employees of government agencies who are responsible for grant mining concessions, overseeing collection of tax revenues, and monitoring market entrants and their activities. This deepening collaboration between private interests and public agencies has given rise to public belief that a “political mafia” is operating in this sector, a group that can act with relative impunity in pursuing personal gain. In addition, the environmental costs associated with the expansion of mining have been considerable. Studies in the Arusha, Mwanza, and Tanga regions indicate widespread water contamination, deforestation, biodiversity loss, and degradation of agricultural fields (Kulindwa et al. 2000a).

As with the mining sector, liberalization has created economic conditions under which entrepreneurs in the tourism sector have benefited significantly. In the move to privatize the sector, the government has sought to increase tourism’s contribution to national output by increasing foreign exchange earnings, creating new employment opportunities, and stimulating development of rural areas and human capital. Attracting foreign investors has been central to the plan over the past decade. Incentives provide special benefits to companies based in neighboring countries and to overseas operators, for example, by providing tax holidays and exemptions.

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One of the most important unsettled issues in developing the tourism sector regards relations between entrepreneurs and local communities, a relationship shaped by insecure land tenure and usufruct rights. In principle, government policy supports ‘benefit sharing’ among users of wildlife reserves and gives priority to local communities in filling new job opportunities. The current land tenure regime, however, creates conflicts over the ability of communities and individuals to control use of lands when tourist enterprises want to expand their operations. These conflicts are often intensified by the failure of tour operators to provide employment opportunities to local inhabitants and to distribute revenues through community governance mechanisms (Kulindwa et al. 2000b). The situation at the local level is exacerbated by conflicting decision-making mechanisms on national and local levels, and the uncertainty associated with various kinds of ownership claims. Environmental problems associated with tourism development have also been serious. For example, coastal tourist developments provide clear examples of ripple effects, which start with the destruction of mangrove forests and beaches and result in coastal erosion and serious negative impacts on fisheries.

Cost and Benefits

Viewed at the aggregate level, economic reforms have generated generally positive economic outcomes. For example, real growth averaged 3.3 percent annually in the reform period of 1987 to 1998. Improvement in aggregate figures was reflected in both the mining and tourism sectors. The mining sector’s share of GDP increased from 0.8 percent in 1980 to 1.3 percent in 1993 and then climbed to 2 percent in 1998. After years of decline, tourism’s share of GDP increased from 1.5 percent in 1990 to 7.4 percent in 1998. Reforms also improved performance of the fiscal balance, with budget deficits falling from 11 percent of GDP in 1986 to 4.6 percent in 1998. However, Tanzania witnessed a steady growth of its trade deficit, despite consistent growth in foreign exchange earnings generated by the mining and tourism sectors. Tax revenues also fell despite the increased tax contributions from those sectors. In addition to tax evasion by small operators, the tax incentives for mining and tourism generated tax revenue losses estimated to equal about US $30 million a year. The reforms also have generated other important economic benefits in these two sectors, foremost of which has been the creation of employment opportunities.

The social and environmental costs associated with the reforms are quite extensive. Many are attributable to a combination of policy and implementation failures. Immediate environmental costs include extensive degradation of forests, contamination of waters, degradation of agricultural lands, and disruption of marine ecosystems. Consistent failure to invest, and to oblige users to reinvest, in maintaining the integrity of national parks is leading to serious degradation in the quality of tourist destinations. Several problems hamper the government’s ability to foster sustainable tourism and responsible mining. First, its enforcement capacity is severely limited by low levels of staffing, inadequate training, poor communication, and substandard tools and facilities. Second, Tanzanian policy makers have taken a very centralized approach that does not adequately involve local communities in decision-making. This has led to the creation of laws and

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institutions that are not responsive to local needs, often are unpopular, and so are not supported.

Social costs of the reforms include increased conflict between government representatives and local communities, between miners and communities, between tour operators and communities, and within communities. These may arise from concerns over erosion of cultural values and morality and unfair benefit sharing. They also include the health impacts arising from working in very difficult, toxic conditions, from water and air pollution, and from the spread of communicable diseases promoted by social disruption.

Although the long-overdue changes in the state’s economic role have engendered an economic dynamism in many sectors, a cloud of mismanagement and corruption hangs over the country’s political life. The failure to establish a transparent and effective regulatory system, and the failure to create conditions in which economic groups and agents can compete fairly, have generated considerable political costs reflected in growing public cynicism toward the emerging economic and political order. Political power remains concentrated in a ruling elite affiliated with the CCM. With parliament unable to play an independent oversight role, and with an ineffectual judiciary, the decision-making processes of government remain sheltered from public oversight.

The continued centralization of political power in the context of a liberalized economic system has facilitated a deepening convergence of political and economic elites, which has generated widespread malaise about the degree to which corruption dominates national political life. The situation raises particular alarm for the country’s natural resource base since, in Tanzania and elsewhere, these environmental assets have been the direct source of ill-gotten gains and resource rents. Continued collusion between politicians and private economic agents may well signal further decline and general mismanagement of the country’s natural resources.

A Tentative Balance Sheet

Economic liberalization has brought opportunities to a wide range of economic agents, large and small, national and foreign, operating in Tanzania. Those opportunities are directly attributable to the panoply of economic reforms that dismantled the administered price regime, privatized the marketing system, opened the economy to foreign goods and capital, and established a new set of incentives designed to stimulate investment. Yet the benefits for the country’s rural poor have yet to materialize for many as they experience increased pressure from lower farm gate prices and higher input and transport prices, resulting in stagnant or falling incomes. Moreover, the economic changes converge with institutional reforms creating greater insecurity, loss of control over resources, and diminishing opportunities for the most vulnerable. These dynamics guarantee that Tanzania will continue to undergo rapid change in coming years. Natural resource sectors will remain central to the country’s growth prospects for the foreseeable future. However, the failure to establish a stable regulatory framework, to

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ensure the rights of villages to their traditionally held natural resources, or to provide mechanisms for enforcing those rights and arbitrating claims has led to conflicts between villages and the many new economic agents drawn into the countryside as a result of the economic reforms. Those institutional problems have weakened public confidence in the country’s political system and pose direct, long-term threats to the viability of the country’s emerging economy. The ability of community-based organizations and other groups of civil society to establish themselves as both watchdogs over government and corporate behavior and as advocates of reforms promoting public interests will be influential in determining the long-term outcomes of Tanzania’s reform process.

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III. Zambia

When Zambia gained independence in 1964, the United National Independence Party (UNIP) tried to forge its own version of African socialism, humanism, based on state economic and political monopolies. The one-party state nationalized all sectors of the economy, including the country’s extensive and diverse natural resource wealth, and tried to eliminate political opposition. A boom in copper prices generated abundant revenues that were to be used to construct this version of African socialism. Within two decades, however, declining copper prices combined with general mismanagement of the statist economy left the country one of the poorest and most indebted nations in the region. Economic reforms and political change were inevitable. This essay focuses on the impact of the economic reform program, launched in 1989, on the livelihoods of communities in what are called ‘deep rural areas.’ The discussion focuses on the economic dynamics and institutional change generated by the reform program, which provided both new opportunities and new barriers for rural families by altering the incentives and management regimes governing Zambia’s natural resources.

The Authoritarian Regime

Zambia’s colonial legacy fundamentally shaped the economic policies of UNIP at independence. The colony had served as an unskilled labor reservoir for South Africa and Southern Rhodesia and as an economic enclave for foreign mining companies. Foremost among the new government’s goals was to break Southern Rhodesia and South Africa’s stranglehold over the fragile economy and to render the rural areas more productive by bringing the peasantry into the formal economy. Toward this end, the government, using copper revenues, sponsored policies that included: investing in agricultural and non-agricultural activities in rural areas; establishing state commercial farms and producer cooperatives; monopolizing commodity marketing; and expanding state marketing mechanisms, input provision, and a credit system to deep rural areas.

With nationalization, the president owned the country’s natural resources and was empowered to use that wealth on behalf of all Zambians for the country’s development. The first institution by which the state exerted control over the country’s natural resources was the newly created Zambian Industrial and Mining Corporation (ZIMCO). ZIMCO eventually controlled 121 state companies, including Zambian Consolidated Copper Mines (ZCCM), which controlled all the mining companies in the country. The second institution was the National Agricultural Marketing Board (NAMBOARD), which determined the terms on which rural populations, then 65 percent of the country’s total population, interacted with markets. Through its network of regional cooperatives, the state controlled agricultural inputs and set prices on farm produce that was shipped to central marketing and storage centers. During the “fat decade,” the first ten years of independence, the level of returns from resource sectors was so ample that benefits flowed easily from the coffers of the government through its steadily growing network of state employees and rural beneficiaries. One of the remarkable features of statism and authoritarian rule in Zambia

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in its early years was that it derived support from the delivery of real improvements in rural living standards, achieved by transferring revenues from the mining sector (Bratton 1994). For example, NAMBOARD’s willingness to collect grain and maize from the farthest reaches of the countryside earned UNIP strong support from the peasantry. Poverty declined as Zambians made gains in income, life expectancy, school enrollment, and nutrition. This development approach remained viable, however, only as long as the copper industry remained highly profitable and transfers into the industrial and agricultural sectors generated a steady income flow. Neither of these conditions held true for long.

Economic Reform

By 1990, the Zambian economy had collapsed. Investment fell from 24 percent of GDP in 1986 to barely 9 percent in 1989. Inflation raged out of control. Copper production declined from 700,000 tons to 450,000 tons a year (World Bank 1996b). Internal economic mismanagement and excessive state spending were exacerbated by adverse external conditions, notably the rapidly declining price of copper and the oil shocks of the 1970s. Per capita GDP fell an average of 2.3 percent per year during the 1970s and declined another 50 percent during the 1980s. By 1991, 67 percent of Zambians lived in poverty, compared to an estimated 60 percent in 1975 (World Bank 1996a, 1999).

Because of fierce political opposition to an IMF/World Bank reform package proposed in 1985, UNIP instead implemented a weaker, domestically designed reform program. The failure of that reform contributed to growing public pressure for fundamental political change, from which the Movement for Multiparty Democracy (MMD) emerged. The MMD was grounded in the trade unions and built its political accountability largely through urban-based groups, and it has retained its urban bias throughout its political reign (Bratton 1994).

When the MMD took power in November 1991, it quickly began restructuring the Zambian economy through a package of World Bank/IMF-funded programs. During the ensuing decade, the government remained committed to the Bretton Woods stabilization and structural reform policies. The economic reform package has centered on opening the economy to foreign markets and investors; reducing the economic role of the state; and reforming and diversifying the agricultural sector. A key element has been the government’s determination to implement a cash budget, to which it has adhered despite adverse external economic and internal financial conditions. A tangible result of that fiscal discipline has been the lowering of inflation rates from around 200 percent in 1993 to 40 percent or less in the late 1990s. By 1999, more than 80 percent of state enterprises had been privatized, although major exceptions remained. Despite improvement of a few traditional economic indicators, the formal economy has continued its steady decline, including a 4 percent annual decline in per capita income since the mid-1970s (Rakner et al. 1999). While reforms have succeeded in improving the fiscal balance, the continued economic decline and debt overhang have squeezed public expenditures. The debt-to-GDP ratio has remained high, which has left little room

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for spending on either the infrastructure or on the social, agricultural, or environmental sectors. Employment in the formal sector dropped more than 50 percent during the 1990s. While extraordinary external pressure finally convinced the government to sell ZCCM in 1999, the company commanded a price far below its potential sale price several years earlier (Economist Intelligence Unit 1999-2000).

Agricultural sector reform was given high priority since future national economic development was tied to increasing non-traditional agricultural exports (World Bank 1996a). Market liberalization and privatization of production and marketing systems have allowed large agricultural operations to expand and improve efficiency. Liberalization of export markets and removal of price controls have allowed Zambian producers to sell at higher prices and has encouraged export of non-traditional agricultural products such as flowers, paprika, and guar beans. Between 1994 and 1998, the value of all non-traditional exports rose almost 200 percent. Paradoxically, during this period, maize production dropped nearly 40 percent, and Zambia found itself moving from relative food self-sufficiency to an expected food deficit. Strict monetary policy has created a credit squeeze that has pushed many small-scale commercial farmers out of business. The removal of fertilizer subsidies, which aided poor farmers, has led to extensification and a return to slash-and-burn techniques with attendant environmental consequences.

Institutional Reforms for Rural Communities

Despite many changes in agricultural policies over the years, the government has consistently aimed to end the dualistic nature of the agricultural economy, which is sharply divided between small subsistence producers and large commercial producers. Ending dualism requires integrating the peasant producer more directly into the formal money economy, namely by transforming subsistence farming into market production, increasing wage-labor on commercial farms, diversifying on-farm production, and expanding off-farm activities. This goal underlies the institutional reforms that the government and international agencies have pursued to promote agricultural growth. These reforms have generated opportunities for some, but have proven disruptive and destabilizing for many rural poor.

Of all the countries of colonial southern Africa, Zambia’s traditional tribal governance system remained most firmly intact up to and beyond independence. Few large agricultural companies operated in the land-locked colony, despite extensive and fertile soils. With independence and UNIP’s commitment to opening development opportunities for rural Zambians, institutional arrangements underwent significant change. Along with the creation of NAMBOARD, UNIP also implemented a land reform measure in 1975 that abolished freehold land titles and gave ownership of all land to the president. The president then granted rights to individuals either under the traditional land tenure system, accounting for 90 percent of lands, or statutory tenure, under a policy intended to increase the role of statutory tenure. Under the traditional land tenure system, land was considered to belong to the community as a whole, and the community governed its use (Kambenja 1996 and Mano 2000).

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Policies intended to increase the role of statutory tenure were established for the wildlife sector, eroding the limited control and revenue-sharing arrangements with local communities established during the colonial period. All tourism revenues were to be retained by the central government. Having gained centralized control, the government encouraged commercial poaching in order to generate maximum revenues from game hunting. The rapid disappearance of Zambian wildlife that resulted finally led the government to establish various community-based natural resource management systems to increase local management and revenue sharing. But despite the apparent reversal in policy, the central government consistently undermined local rights as it continued to issue special hunting licenses.

Equally important for resource management, UNIP opened political offices across the country with responsibility for overseeing local councils, ensuring compliance with government decrees, and controlling political activities. Within a short time, these offices created conflicts with local authorities whose decision-making processes were based on customary laws and governance processes. Given the extensive patronage system and the ruling party’s ample resources following independence, however, political officers carried considerable sway over local decision-making and resource distribution.

When the MMD government came to power and began implementing structural reforms, they also set about designing institutional changes to support the economic reforms. Since the agricultural sector was central to the economy, land reform became the institutional centerpiece. The Lands Act of 1995 sought to establish landholdings as an asset with cash value that could facilitate investment and credit-making in the stagnant sector. This monetization of land sought, among other objectives, to transfer customary or traditional tenure to leasehold tenure, granted by the president for 99 years. The act, however, generated confusion regarding the rights and mechanisms by which local communities and individuals could obtain title to their traditional lands. This uncertainty has generated a growing number of claims by traditional users seeking to protect their access to land from new claimants (Mano 2000, Kambenja 1996).

The MMD government also implemented institutional reforms in the wildlife and forestry sectors, two key areas affecting rural livelihoods. In creating the Zambian Wildlife Authority (ZAWA) through the Wildlife Act of 1998, government and donors sought to create an independent authority that would be financially self-sustaining while generating higher revenues for the tourism sector. Under the act, local tourism revenues would finance the ZAWA staff. That new appropriation of wildlife rents diminishes the revenues available to local tribes and communities, the custodians of wildlife. The act also removes tribal chiefs as chairpersons of the Community Based Natural Resource Management committees, local boards that oversee tourism activities and provide resources for community improvement activities. More recently, the Forestry Act of 1999 established a similar forestry authority, with the primary goal of increasing the national revenues from the forestry sector. Under this arrangement, few revenues are to be distributed to the communities whose forested lands are being harvested.

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Opportunities and Growing Conflicts

Case studies conducted of two deep rural areas, Chiawa and Kaindu, provided insights into the impacts of economic liberalization and institutional reform on rural livelihoods, which are relevant throughout Zambia. On the local level, tour operators, largely foreign, have benefited from the liberalization of the economy through increased access to natural resources, wildlife, rivers, and the resources of local communities when they are needed. Commercial farmers, game ranchers, and agribusiness have taken advantage of the Lands Act to acquire control of vast stretches of land, including community-controlled land. Expansion of agribusiness has brought significant environmental damage to Zambia’s surface water through fertilizer contamination, livestock waste, and discharge from processing plants. Some rural families are enjoying new economic opportunities and gaining access to material goods that were far beyond their grasp a decade ago. By the same token, many families and communities are losing control over their resources, authority, and economic opportunity through displacement and dispossession. The Lands Act has significantly weakened traditional authorities. Similar outcomes are foreseen from the economic and institutional reforms being implemented in other natural resource sectors such as the forestry sector.

While the economic reforms are largely irreversible, it is clear that simply continuing to push institutional reforms in the current direction will deepen conflicts in rural areas, with the poor, vulnerable communities most likely to pay highest costs. The prescribed reforms are not, however, immutable. Significant alterations could be made to protect the interests of the rural communities without undermining those reforms essential to dismantling the statist economy. First is revising the Lands Act to prevent powerful corporations and individuals from using the new tenure rules to gain control over communal lands. Second are many simple changes in policy application that would be highly beneficial for rural communities, such as strengthening local control over natural resources, increasing local fiscal authority, and enhancing local managerial capacity.

Structural changes have brought irrevocable change to Zambian political life. The old one-party elite of UNIP has been displaced, its statist economy turned over to private companies and, for a brief moment, hopes of democratic governance seemed to take hold. Privatization of natural resource wealth and economic liberalization have slowly created conditions conducive to dismantling the authoritarian structures and clientelism kept in place for over 40 years.

During the past decade, however, a new political elite associated with the economic reforms has become entrenched at the center of the government. This elite has actively pursued new forms of collusion and corruption that bind the new private sector to its political control. The consolidation of the political and economic elite poses particular threats for the rural population. The institutional reforms being implemented already pose serious threats to the influence and stability of community-level organizations and authorities. Through these changes, the authority of villages and chiefs over natural

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resources, be it land, water, wildlife, or forests, has steadily eroded, and the ability of individual users to gain title or effective control is increasingly uncertain.

A Tentative Balance Sheet

The Zambian case brings into focus the effects of promoting desperately needed structural changes through a reform package that was poorly adapted to the country context. The overall goals of reducing the state’s economic preponderance in favor of the private sector, providing incentives to diversify and expand the agricultural sector, and reestablishing the fiscal balance were basic requisites for putting Zambia on a sustained growth path. That those fundamental reforms have taken root holds promise for building a more dynamic, responsive economic system.

Despite those gains, what remains particularly disturbing about the Zambian experience is the gross disregard that designers of the reform package showed for the political and institutional arrangements that shaped Zambian life. That disregard began with the failure to understand the structure and exercise of power on the national level and the economic foundations, namely natural resource wealth, on which that power rested. Perhaps more important was the insistence on controversial institutional reforms that have pitted the least powerful social groups, including rural farmers and rural communities, against the most powerful, politically adept groups in the country. Equally disturbing is the process by which economic reforms and institutional changes have created a new political and economic elite whose actions and policies lie beyond the realm of public scrutiny and accountability. In this context, villagers and traditional authorities will face a dogged struggle to assert their rights and establish their rightful place in the future development of the country.

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IV. Zimbabwe

Since the establishment of the British South Africa Company (BSAC) in Southern Rhodesia in 1889, the political economy of the region has been shaped by conflicts between white settlers and the native African population in their efforts to control the region’s productive lands. The successful struggle for nationhood in 1980 and the rise of the Zimbabwean African National Union - Patriotic Front (ZANU PF) did not attenuate this conflict. This essay first summarizes the patterns and relations of natural resource management established by the settler regime during the colonial period, and then focuses on the period from 1990 onward when the Zimbabwean government embarked on a program to liberalize key sectors of the economy. Results of several studies of the local impacts of tourism expansion are used to illustrate the impact of that program in rural areas. The essay concludes with an analysis of how structural reforms altered land uses and markets in ways that ultimately exacerbated decades-old conflicts over land tenure.

The Foundations of Conflict

Under the management of the BSAC, white settlers were granted more than 21.5 million acres of Southern Rhodesia’s most fertile lands, where they produced a diverse array of agricultural commodities for domestic and international markets, and expanded mining activities (Mosley 1983). The growing wealth and economic dynamism of the settler colony, as well as their need to implement economic and administrative policies favorable to their economic expansion, generated conflict with the BSAC. As a result, Britain granted Southern Rhodesia rights as a self-governing settler colony in 1923 (Skälnes 1995).

Through its control of the economy and politics, the settler community imposed a series of restrictive measures on African farmers. The Land Apportionment Act of 1930 forfeited the rights of Africans to any land that might “be required for European settlement” (Mosley 1983). Africans were allocated 7.4 million acres of ‘Native Purchase Areas.’ Differential prices were set for African produce and taxes were imposed on villagers, among other measures, to place African farmers at severe economic disadvantage (Skälnes 1995). The Natural Resources Act of 1941, which granted a national Natural Resources Board sweeping authority to manage environmental resources, continues to provide the legal framework through which a command-and-control management regime operates today in communal areas (Scoones and Matose 1995). Through these restrictive measures, as well as direct physical coercion, the African population was pushed to poor arid lands and, by 1950 approximately 30 percent of the population was landless (Moyo 1991).

The white settler economy was largely oriented to export markets. The growth of large-scale agricultural farms quickly spawned expansion of agro-processing plants, from which subsequent industrial diversification could take place. The mining sector also expanded steadily. Steel and iron plants were built during the 1930s and 1940s, allowing

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the country to become a producer of intermediate capital goods. By 1965, the manufacturing sector’s contribution had risen to 40 percent of total exports.

As decolonization became the norm in Africa during the 1950s and 1960s, unwillingness to expand political participation to the Africans drove Southern Rhodesia’s white settlers to declare independence from Britain. In the wake of the international condemnation and economic sanctions that followed the Unilateral Declaration of Independence in 1965, the settler community had little option but to pursue an import substitution industrialization policy. The fact that industrial diversification had already progressed so far allowed Rhodesia to sustain its inwardly focused economy for the better part of the next 15 years (Skälnes 1995). During this period, the structure of the agricultural sector, which pitted large-scale settler farming against the small-scale and communal production of Africans, remained untouched. Similar disparities characterized the forestry and the wildlife sectors.

By 1980, the internal economic and political strains of maintaining the racially segregated regime became untenable. Opportunities for diversifying the economy had been exhausted, the need for foreign capital and technology had increased, and the difficulty in accessing foreign markets constantly constrained economic opportunities. As conditions for the predominantly rural African population worsened, their willingness to actively support the growing guerrilla movement increased proportionately in both rural and urban communities. In particular, the promise of regaining control of the land motivated the rural African population to support the various wings of the liberation movement.

Despite the Marxist-Leninist rhetoric of the independence struggle, once ZANU-PF gained power in 1980, it pursued a markedly conservative economic policy that ensured continued control over the economy by white entrepreneurs and financiers. Despite an initial wave of white flight that reduced the settler population by almost 50 percent, 6,100 white commercial farmers controlled 39 percent of the country’s total land area, including the most productive lands. Their control over the manufacturing and financial sectors was even more absolute (World Bank 1995a).

While protecting this white-dominated economic structure, ZANU-PF also embarked on a program to extend social services, namely education and health services, and economic opportunities to the African population in communal areas. Communal areas included 700,000 smallholder households “crowded into tribal trust land areas, most of which lay in semi-arid parts of the country or in locations with poor soils” (World Bank 1995a). Government marketing services were extended to smallholder farmers and fixed or floor prices for most crops guaranteed them minimal prices. In the 1980s, these supports provided economic opportunities to rural populations previously outside the formal economy. The costs of those subsidies, however, contributed to rising government budget deficits.

Modest land redistribution efforts were initiated in the first five years after independence. The government resettled 47,678 families in the 1980s on over three million hectares

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purchased or obtained through forfeiture. The government tried to open lands to a small but growing black elite, through, for example, loans for purchase of large-scale commercial farms (LSCF). Communal cooperatives gained access to 176,000 hectares while state-owned farms took control of about 500,000 hectares (Moyo 1995). However, rather than expanding land redistribution, the government actually halved its land acquisition budget by 1988, signaling to large-scale farmers that their commercial ventures remained secure. During the late 1980s, the government also reduced the availability of credit, fertilizer, seeds, and other inputs to smallholders, further limiting their economic opportunities (World Bank 1995 b). Public distrust of the ZANU-PF government rose in the late 1980s when it became apparent that the land redistribution programs were benefiting party functionaries, government ministers, and high-ranking civil servants, not the Africans constrained to communal areas.

This period saw an increase in state political and economic control over the smallholder sector, particularly through the Communal Lands Act of 1982. This and other legislative means reduced the power of traditional chiefs as they increased the control of District Rural Councils and other government-appointed administrators. These reforms did nothing to address the pressures of increasing environmental degradation and demographic growth being felt in the communal areas.

Control and management of forests followed the pattern of land tenure policies. LSCF were entrusted to manage their forested areas on a self-policing basis, while forests in the communal areas were subject to increased state regulation, which limited forest use to subsistence purposes and prohibited marketing of timber. The outcome of this dualistic policy has been a pattern of increasing forest degradation in and adjacent to communal areas, with villagers often obliged to cut wood and harvest crops within state forest estates (Nhira et al. 1998 and Mandondo 2000).

Economic Reforms

The implementation of structural reforms in 1990 grew not from financial or structural crisis but rather from the needs of the white industrial sector to open the country to international markets. Structural bottlenecks created by the import substitution model of the Unilateral Declaration of Independence (UDI) period were slowing the economy. By the end of the 1980s, investment had fallen to less than 20 percent of GDP and was insufficient to raise productivity. Growth in the labor force was far outpacing employment expansion, thus intensifying pressure in rural areas while expanding the informal sector. The challenge was to engage in a steady liberalization program that would allow the industrial, agricultural and mining sectors to expand by tapping into new international markets (World Bank 1995a and Gibbon 1995).

The government began implementation of the Economic Structural Adjustment Program (ESAP), a national program designed with World Bank input, in 1990. The six-year program sought to reduce budget deficits and reform public enterprise; liberalize trade; increase domestic competitiveness through market liberalization; and strengthen social safety nets to protect the poor. The second phase of the reform process, the Zimbabwe

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Program for Economic and Social Transformation (ZIMPREST), was launched in 1996. ZIMPREST reinforced plans to open the economy to world markets and included specific initiatives for mining, agriculture, and manufacturing. It also called for increased investment to expand opportunities for black-owned businesses and to create employment for the black population. These reform programs had a number of positive economic outcomes. Zimbabwe diversified its exports, with manufactured exports rising 14 percent a year and agricultural exports 43 percent a year between 1991 and 1996. GDP growth reached more than 5 percent a year between 1992 and 1995, and investments rose to about 22 percent of GDP. After the second set of reforms in 1996, foreign and domestic investors began bringing capital back into the economy. The country’s labor costs were globally competitive at that time, and government expenditures declined as civil service and military posts were eliminated.

Despite these positive outcomes, economic performance has deteriorated on many counts. There has been a distributional shift away from low-income households as a result of the soaring inflation and stagnant output and employment (World Bank 1997c and ZERO 2000). A steep rise in the price of food coupled with a 35 percent decline in wages and cuts in social spending made poverty even, particularly in the countryside. GDP per capita in 1997 was still below pre-reform levels. The economy worsened dramatically in the last years of the 1990s as political and economic setbacks brought the country to the brink of collapse. Inflation reached 60 percent in 2000, and foreign reserves were depleted. Heavy borrowing continued to sustain government spending but, in turn, created extremely high interest rates. The political turmoil set off by the elections of 2000 contributed to the economic collapse.

The tourism sector provides a useful case study for understanding the impact of the reforms on rural communities reliant on natural resources given the sector’s rapid growth in the 1990s, its central importance to many rural communities, and its direct link to the land question. If the economic reforms were to generate benefits for the rural population, the tourism sector and, in particular, the well-known CAMPFIRE program (Communal Areas Management Programme for Indigenous Resources) seemed a likely mechanism for extending benefits to the communal areas. Although the government and the World Bank did not consider the tourism sector in the structural adjustment program, tourism’s contribution to GDP increased from 2.6 percent to 7 percent between 1992 and 1996 and the number of tourists increased 300 percent. When its secondary benefits, such as associated employment for artisans and farmers, are taken into account, its contribution to the economy almost doubled. The tax yield from tourism almost tripled, and tourism became the country’s third largest foreign exchange earner (ZERO 2000).

Three case studies lead to the conclusion that communal areas have derived minimal benefits from the expansion of tourism, benefits that became available through trickle-down effects from the LSCF and state sectors. One inquiry (ZERO 2000) looked at the impact of the expanding tourist economy at sites located near national parks where smallholder agricultural production predominates yet where large-scale tourist activities

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are common. Researchers concluded that growth in tourism was not felt on the local level, and neither employment nor spin-off economic benefits accrued to the villages. They also underscored the costs, such as loss of livestock and crops to wildlife, associated with supporting tourism at the village level. While in years past CAMPFIRE programs provided an important source of cash income for the villagers, the study confirmed that the lack of power exercised by local communities over resources, land, and tourism benefits reflected the increasing control of the District Rural Councils, essentially political extensions of the ruling party, over local resource management. A parallel study (Bond 1997) attributes the very limited adoption of wildlife-based tourism as a viable land use for communal areas to institutional arrangements and broader economic conditions that worked against the rural poor. Constraints include the breakdown of both the traditional and modern political mechanisms for allocation of land; the low rate of return to individual households from wildlife utilization in the communal lands; the failure to empower rural wildlife producer communities; and the increasing demand for land for agriculture due to declining urban wages and formal sector employment. At the same time, wildlife-based tourism has become of increasing importance to the LSCF sector. A third study focused on the role of national and international tourist operators and their interaction with communal areas (Murphree 2001) in one community. In its early years, government interference with the CAMPFIRE program throttled community efforts to develop tourist opportunities and there were numerous struggles with government officials over poaching, damage caused by wildlife, and concession revenues. That situation changed under the structural reform program when a private company expressed interest in developing tourist lodges on communal lands. A formal agreement was reached by which the community agreed to leave certain communal lands undisturbed for wildlife tourism, in return for an established percentage of gross revenues. The returns to the communal area have included infrastructure development and employment opportunities in addition to the considerable revenues paid to the Rural District Council. The Land Question

A coherent analytical framework for understanding the different outcomes in the tourism sector, as well as the skewed distribution of benefits from the adjustment process more generally, is provided by Sam Moyo (2000). Moyo asserts that structural reforms have had a significant impact on land uses and values, primarily through liberalization of domestic agricultural markets, provision of export incentives, and reduction of financial and import/export controls. Restructuring of the agricultural sector and land markets led to a significant change in land use, particularly in LSCF and state-owned farms. The new macroeconomic and sectoral incentives have led landowners to diversify production into higher value products and activities, including horticulture, wildlife, and ostrich raising. Moyo concludes that these land use changes have been adopted by approximately 50 percent of LSCF, but by no more than 10 percent of communal areas. These new land uses and higher returns have significantly altered the dynamics of the land market and altered the political struggles unfolding around the land question. Moyo identifies several

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key trends on the land question associated with liberalization of the economy including: the entry of transnational corporations; illegal allocation of communal lands; utilization of marginal lands; and land seizures by squatters.

The issue of land seizures is central to understanding the distributional effects of the adjustment process, and to understanding the current political and economic crisis. Because of the studious disregard of the land question by the reform program, crisis conditions and pent-up demand for land in communal areas inevitably led to growing social unrest from the early 1990s onward. The demands of the rural poor converged with the interests of a growing elite black economic lobby that wanted to increase its access to the country’s most productive lands. Those growing public pressures obliged the government to articulate a new land policy. Through the Land Act of 1992 and several constitutional amendments, the government established the means by which it could appropriate land for redistribution. Yet despite public pronouncements and promises to the rural poor, the government gave priority to fostering a black elite in the LSCF sector through land redistribution and subsidies (Moyo 1995). This investment limited the availability of government resources for the communal areas.

In response to the growing resentment and desperation among the rural poor, the President traveled across the country during 1997-98 promising rural populations that the government would seize half of the country’s white-owned farms to resettle tens of thousands of landless peasants. Not surprisingly then, during mid-1998, land invasions of white-owned farms by peasants catapulted the land issue to national prominence. These squatter actions raised the prospects of uncontrolled land seizures, broader social upheaval, and loss of political control by the central government. In response, the government outlined a five-year plan that would resettle 100,000 families on five million hectares of land purchased from white farmers (Economist Intelligence Unit September 1998).

ZANU-PF’s manipulation of the land question during the 2000 parliamentary elections raised the prominence of the issue on the national political agenda. To mobilize its rural electoral base, the party engineered land invasions that were frequently accompanied by violence and murder of white farmers, black farm hands, and political opponents. It has been, however, the deepening of inequality in the rural sector and the economic duress in communal areas that has created social conditions such that political crisis became unavoidable. At the center of that growing inequality is the increased economic benefit derived from new land uses for the wealthy, while growing economic, environmental, and social crisis prevails in the communal areas and drives efforts by the poor to obtain the productive resources on which their survival depends. In responding to the new economic opportunities, the more dynamic economic agents have substantially altered land uses and land markets across the country. In contrast, as illustrated by analysis of the tourism sector, the communal areas have been significantly constrained in responding to new opportunities. The reform program has obliged them to rely ever more intensely on natural resources to survive.

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The economic reform program has had a direct and significant impact on the welfare of the poor above all by affecting their ability to control the environmental resources on which their livelihoods depend. Unless a very explicit social policy sets conditions on how the economic reforms are implemented, those impacts will continue to vest greater control and wealth in the powerful, privileged economic groups while reducing the options and competitive capacity of rural smallholder sector. Appropriate institutional and political conditions would include economic incentives and subsidies directed to strengthening the competitive capacity of the rural poor; institutional conditions by which the rural poor can stabilize and strengthen control over environmental assets; and, political systems guaranteeing the representation of the rural poor. Ultimately, finding ways of addressing the deepening inequalities and conflicts in rural areas holds the key to moving beyond the current political impasse engulfing Zimbabwean society.

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V. Natural Resource Wealth in the Construction of Neoliberal Economies in Southern Africa

The essential features of the economic reform programs promoted by the Bretton Woods institutions, which remain the same today as when Tanzania, Zambia, and Zimbabwe embarked on their respective reform processes over a decade ago, were:

diminishing the role of the state as an economic agent; dismantling barriers to the international flow of goods and capital; and reforming national institutions to support the economic reforms.

The statist economies maintained by authoritarian political regimes in southern Africa were incompatible with this reform blueprint on one fundamental point. State-driven economic arrangements prevented private capital from gaining access to the countries’ considerable natural resource wealth and allowed that wealth to be exploited by an increasingly corrupt national political elite.

Flowing from that incompatibility was a second major problem. While the Bretton Woods institutions were under pressure to demonstrate tangible results in alleviating poverty through the economic reform programs, that outcome was not possible under the autocratic regimes that dominated the resource-based countries of southern Africa. Unfortunately, design and implementation of the reform programs largely ignored the fact that a specially tailored set of requisites and approaches was required to meet the objectives of reform in autocratic regimes anchored in natural resource wealth. In these three southern African countries, the Bretton Woods institutions designed and oversaw economic reform programs that assumed the presence of economic and institutional conditions that simply did not exist. This final essay offers some general observations and several recommendations about economic reforms, governance, and natural resource wealth in southern Africa in light of our analysis of the interaction of social groups, economic agents, and the state. Our conclusions are organized around three basic questions, as follows.

Question 1: What groups and economic agents have gained or lost control over natural resources in the context of economic reforms?

Transfers of resources took various forms under the reform programs as resources were passed to large foreign corporations, national entrepreneurs, and individuals. The principal transfer of control over environmental resources was from the state to private corporations and individuals. Recipients of those transfers included international corporations that entered the countries with considerable investment capital and ample access to international markets. These companies acquired rights to extract minerals and timber and to develop high-value tourist destinations, and acquired land title or concessions for large-scale commercial agriculture and logging. State-owned resources were also transferred to national entrepreneurs through grants of prospecting and mining concessions and concessions for modest tourist accommodations, access to protected areas, and land concessions to medium-sized commercial farms. Finally, transfers of state-controlled environmental resources included devolving ownership, or trusteeship, to

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villages, small farmers, and the landless, notably in Tanzania, though in these cases tenure often remains uncertain.

With the implementation of legal and land tenure reforms, traditionally managed resources were transferred to private control in Zambia. Community authorities were unable to seek redress for these changes since neither the institutional mechanisms nor policy makers associated with those transactions were publicly accessible. Similarly, liberalization of Zimbabwe’s land markets increased competition for new land and resulted in appropriation of land in communal areas through less than transparent means by private agents. There, competition and conflicts between large-scale commercial farms and the land poor, which intensified as a result of the reform process, have led to forced transfers between private owners as local leaders and villagers have seize white-owned commercial farms.

Question 2: Through what processes, policies, and relations have these groups acquired or lost control over natural resources?

The Bretton Woods institutions established the economic policy framework, provided the guarantees to private investors, and helped shape the institutional reforms through which the economic policies would be applied in each country. Those policies explicitly sought and succeeded, to varying degrees, in diminishing the role of the state as the organizing force of national economic life. In addition to the macroeconomic reforms, specific resource-based sectoral reforms, including reforms in agriculture, mining, tourism, and forestry, explicitly sought to remove the state from economic activity in favor of private investors and entrepreneurs.

These policy interventions were ultimately intended to create macroeconomic stability such that private capital would accept the risks associated with investing in the three countries. Among the guarantees required to attract private capital were reassurances that profits could be repatriated, that private banking firms could manage investment capital, that technology could be imported without undue constraint and delay, and that national currency could be converted to hard currency.

In addition, the reform process established a series of incentives, such as tax exemptions, that sought to ensure high returns from natural resources for foreign investors.

Those reform measures and institutional changes produced, in some cases, a significant improvement in traditional economic indicators. However, while some social groups benefited considerably from their new access to natural resource wealth, others, usually the rural poor, experienced heightened insecurity, falling living standards, and weakened institutional control. As the policy and institutional reforms were put in place, often backed by government and international coercion, it also became apparent that numerous weaknesses and deficiencies allowed rampant corruption and collusion to thrive.

The wide range of institutional reforms accompanying the economic policies have been equally significant in changing access to and control over natural resource wealth, and are

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often the mechanisms through which new policies are felt most directly at the local level. National institutional reforms enacted in the natural resource sectors of the three countries have included land reform, decentralization programs, creation of resource authorities, and political reforms. Each of the countries has implemented land reform programs purported to increase the access and control of smallholders, the land poor and the landless. In general, the reforms are premised on expanding market-based relations into rural areas, thereby supplanting the traditional forms of trusteeship and usufruct or overriding state-managed systems imposed following independence. These reforms have created some opportunity but also widespread insecurity in rural areas throughout Tanzania and Zambia. In Zimbabwe, changes in land use and land tenure have been driven by worsening conditions in communal areas and the failure of the government to promote land redistribution over the past 20 years. Local initiatives to regain control over the most productive lands, and thereby correct historical injustices, have been overtaken by political forces in which the land question has become the focus of manipulation and the driving factor in current social upheaval.

Creation of resource authorities, as is the case with forests and wildlife in Zambia, is intended to increase the aggregate economic returns to the country from exploitation of natural resources. However, while promising to increase revenues for local communities, the resource authorities have become mechanisms by which the central government can capture resource rents while off-loading administrative costs from the central budget.

Decentralization, which implies devolving to local leaders and communities the authority to make decisions that affect their daily lives, has been embraced, in principle, by the three countries. In Zambia, however, the decentralization process often has provided a mechanism for marginalizing established local authorities from decision-making while placing political faithful and appointees in new positions of local power. In Zimbabwe, any pretense of decentralizing political authority has been subverted by the polarization of national political life between the ruling party and opposition movements. The more recent decentralization experience in Tanzania shows promise that a more meaningful redistribution of decision-making may accompany the land reform program now underway.

The establishment of adequate institutional mechanisms to regulate and ensure transparency of transfers has not accompanied the privatization of the natural resource sectors. As a consequence, rampant corruption and collusion have characterized the reforms in the three countries. Foremost is the collusion between members of the country’s political elite and private economic agents seeking access to natural resources. Results of this collusion take the form of granting of mining concessions, construction permits on tourist sites, land grants or concessions on communal land, timber permits, and tourist operator agreements. Corruption at the national level has invariably translated into comparable problems at the provincial, district, and local levels. The pervasiveness of corruption is now such that public confidence in all three governments has plummeted and has provoked public protest and unrest.

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Coercion has been an integral part of the economic reform process from its outset. International development agencies and private lenders coerced recalcitrant governments to adopt reform programs using lending conditionalities or refusing to reschedule debt obligations. Although the Bretton Woods institutions still proclaim the neutral character of their policy reforms, public and private opposition to their coercive character has resulted in non-compliance, political demonstrations, and postponement of reforms. Coercion has also been used frequently by national governments to repress civil society as it has risen up to protest the social, political, and environmental costs of the reform programs. Of the three countries, the coercive measures employed by the ruling party in Zimbabwe are unmatched in the region. Mobilization of party faithful to invade and seize white-owned commercial farms has expanded to include nationwide intimidation and repression of political opponents and attacks on white-owned industries and businesses as well. Escalation of coercion and physical violence is now firmly engrained in the country’s political dynamics.

Question 3: Will those changes promote sustainable development paths by promoting environmental sustainability, enhancing social equity, and increasing governments’ public accountability?

To address the issue of environmental sustainability, we need to consider whether the economic reforms, new incentives, and associated institutional changes established economic and institutional conditions under which sustainable resource and environmental management will likely develop. On the positive side, diminution of the state as a direct economic agent opens the possibility of establishing the state as the principal guarantor of national environmental performance and, subsequently, as a provider of public environmental goods and services. However, despite this new potential, governments of the three countries have not sought to strengthen or enforce environmental standards so as not to discourage foreign investors. Moreover, collusion between government and the private sector discourages development and application of rigorous environmental regulation. Notably, the only sustained incentive to implement more rigorous environmental standards and establish more effective environmental agencies has come from external sources.

The economic reforms were justified over 10 years ago by the promise that they would significantly enhance social equity and improve the welfare of the rural poor by changing internal terms of trade, removing anti-rural biases, and creating employment opportunities. To date, the policy and sectoral reforms have brought occasional improvements in the welfare of rural populations. However, the majority of Africans in each of the countries is still living in near abject poverty. Reforms in natural resources sectors promised similar improvements in the lives of the rural poor but, with the exception of the mining sector in Tanzania, have delivered only meager results, results that have been accompanied by considerable social and environmental costs. Institutional reforms likewise promised to empower local producers, communities, and village authorities but, while benefiting some, have led to widespread uncertainty, insecurity, and direct loss of control for a greater number of communities.

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Political accountability and transparency have not increased notably, and there are few indications that the voice and influence of the rural poor will increase as a result of the economic reforms in these three countries. National development priorities will continue to be set by political insiders and the emerging economic elite. Each of the three countries has seen stirrings of increased transparency coupled with a renewed embrace of authoritarianism and corruption. At one end of the spectrum, Tanzania has opened its formal political process to multi-party democracy, a freer press, and more vibrant civil society. At the same time, however, the pervasiveness of corruption and rent seeking has severely undermined public confidence in the current system of governance, political parties, and national leaders. Once held forth as the beacon of democratic reform on the continent, Zambia has steadily slipped toward more autocratic rule since the implementation of economic reforms, and has largely reverted to one-party domination marked by growing collusion between the ruling party and private business built upon the country’s extensive natural resource wealth. Zimbabwe falls at the other extreme of the spectrum as a society fractured by political strife, economic collapse, and social instability related to the unresolved land question, and associated natural resource issues. Any effort to promote public accountability and strengthen the rural communities in Zimbabwe remains wedded to resolution of the land issue.

Pursuing Reforms Without a National Consensus

The preoccupation of the Bretton Woods institutions with the implementation of economic policies that were generally misplaced in the context of the statist, authoritarian regimes of the region contributed significantly to the frustration of the reform process. These policies were misplaced on numerous counts. First, the international structure of demand and the accompanying declining terms of trade cannot provide the economic foundations for addressing the persistent debt burdens while reversing the deepening grip of poverty on these societies. The natural resource sectors cannot pull the economies out of their current problems. Second, simply replacing state rent seeking in natural resource sectors with private rent seeking cannot provide the economic foundations or government revenues for addressing the debt overhang and supporting development. Third, the institutional framework for reestablishing macroeconomic equilibrium is lacking. The mechanisms for overseeing the natural resource sectors were not put in place prior to or during the reform process, leaving the countries open to rent seeking and corrupt business practices.

Coupled with the misplaced policies promoted by the Bretton Woods institutions were the misplaced priorities of national political leaders. Initially, national leaders had little or no direct interest in seeing the policy reforms implemented since they had clear vested interests in the maintenance of the state-run economies from which their personal economic and political power was derived. More recently, while yielding control over the economy, political elites have found ample opportunity to expand their economic standing through deepened ties with new economic agents that have moved into the transformed economic environment.

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Over the past decade or more, a lack of national purpose and consensus consistently eroded implementation of the reforms in each of the countries. Political leaders and technocrats have allowed the reform process to become a proxy for a national development strategy. Many have used the structural change as a new opportunity for promoting their personal interests. While traditional economic indicators have improved in some circumstances, the costs of reforms have fallen largely on the poor, most often the rural poor.

The dynamic functioning of civil society has been the central factor missing in the reform process in these three countries. During the reform processes, neither multilateral development institutions nor national governments have sought to strengthen the capacity of civil society to help shape, refine, or guide implementation of the structural changes. Quite to the contrary, the World Bank and IMF have shielded their policies and agreements from the scrutiny of the affected public. National political elites have used civil society for manipulative purposes when public protests would aid their efforts to fend off the incursions of the Bretton Woods institutions on their positions of privilege and power. Groups from civil society have faced innumerable challenges in exercising the necessary watchdog and advocacy functions often taken for granted in more democratic societies. Without those public functions, little has remained to prevent new forms of exclusion, corruption, and mismanagement becoming entrenched in the emerging economic and political systems.

Recommendations

Many recommendations that can be drawn from these studies, including the need for transitional strategies to allow the poor to adjust to new market conditions, have been made in the context of our earlier research and advocacy programs. Here, we focus our recommendations on three priority issues.

First, for the Bretton Woods institutions, we recommend that strategic environmental assessment and planning (SEAP) be applied to all policy-based lending operations. While the SEAP may take various forms, this comprehensive type of assessment must shape whatever policy or programmatic lending operations the World Bank and IMF support with public funds (see Iannariello et al. 2000 for a methodology developed by WWF as part of this project). Strategic environmental assessment and planning must fulfill four specific objectives:

Integrate environmental and social considerations into a unified perspective, recognizing that economic reforms alter the status and opportunities of different social groups in different ways, as they also alter the ways those groups interact with the environment.

State clearly the environmental risks and benefits that are associated with any policy-based operation, including structural adjustment loans.

Develop an independent, publicly accessible monitoring mechanism to gauge the environmental performance of the policy operations on a regular basis.

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Establish a policy response mechanism by which responsibility is clearly delegated and appropriate government agencies empowered to correct unacceptable environmental costs associated with policy and institutional reform.

By establishing such a responsive assessment instrument the Bretton Woods institutions can break with their past record of excluding civil society from involvement in policy reforms and provide the mechanisms for strengthening civil society’s role vis-à-vis entrenched interest groups.

Our second recommendation concerns the importance of strengthening civil society in developing countries, particularly in countries with resource-based economies. The experiences of these three countries underscore the important role that mechanisms of public oversight and accountability play in ensuring that natural resource wealth is used for public, not just private, good. In the absence of watchdog and advocacy activities of a diverse band of civic organizations, public and private rent seeking finds fertile ground and collusion between economic and political actors flourishes.

In light of the above, we strongly recommend expansion of the investments of bilateral agencies, specialized agencies of the United Nations (UN) development system, and international non-governmental organizations (NGOs) inpromoting the development of local community and advocacy groups, be they in the field of governance, human rights, or the environment. Investments should strengthen the capacity of NGOs in developing countries to monitor and analyze developments in natural resource sectors. Investments should promote the capacity of civil society to:

analyze and highlight the role of natural resource wealth in national development plans and strategies;

identify the corresponding government agencies and government staff responsible for managing those sectors;

identify the policy framework and legal mechanisms that regulate economic activity in those sectors;

monitor proposed institutional changes in those sectors, including land reform, resource authorities, and decentralization proposals, among others;

analyze, whenever possible, the linkages between economic agents active in the resource sectors and government employees and policy makers; and

develop policy and institutional proposals designed to increase local control over resources and revenues derived from those resources.

Our third recommendation concerns establishing guiding principles for national development strategies that will ensure natural resource wealth benefits the rural poor.The foregoing conclusions highlight a unique set of issues and challenges particular to natural resource-based economies that need to be addressed if democratic regimes are to take firm root and if sustainable development is to drive national development strategies. They highlight the fact that economic changes are unfolding in ways that create many opportunities for the entrepreneurial classes and those with political influence. They also underscore the growing sense among the poor, particularly the rural poor, of loss of economic control and disempowerment in the political sphere.

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As an international environmental organization, WWF’s abiding interest is in promoting conservation and the sustainable management of our planet’s natural resource base. We have worked consistently with rural communities to find ways of addressing both their need to improve livelihoods and our conservation agenda. One of the main lessons we have learned is that our conservation objectives can best be fulfilled if rural populations enjoy productive, stable, and healthy lives. WWF remains far from having found formulaic answers in trying to address the complex dynamic linking rural poverty, conservation, and natural resource wealth. As with other environmental and development organizations, WWF is steadily challenged to explore new approaches to addressing these dynamics, particularly today as new economic incentives and institutional reforms increase pressure on fragile rural areas. What is certain, however, is that the current policies and institutional reforms are carrying us no closer to addressing the complex dynamic between rural poverty and the environment.

While the transition to market-based economies in countries of sub-Saharan Africa is not only necessary but also urgent, we also believe that a new set of principles governing changes in rural areas must implemented if more favorable poverty alleviation and conservation outcomes are to be accomplished. New guiding principles must aim to strengthen the control of the rural poor over natural resource wealth and provide sustained support such that the rural poor can use those resources more productively and sustainably. We propose that the following principles serve as the basis for establishing economic and institutional policy in rural areas of developing countries:

protecting the access of rural poor to environmental resources; expanding the control over and access of the rural poor to environmental

resources; redistributing revenues derived from natural resources to the rural poor; increasing redistribution of revenues from private companies to rural

communities; establishing and broadening co-management regimes for natural resources

between private companies, the state, and rural communities; providing inputs and targeted supports, such as credit, infrastructure, technical

and marketing support, and education to rural producers.

These principles arise from the specific experiences of the three countries considered in this publication. Other principles, particularly regarding governance and human rights, must accompany those suggested above to create a full complement of guiding principles that should condition the development of the emerging economic order. This essay concludes, therefore, with a call to the growing number of environmental, human rights, and development groups to reach beyond our particular institutional agendas and to agree on common principles that will guide our efforts to place the economic system under greater public scrutiny and control.

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