Tanzania Comoros

COUNTRY REPORT

2nd quarter 1996

The Economist Intelligence Unit 15 Regent Street, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 40 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through subscription products ranging from newsletters to annual reference works; through specific research reports, whether for general release or for particular clients; through electronic publishing; and by organising conferences and roundtables. The firm is a member of The Economist Group.

London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 15 Regent Street The Economist Building 25/F, Dah Sing Financial Centre London 111 West 57th Street 108 Gloucester Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, USA Hong Kong Tel: (44.171) 830 1000 Tel: (1.212) 554 0600 Tel: (852) 2802 7288 Fax: (44.171) 499 9767 Fax: (1.212) 586 1181/2 Fax: (852) 2802 7638

Electronic delivery EIU Electronic Publishing New York: Lou Celi or Lisa Hennessey Tel: (1.212) 554 0600 Fax: (1.212) 586 0248 London: Moya Veitch Tel: (44.171) 830 1007 Fax: (44.171) 830 1023 This publication is available on the following electronic and other media: Online databases CD-ROM Microfilm FT Profile (UK) Knight-Ridder Information World Microfilms Publications (UK) Tel: (44.171) 825 8000 Inc (USA) Tel: (44.171) 266 2202 DIALOG (USA) SilverPlatter (USA) Tel: (1.415) 254 7000 LEXIS-NEXIS (USA) Tel: (1.800) 227 4908 M.A.I.D/Profound (UK) Tel: (44.171) 930 6900

Copyright © 1996 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author’s and the publisher’s ability. However, the EIU does not accept responsibility for any loss arising from reliance on it. ISSN 0269-6776

Symbols for tables “n/a” means not available; “–” means not applicable

Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK 1

Summary

Tanzania, Comoros 2nd quarter 1996

June 3, 1996

Tanzania Political and economic structures Pages 3-4

Outlook: The political deadlock in Zanzibar will remain a serious problem for the president and will harm relations with donors until a solution is found. On the mainland, Mr Mkapa faces a difficult task in fighting entrenched corruption and mismanagement, and in overhauling the party state apparatus. His drive against the worst bureaucratic excesses will win him friends among the donors, but few within the ruling CCM. Tight budget targets, if adhered to, will help reduce inflation and represent a major step towards macroeconomic stability. Depending upon the gravity of future developments in Zanzibar, a renewal of IMF lending can be expected under an ESAF, which may in turn trigger a much-needed restructuring of external debt. Following a period of rather surprising strength against the dollar, the shilling will depreciate swiftly, averaging TSh680:$1 in 1997. Pages 5-8

Review: Mr Mkapa has finally acknowledged the potentially dangerous nature of the political stand-off in Zanzibar, after having spent several months avoiding the issue. An increasingly hard line from donor governments may have helped his concentration. The opposition CUF has been controlling the news agenda amid allegations that its supporters, mostly from the northern isle, Pemba, have been persecuted by the CCM administration of the Zanzibari president. Among many diplomatic initiatives, Mr Mkapa has initialled the protocol setting up the East African Cooperation secretariat and concrete measures have been taken to boost regional integration with Kenya and Uganda. Macroeconomic stabilisation has continued as the impact of the presidential election recedes. Money supply has actually contracted, despite low interest rates. The inflation rate is coming down and the shilling has resumed its downwards path against the dollar. Fiscal reform and a clearout of corrupt officials have been signalled and several parastatal boards have been dissolved. A survey has underlined the extent of poverty. Coffee output has risen, although speculative traders have been caught out by falling prices. Canadian involvement has continued in the mining sector, although the internal wrangling at Sutton Resources has diverted attention from elsewhere. Tender bids have been invited for the Songosongo pipeline contract. The South Africa- owned Tanzania Breweries Limited goes from strength to strength, while the Parastatal Sector Reform Commission is adopting a higher public profile, and tourism is being accorded higher governmental priority. The transport sector has suffered strikes, power cuts and a disaster on Lake Victoria. The EIU’s index of export unit values has stabilised after falling in late 1995. Multilateral debt service remains the country’s biggest external burden. Pages 8-22

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 2

Comoros Political and economic structures Pages 23-24

Outlook: France, Comoros’ main foreign partner, will probably build a reasonable working relationship with the newly elected president, Mohamed Taki Abdulkarim. Fiscal austerity and further privatisations will continue to head the donors’ wishlists. Pages 25-26

Review: Mr Taki has won the presidency after several defeated first-round candidates transferred their allegiances to him, against Abbas Djoussouf, criti- cised as being “France’s candidate”. This loyalty has resulted in a number of them being offered cabinet positions. Mr Taki has initiated political reforms, but has not yet arrived at a distinctive economic policy. The economic situation is still dire, although revenue collection has reportedly improved. The privatisation programme remains sluggish. Pages 26-32

Statistical appendices Pages 33-36

Editors: Andrew Manley; Gregory Kronsten All queries: Tel: (44.171) 830 1007 Fax: (44.171) 830 1023

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 Tanzania 3

Political structure: Tanzania

Official name: United Republic of Tanzania

Form of state: republic, formed by the 1964 union of Tanganyika and Zanzibar

Legal system: based on English common law, the 1977 Union and 1985 Zanzibari constitutions, as amended

National legislature: National Assembly, comprising 269 members (232 directly elected and 37 women appointed); elected members are chosen by Union-wide adult suffrage every five years; Zanzibar has its own House of Representatives of 59 members (9 women appointees) legislating on internal matters

Last elections: October-November 1995 (legislative and presidential)

Next elections: 2000 (legislative and presidential)

Head of state: president, elected by universal adult suffrage every five years

National government: the president, vice-president and Council of Ministers; last reshuffled November 1995

Main political parties: the ruling Chama Cha Mapinduzi (CCM); Civic United Front (CUF); National Convention for Construction and Reform (NCCR-Mageuzi); United Democratic Party (UDP); Chama Cha Demokrasia na Maendeleo (Chadema)

President Benjamin Mkapa Vice-president Omar Ali Juma Prime minister Frederick Sumaye

Key ministers agriculture & cooperatives Paul Kimiti community development, women’s affairs & children Mary Nagu communications & transport William Kusisla defence Edgar Majogo education Juma Kapuya energy & minerals William Shija finance Simon Mbilinyi foreign affairs Jakaya Kikwete health Zakia Meghji home affairs Ali Ameir Mohammed justice & constitutional affairs Bakari Mwapachu labour & youth development Sebastian Kinyondo lands, housing & urban development Gideon Cheyo natural resources & tourism Juma Ngasongwa science, technology & higher education Jackson Makweta trade & industry Abdallah Kigoda water & livestock development Pius Ng’wandu works Anna Abdallah

Governor of the central bank Idris Rashidi

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 4 Tanzania

Economic structure: Tanzania

Latest available figures

Economic indicators 1991 1992 1993 1994 1995a GDP at market pricesb TSh bn 626 766 962 1,249 n/a Real GDP growthb % 0.7 2.6 4.4 3.5 3.5 Consumer price inflationb % 22.2 23.1 25.3 34.1 27.0 Populationc m 25.2 25.9 26.7 27.4 28.2 Exports fob $ m 362 401 462 519 550 Imports cif $ m 1,285 1,314 1,300 1,505 1,450 Current account $ m –451 –422 –409 –390 –400 Reserves excl gold $ m 203.9 327.3 203.3 332.1 270.2d Total external debt $ m 6.689 6,781 6,963 7,442 n/a External debt-service ratio % 39.8 40.8 29.2 20.4 n/a Coffee productione ’000 tons 37.7 52.2 56.3 48.5 49.0d Cotton (lint) productiond ’000 tons 49.2 90.7 105.3 50.7 37.0 Manufacturing indexb (1985=100) 117 110 110 101f n/a Exchange rate (av) TSh:$ 219 298 405 510 575d

May 31, 1996 TSh565.0:$1

Origins of gross domestic product 1994b % of total Components of gross domestic product 1993b % of total Agriculture, forestry & fishing 57.1 Private consumption 81.6 Trade & hotels 15.3 Government consumption 8.5 Manufacturing 7.6 Gross fixed capital formation 45.4 Transport & communications 6.5 Increase in stocks 5.2 Construction & utilities 5.2 Exports of goods & non-factor services 31.3 Mining 1.3 Imports of goods & non-factor services –72.2 GDP at factor cost incl others 100.0 GDP at market prices 100.0

Principal exports 1994 $ m Principal imports 1994 $ m Coffee 115.2 Machinery & transport equipment 545.1 Cotton 104.8 Textiles & clothing 231.5 Manufactures 76.8 Petroleum & products 148.6 Cashew nuts 52.0 Food & drink 127.0 Minerals 30.2

Main destinations of exports 1994g % of total Main origins of imports 1994g % of total Germany 10.1 UK 10.4 Japan 9.1 Saudi Arabia 10.1 Belgium-Luxembourg 7.7 Kenya 8.8 UK 6.3 Japan 6.8 India 6.3 Germany 6.1 a EIU estimates. b Mainland only. c EIU estimates based on census results. d Actual. e Crop years ending June. f Average January-June. g Based on partners’ trade returns; subject to a wide margin of error.

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 Tanzania 5

Tanzania

Outlook

The Zanzibar problem In late May there were signs that the president of Tanzania (the Union between remains unsolved mainland Tanganyika and the isles composing Zanzibar), Benjamin Mkapa, was adopting a new policy of engagement with the controversial Zanzibari president (and vice-president of the Union), Salmin Amour. This trend suggests four possible outcomes to the political deadlock which has paralysed the isles since the presidential elections of October 1995.

• Mr Amour will be forced to stand down in favour of a cross-party administration under a neutral, respected figure, possibly from the legal world.

• The Zanzibari president will be obliged to offer some form of accommod- ation to the opposition Civic United Front (CUF), possibly co-opting a few personalities into government. This would provide an opportunity to split the opposition party, but the CUF has so far presented a formidably cohesive front.

• Enough has already been done to consign the episode to history and the CUF campaign will run out of momentum (and funds), leaving an uneasy stalemate.

• At the very worst, Zanzibar descends into civil war, complete with the tragic irony of an underground opposition militia seeking succour from the super- rich sheikhdoms of the Gulf, where CUF-supporters from Pemba island retain close family ties.

The first of these may have earlier been an option—and Mr Amour’s expulsion from the ruling Chama Cha Mapinduzi (CCM, the party of government in both Zanzibar and the wider Union) might still be a mechanism for achieving it; there is a school of thought which argues that, deprived of political party backing, he would no longer be eligible for the presidency, but this would have to be applied retrospectively, as the constitutional clause applies to candidates for the presidency and the position is unclear regarding existing incumbents. The second would be anathema to Mr Amour, but in practice could conceivably neutralise the CUF: the opposition party might feel unable to refuse an invitation to coalition government and would possibly come under diplomatic pressure to do so with a good grace. The donor community would then eagerly back off (as long as the reported violence and intimidation against Pembans and other CUF supporters ceased) and the issue would slip quietly down the international agenda. This or the third outcome seem the most likely at this stage.

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 6 Tanzania

Mr Mkapa will work to On the mainland and within the Union-wide CCM hierarchy the likelihood is consolidate his position— that Mr Mkapa will see off the challenge of those disgruntled senior members who resent their exclusion from cabinet and the continuing unofficial influence of Tanzania’s founding president, Julius Nyerere. Mr Nyerere’s successor and Mr Mkapa’s predecessor as head of state, Ali Hassan Mwinyi, is content to be retired and free from further investigation. He has stood down early from his chairmanship of the CCM and Mr Mkapa is expected to succeed him in this post at an extraordinary congress in Dodoma on June 22. Mr Mkapa may, however, need Zanzibari CCM votes, as he did for his nomination as presidential candidate in 1995. This in turn could complicate further the situation in the isles.

—while watching his back As the recent rash of senior retirements “in the public interest” continue, however, the president will acquire an ever-lengthening list of influential ene- mies. They will plot against him, and he has a long and dangerous task ahead in attempting to supplant the political culture of corruption. He can afford to move neither too fast nor too slowly, and pressure from foreign donors for swift and visible results will have to be applied judiciously and with finesse; donor embassies will not wish to wake up one day to find that Mr Mkapa has been toppled by a cabal of CCM “dinosaurs”.

A tight budget is According to estimates reproduced by a weekly newspaper, Business Times, in planned— April, the 1996/97 public expenditure projections, which are being prepared for approval of parliament (and the IMF), target a 7% increase in spending compared with the 1995/96 projected outturns. Even as average annual inflation eases (probably into the 15-20% range by the end of the coming 1996/97 fiscal year), this level of nominal spending would represent a significant decline in real terms (the headline in Business Times ran “Next year’s budget spells doom!”). If this is confirmed as the budgeted target, it is unlikely to be achieved. However, strong revenue growth may be expected to continue as the crackdown on customs and tax evasion brings wider compliance, and the overall financing requirement should be consistent with macroeconomic stability. Otherwise the broad macroeconomic outlook is little changed from last quarter: real GDP is expected to expand by a comparatively weak 4% in 1996, rising to 4.5% in 1997, as the pace of industrial growth is maintained by mining investment, and agriculture continues to adapt to market liberalis- ation. Annual average inflation should come down to just under 20% in 1997 as the effects of the tight fiscal and monetary stance continue to be felt, despite a rise in the costs of imports as the shilling depreciates (see below).

Forecast summary (domestic)a (% real change) 1994b 1995c 1996d 1997d GDP at factor cost 3.5 3.5 4.0 4.5 of which: agriculture 3.5 4.0 3.5 4.0 industrye 2.0 2.0 5.0 5.0 services 4.0 3.0 4.5 4.0 Consumer prices 34.1 27.0 22.0 19.0

a Mainland only. b Actual. c EIU estimates. d EIU forecasts. e Includes mining and construction.

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 Tanzania 7

—to secure IMF support— Since Tanzania last drew IMF credit in 1992, there have been so many false dawns in relations with the Fund that it is as well to cast a wary eye around now (as the two parties are poised once again to reach an agreement) and consider what could go wrong this time. The answer is clear: Zanzibar. If the worst-case scenario sketched above were to occur, Tanzania would become a politically difficult place for the Fund to lend to.

Assuming this does not come about, a disciplined and credible budget will trigger negotiations that should rapidly result in the granting of an Enhanced Structural Adjustment Facility (ESAF) of some $200m. There should also follow a somewhat happier Consultative Group meeting of Tanzania’s donors than that held last year, and overdue debt restructuring at the Paris Club would be in prospect later in the year. The finance minister, Simon Mbilinyi, has the reputation of being a shrewd, realistic political survivor, and has probably realised that this is the only advisable route to take under current circumstances.

—and prop up the balance There have been some rather unlikely estimates of exports reaching well above of payments— $600m, but no reliable final trade figures for 1995 have yet reached the public domain. For the moment the EIU retains its expectations for 1995-96, while in 1997 imports are expected to climb, as renewed balance-of-payments support from major donors provides much-needed external-sector breathing space, as might a possible major debt restructuring. Minerals and manufactures will compensate for stagnant exports of coffee and cotton.

—as the shilling is driven Although the shilling has recently returned to the downwards trend required to down prevent its further appreciation in real terms, the currency is likely to average no weaker than TSh590:$1 this year, before depreciating sharply to average some TSh680:$1 in 1997, probably as a result of open-market operations by the Bank of Tanzania (BoT, the central bank). This will provide a greater impetus to exporters than has existed recently, although Tanzania’s regional trade pros- pects depend largely upon the strength of the Kenyan shilling; if this too depreciates, any comparative advantage on basic manufactures could be wiped out.

Forecast summary (external) ($ m unless otherwise indicated) 1994a 1995b 1996c 1997c Merchandise exports fob 519 550 525 525 of which: coffee 115 150 120 100 cotton 105 80 70 80 manufactures 77 60 70 90 Merchandise imports cif 1,505 1,450 1,550 1,600 Current-account balance –390 –400 –350 –400 Average exchange rate (TSh:$) 510 575a 590 680

a Actual. b EIU estimates. c EIU forecasts.

Multilateral debt relief is A new and potentially revolutionary debt-reduction strategy for poorer and a distant prospect highly indebted less developed countries (LDCs), has been outlined by the IMF and World Bank, and is on the agenda at the G7 summit due to be held in late June. Under the plan, multilateral debt could, for the first time ever, be re- scheduled, consolidated, and possibly even written off. The potential benefits

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 8 Tanzania

are great for a country in Tanzania’s position; over $2.6bn of its total $7.4bn external debt was owed to multilateral creditors at the end of 1994, a situation which will not have improved since. To qualify for multilateral debt relief, however, Tanzania would have to complete a three-year IMF programme, secure forgiveness of 90% of obligations on its eligible bilateral debt in the subsequent three years, and still then be adjudged to be suffering an unsustainable burden on Bretton Woods criteria. Any eventual write-off is therefore a long way off. Indeed, there is yet to emerge any indication of quite how the eventual forgiveness of multilateral debt would be technically handled in the books of the lending institutions themselves.

Gross domestic product Real exchange rates (c) % change on previous year 1990=100 6 120 Tanzania KSh:$ 5 Africa R:$ 110 4

3 100

2 90 TSh:$ 1

80 0 1993 94 95(a) 96(b) 97(b) (a) Estimates. (b) Forecasts. (c) Nominal exchange rates adjusted for changes in relative consumer prices. Sources: EIU; IMF, International Financial Statistics; World 1990 91 92 93 94 95(a) 96(a) Economic Outlook.

Review

The political scene

Busy, and avoiding the big The Union president, Benjamin Mkapa, has been a busy man in recent weeks, issue— dashing about the region on all manner of diplomatic initiatives, fighting back-room battles with disgruntled Chama Cha Mapinduzi (CCM) conserv- atives at home and, above all, ignoring the festering political crisis in the isles of Zanzibar, in the apparent hope that it will all cool down and be quietly forgotten.

In mid-February, during an audience with newspaper editors, Mr Mkapa was asked to summarise the events of his first 100 days in office. He spoke of everything from the situation of Rwandan and Burundian refugees in the north to crop harvests, but made no mention of the impasse in Zanzibar, the single biggest issue facing his administration, and one with considerable implications for the future of the 32-year-old Union. In late May, however, he gave evidence of a new willingness to tackle Zanzibar, as donors began to freeze aid to the isles (see below and The economy).

—Mr Mkapa is “surprised” Elsewhere, Mr Mkapa has declared himself “surprised” at the response of the by events in Zanzibar— Civic United Front (CUF) and its Zanzibari presidential candidate, Seif Shariff

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 Tanzania 9

Hamad, to the declared results of last October’s elections in the islands. The CUF has overwhelming support on the northern isle of Pemba and split the vote in Zanzibar town and elsewhere on Unguja.

That the CCM reversed a narrow victory for Hamad in the presidential vote and declared it a win for its own candidate, Salmin Amour, has been demonstrated beyond any reasonable doubt (see below). Mr Mkapa’s stance thus suggests two equally unattractive explanations: either the man pledging to bring honesty and openness to Tanzanian government is being disingenuous, to put it mildly, or he is himself a sadly blinkered victim of misinformation put out by the CCM party machine.

—where CUF works hard In the meantime, with modest resources at its disposal, the CUF has energeti- to seize the agenda— cally and effectively pursued a campaign of agitation at home allied with lobbying abroad to ensure that the issue is not swept under the carpet. What may have surprised the president and the CCM most is the CUF’s capacity for coherent organisation and its impact on international opinion.

—and describes the Hamad was in London at the beginning of May, lobbying parliamentarians anatomy of a rigged and the press and circulating a meticulously compiled document, Why CUF election does not recognise Salmin Amour’s Victory. Its authors restrain themselves from out-and-out polemic to provide a detailed chronological account of the events of last October, down to precisely how many votes were reallocated in each ward between the first partial announcement of the result on the evening of October 24 and the adjusted “official” figures of October 26 (4th quarter 1995, pages 9-12).

According to Hamad, with thousands of Pembans driven out from Zanzibar town and the rest of the main island, Unguja, splits are emerging within Mr Amour’s own administration. In mid-April the isles’ trade and industry minister, Taimur Swaleh Juma, resigned citing poor health. One of the former minister’s relatives had been held after power facilities were sabotaged by alleged CUF supporters at the beginning of the month, but his decision has elsewhere been described as that of a moderate jumping ship before it starts to sink. It took Mr Amour an entire month to find a replacement for Mr Juma.

Human rights abuses Mr Mkapa visited Unguja at the end of April, to deliver a speech in which he provoke presidential described the October election result as history and gave his backing to action— Mr Amour. A week later the isles president was belatedly sworn in as a member of the Union Council of Ministers. These events were greeted with anger by CUF militants, while the isles’ police and CCM zealots took them as their cue for a heavy-handed crackdown on dissenters and Pembans generally (virtually all Pembans, in Pemba or elsewhere, support the CUF). The CUF alleges that 600 of its supporters were arrested following Mr Mkapa’s presidential visit and that violent intimidation was widely practised.

As Scandinavian and other donors began to exert heavier pressure over the issue, Mr Mkapa made what may turn out to be a significant gesture at the end of May when he exercised Union prerogatives in the areas of security and home affairs to retire Zanzibar’s commissioner of police, Musa Hamisi, and four of his senior assistants, in the public interest.

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 10 Tanzania

—and mark a turning This move—implemented over the head of his home affairs minister, the CCM point deputy secretary-general for Zanzibar, Ali Ameir Mohammed—marked a sud- den shift in policy for the president, who had previously studiously avoided the issue. The president’s hands were tied in part by his own struggles within the CCM, but also by the possibility of Mr Amour splitting the party (and perhaps even going for broke with a revival of the pre-CCM Afro-Shirazi Party in Zanzibar) and by the uncertain role of the “Father of the Nation”, Julius Nyerere. The founding president is known to have favoured the formation of a coalition government in the isles, and is said to have been stung by a series of personal insults since delivered by Mr Amour. Mr Nyerere attended meetings of the CCM central organs in Dodoma in March, at which it was expected that he would force the Zanzibari president to back down, but the impasse persisted, leading to accusations in the mainland opposition press that the political veteran had lost his touch. Mr Nyerere has in any case always been wary of getting mixed up in the cut-throat world of Zanzibari politics: he once famously said that, given his way, he would tow Zanzibar 1,000 miles off the coast. The CUF has asked that Mr Nyerere bring the two sides together, but the former president has been up-country in Mwanza with his hands full as part of his initiative to bring peace to Burundi. Meetings through April between the Burundian factions achieved little progress.

Mr Mkapa has to watch The president is also hemmed in by the internal dissent of the so-called conserv- his own back ative “dinosaurs” among those senior officials who were not called into his new government. The former prime minister (and current CCM vice-chairman), John Malecela, and the party’s secretary-general, Lawrence Gama, represent one such centre of influence. Recognising that his party post would not see him into cabinet under the new, post-Mwinyi order, Mr Gama stood for election to parliament, but still was not chosen. Earlier, in December 1994, Mr Malecela was effectively sacked and put out of the pre-election presidential running by Mr Nyerere (1st quarter 1995, page 6). Mr Nyerere then backed Mr Mkapa for the party’s nomination. Both Mr Malecela and Mr Gama were promoted under the former president, Ali Hassan Mwinyi, and both sought to weaken his successor by campaigning for their former patron to retain his chairmanship of the CCM after next year’s party elections. However, Mr Mwinyi is stepping down early and Mr Mkapa will probably succeed him.

“East African On March 14 Mr Mkapa joined his Kenyan and Ugandan counterparts in Cooperation” gets under the northern city of Arusha to sign a protocol establishing the East African way— Cooperation (EAC) secretariat. After a period of wrangling between the president of Kenya, Daniel arap Moi, and the Ugandan president, Yoweri Museveni, which Mr Mkapa can congratulate himself on helping bring to an end, a Kenyan, Francis Muthaura, was appointed as the EAC’s secretary-general.

After the years of mistrust that followed the collapse of the East African Community in 1977 (the retention of the old initials will no doubt bring all manner of aged china, uniforms and stationery back into circulation) some steps have already been taken towards the re-establishment of old ties. Since the beginning of the year, passenger services have resumed across Lake Victoria between the Tanzanian and Kenyan ports of Mwanza and Kisumu. Trains have run again between Voi in Kenya and Moshi. The partners’ bureaux of standards

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 Tanzania 11

have even begun the grey task of harmonisation that will facilitate trade and investment across their borders.

—but disaster strikes on An immediate and horrifying blow to such hopes came in late May when an Lake Victoria overcrowded Lake Victoria ferry, the Bukoba, sank with the loss of more than 900 lives. A bungled rescue attempt added to the death toll, and the alleged unseaworthiness of the vessel has created a scandal in Belgium, which donated the Bukoba to Tanzania in 1979. Although the ferry was on an internal journey between the ports of Bukoba and Mwanza, the incident cruelly illustrates the problems of safety, infrastructure and regulation that all three EAC countries will face in the quest for increased circulation of people and goods.

The Rwandan tribunal Meanwhile, the UN’s Rwanda war-crimes tribunal has only just got properly is delayed under way. The first indictments were issued in December (1st quarter 1996, page 10), but the first two suspects could not initially be extradited from Zambia for lack of cells in which to hold them at the Arusha conference centre. Once this problem was solved, the first session of the tribunal was held on May 30, at which two alleged ringleaders of the genocide of Tutsis and moderate Hutus in 1994 pleaded not guilty to all charges brought. The session was adjourned to October while further evidence is compiled. Only ten people have so far been charged in the two years of the tribunal’s existence.

Mr Mkapa maintains a When he has not been busying himself with the EAC or Rwanda-Burundi, busy diplomatic schedule Mr Mkapa has maintained a hectic diplomatic schedule in other directions. Having assured the Sudanese ambassador of Tanzania’s support for any peace initiative there on February 25, Mr Mkapa arrived in Harare for a two-day official visit the day after. He then visited Lusaka, and spoke in support of stronger ties with Zambia. In April the president travelled to Maputo, for a three-day visit to Mozambique, before moving on to Malawi on April 18.

The foreign minister, Jakaya Kikwete, has described the new emphasis of Tanzania’s foreign policy as being that of “economic diplomacy”, and indeed direct cash benefit may derive from having a regional statesman at the helm. Coincidentally, recent historical analysis of Japanese aid to Tanzania suggests that Tokyo’s support for the country during South Africa’s latter apartheid years was driven by the desire to avoid censure from Tanzania for continued trade links with Pretoria.

Steps are taken to protect Even as a Kenyan medic, Professor Arthur Obel, was giving a controversial AIDS sufferers public lecture in Nairobi in March on his claimed cure for the HIV virus, the Tanzanian health ministry was unveiling policy proposals for the protection of AIDS sufferers from discrimination in employment, housing, education and other areas of life. To considerable international scepticism, Professor Obel originally claimed that his drug, “Pearl Omega”, had reversed HIV-positive status in tests, and, according to press reports, Kenyans have been paying KSh30,000 ($515) for six-month courses of treatment. In Tanzania, as for the bulk of Kenyans, such an option would be prohibitively expensive even if there were any hard proof that it was effective. Instead, the Tanzanian health ministry is focusing on the immediate need to assist the HIV-positive community (perhaps one in ten of the population, judging by recent infection rates among

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 12 Tanzania

blood donors) to live with the virus. As revealed to the regional weekly newspaper, The EastAfrican, by the National AIDS Control Programme (NACP), the draft policy disallows HIV screening for employment, adding that: “HIV infection shall not be cause for termination of employment.” Discrimination against HIV and AIDS sufferers is already widespread in the country and the policy initiative is timely.

The economy

The economy stabilises— The Tanzanian macroeconomy has come to heel over the first half of this year, efforts are being made to entrench the improvements with institutional changes aimed at securing fiscal discipline in the medium term, and conditions are being created under which the country might see some lasting benefit from further structural reform.

• Budgetary receipts exceeded targets agreed in the IMF “shadow programme” over the early months of the year. TSh46bn ($86m) was collected in March, compared with a targeted TSh38bn.

• The government has managed to clear much of its debt to the Bank of Tanzania (BoT, the central bank). According to the central bank’s governor, Idris Rashidi, TSh23bn ($44m) was repaid in March, and the trend continued into April.

• Money supply has actually begun to contract in absolute terms. The broad M3 measure recorded a 5.4% fall in March, despite falling interest rates.

• Inflation is still well above 20%, while its pace in neighbouring EAC countries has been constrained to single figures, but the rate is on a clear downward trend. Mr Rashidi’s prediction of a single-figure rate in 1997 appears fanciful, however.

—with some unhelpful These trends are not entirely uncontroversial. Tight monetary policies and the results— problems of the National Bank of Commerce (NBC)—which was selling willy- nilly every dollar that came its way to ease its liquidity position—contributed to an appreciation of the shilling, which was at levels of around TSh535:$1 in March, before sliding sharply to around TSh560:$1 in mid-April. Although it eased upwards pressure on prices, this was unhelpful to the export sector. The credit squeeze has also had the obvious and direct effect of making loan finance hard to come by, especially for public enterprises and agricultural cooperatives. In recent weeks, however, a restrained supply of dollars to the interbank forex market seems to have returned the currency to a path of overdue depreciation (see below).

—and other oddities More mystifying than the shilling’s recent strength is a money supply that is recording monthly contractions (not a decline in the pace of expansion, but a fall in absolute terms) while interest rates have been coming down. Apart from the possibility of seasonal factors coming into play, money stocks have been reduced as a policy measure, and in part by the weekly Treasury-bill auctions. Billions of shillings of paper has been unloaded week-in and week-out, and yet the market keeps bidding higher and higher for it. The point here is that, as

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 Tanzania 13

Comparative interest rates, new commercial banks have begun operations, the market itself has rapidly 1996 fleshed out and the declining T-bill yields—which have in turn begun to pull % 35 down deposit rates of interest—are a reflection of this maturity. Talk has now turned to the prospect of establishing a secondary market, into which success- Treasury bills, yield 30 ful bidders for T-bills will be able to resell.

Fixed deposit 25 After its recent strength, the currency stood at TSh578:$1 on May 22. Adjusting for the inflation differential between Tanzania and its main trading partners (a 20 disparity of above 20%), the pace of depreciation during the first weeks of May Savings deposit represents a decline in the real value of the currency, which will be welcome 15 news for exporters.

Evolution of the exchange rate Jan Feb Mar Apr

Source: Business Times. 1995 1996 Nov Dec Jan Feb Mar Apr Mean exchange ratea (TSh:$) 597 582 563 554 556 563 Nominal appreciation (%) 4.4 2.6 3.4 1.6 –0.4 –1.2

a Month-end; simple average of bureaux de change and commercial banks mean buying and selling rates.

Sources: Business Times; EIU.

—Bank and bureau rates Over the same period, the foreign exchange market has also seen a narrowing converge of the gap between the rates offered by banks and forex bureaux. At the end of 1995 a dollar bought at the bureaux cost 5.8% more on average than one bought through a commercial bank. By the end of April average prices had converged to within 0.1% of each other.

From January 1 the bureaux have been barred from expanding into the trade- finance arena, in favour of the banks (1st quarter 1996, page 13). Only partially contained by this measure, bureau trade finance now continues informally via sales of forex ostensibly intended for foreign travel.

Inflation slows— Fiscal restraint, tighter monetary conditions and the recent strength of the shilling (all trends that have tended to promote one another) have begun to impact upon consumer prices. In the year to March, prices faced by Dar es Salaam consumers rose by 26.5%. In the twelve months to December 1995, prices had risen by almost 30% nationally. Year-on-year inflation (to December) had reached 37% by the end of 1994 before Kighoma Ali Malima was removed as finance minister at the donors’ behest and a renewed effort was made to get the economy back on the rails.

National consumer price index

1994 1995 1996 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr % change (year on year) 36.9 36.1 27.6 26.5 29.6 26.5a a Based on Dar es Salaam survey only.

Sources: Bank of Tanzania; Reuters.

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 14 Tanzania

—but widespread poverty The abating pace of inflation notwithstanding, household incomes are so low persists as to trap millions of Tanzanians in conditions of absolute poverty. At the end of last year, two government statisticians concluded a review of household expenditure patterns which suggested that wage earners would have to receive a minimum of TSh98,800 ($170) per month to raise a household of average size out of statistically defined poverty. (A household devoting more than 60% of its income to foodstuffs was considered “poor”.) Following last year’s budget, the annual adjustment took the minimum wage—as paid to the lowest grade of public-sector employee—to TSh17,500 ($30) excluding allowances.

Fiscal reform is pivotal— Control of the fiscal system is pivotal both to macrostabilisation and to the release of IMF funds in support of further structural reform. To this end the Tanzania Revenue Authority is due for launch in July. In March the president retired ten senior customs officials (including the service’s acting commissioner) in the public interest. The finance minister, Simon Mbilinyi, stated that the officials had colluded with traders and clearing agents in tax fraud. The popular press has called for convictions; the Confederation of Tanzanian Industries has called for a general tax amnesty. Both groups are likely to be disappointed: the political cost would be too great in the former case; the economic cost and damage to relations with the IMF too great in the latter.

—and parastatal heads roll The new broom swept on with the dissolution of the boards of 19 parastatals and other public institutions in March. Unfortunately this bold step was not followed by the swift announcement of new appointees and several leading state industries have since been running on autopilot. Even the phone numbers at State House have been changed, part of the wider renumbering of Dar es Salaam exchange lines but also (it is said) because the president and his staff found that too many business people were privy to the full set of direct-line numbers. In a more recent development, a major printing fraud has come to light, involving counterfeit procurement orders, tax and excise receipts, and vehicle logbooks. According to the Paris-based Indian Ocean Newsletter, the government’s chief printer, Cassian Chibogoyo, thinks that this and other similar scams cost the government more than what the newsletter called “common-or-garden tax evasion”. More generally, the new head of the long- dormant but recently revived Anti Corruption Bureau (ACB), Alex Muganda, has made it clear that any attempt to whitewash the ACB’s findings from now on will lead to his public—and no doubt highly embarrassing—resignation. Mr Mkapa cannot afford such a debacle at present.

Donors block funds Against this background, relations between the Union government and donors for Zanzibar have continued to improve (1st quarter 1996, page 11), and in May Norway announced that Nkr47.5m ($7.3m) in balance-of-payments support withheld in 1995 was to be released. However, Oslo has meanwhile cast doubt upon approval of future phases of an electrification programme it is financing in Zanzibar due to a “lack of clarity on the situation” in the isles. Sweden has also put aid commitments to the isles on ice. Tanzanian newspapers quoted the Swedish ambassador, Thomas Palme, as saying that “present trends in the field of democratisation and respect for human rights in Zanzibar are not conducive to development cooperation”. This is an unusually blunt public message, and

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 Tanzania 15

reflects continuing donor anger at the conduct of the Zanzibari presidential elections in October 1995.

Agriculture

Coffee output rises According to estimates released by the Tanzania Coffee Board (TCB) during May, a little— output of the country’s principal export crop rose to 50,000-51,000 tons in the 1995/96 (July-June) season. The TCB put the 1994/95 crop at 49,000 tons, and predicts a decline in the coming season due to the poor short rains of last October-December.

—in a roller-coaster The 1995/96 season was a testing time for the recently liberalised coffee season— marketing system. Farmers were receiving TSh1,100 (just under $2) per kg for arabicas at the beginning of the season, when traders were selling into still-bullish TCB auctions in Moshi (Kilimanjaro Region). As the year wore on, however, world market and auction prices weakened and ex-farm prices fell to TSh700-800/kg at season’s end. In the process traders got their fingers burned; as many as 20 out of 70 operating in the town are thought to have gone under. “Those who came to make a quick buck and didn’t learn how to play the game have been wiped out,” the TCB’s managing director, Edward Sannda, told Reuters with evident relish. Falling dollar prices conspired with the appreciation of the shilling to undermine the cash business of the smaller private traders. As a by-product, a move into futures has been witnessed.

—in which the unions The formerly monopolistic cooperative marketing channels have, meanwhile, struggle struggled to compete with private traders. While the unions suffered sharply reduced access to credit from the cash-strapped state banks, funds from outside the state-owned system provided working capital for private buyers. Given the losses incurred this year, funds may be less readily risked in future, but many of the cooperative unions are in too poor a shape to offer an attractive alternative.

The National Bank of Commerce (NBC), the country’s dominant retail bank, raised $32m in syndicated cotton and other crop prefinance for the past season. Brokering the deal, Union Bank of Switzerland is reported to have raised the sum while originally seeking only $20m. Nevertheless, in the new era of harsh financial realities, the Shinyanga and Mara regional cooperative unions (both of them servicing major cotton-growing areas) were denied NBC finance. In February the bank’s managing director, Donald Kamori, told the independent weekly, the Business Times, that the two unions had large outstanding debts and were “too exposed” to merit additional funding. The NBC has in any case suffered great problems of its own in recent years and is not currently in a position to make any but the safest loans.

The coffee board eyes the Almost 80 years on from the country’s experience of German imperial rule, US market— Tanzania today has a remarkably heavy dependence upon the German market for its coffee. In 1995 exports to Germany accounted for 38% of overseas sales, while Germany and Japan between them took 60% of exports. However, as the speciality coffee market matures in the USA, and American coffee drinkers come to accept premium prices for the best arabicas, the TCB is planning to

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 16 Tanzania

compete with “back-yard” Latin American producers in the huge US market. Chagga coffee, grown by the northern ethnic group of that name, has a particular cachet among fashion-conscious northern hemisphere consumers. In April the TCB’s managing director shook off a Japanese buyer’s complaint of falling quality with a blunt denial of any such thing, and instead packed a delegation off to a producers’ congress in Minneapolis to raise awareness of Tanzanian coffees, as part of a marketing effort supported by the EU.

Coffee exports by variety and destination

1994 1995 Tons % Tons % Mild arabicas 25,432 70.9 31,070 71.5 of which to: Germany 9,415 26.2 14,355 33.0 Japan 9,104 25.4 8,993 20.7 Netherlands 572 1.6 1,307 3.0 Hard arabicas 2,499 7.0 1,984 4.6 of which to: Germany 532 1.5 439 1.0 Robusta 7,940 22.1 10,430 24.0 of which to: Germany 3,037 8.5 1,732 4.0 Total 35,870 100.0 43,484 100.0 of which to: Germany 12,984 36.2 16,526 38.0 Source: Reuters.

—for its higher-value milds According to TCB figures released in March, mild arabica exports (of 2,920 tons in all) earned an average 102 cents/lb in January, hard arabicas averaged 94 cents/lb and robusta 86 cents/lb. In the last TCB auction of 1995, milds traded in the range of 118-154 cents/lb ex-warehouse. On the same day, the New York indicator price hovered around 90 cents/lb. The New York price is quoted cif (inclusive of freight charges to North America), giving some idea of the premium secured by the better Tanzanian grades.

Mining and energy

Canada remains With a delegation of Canadian mining industry representatives visiting in prominent in the mining February and the Ministry of Energy and Minerals presenting Tanzania’s poten- sector— tial at a World Bank-backed mining symposium in Montreal in May, Canada has been central to recent activity in the sector.

In February the South African Iron and Steel Corporation (Iscor) revealed that it had signed an agreement to acquire 51% of three gold permits owned by Pangea Goldfields (again of Canada). Pangea had already successfully sold on similar rights in other areas to Ashanti Goldfields Corporation of Ghana and to South Africa’s Randgold.

—as it has always been Canadian involvement in the Tanzanian mining industry goes back a long way. It was a Canadian former employee, JT Williamson, of another South African concern, Anglo American, who discovered and gave his name to the

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 Tanzania 17

Mwadui-Williamson diamond deposits that are still producing in Shinyanga Region today. According to the account of his career reproduced as an aside in the mining ministry’s otherwise technically detailed 108-page document Opportunities for Mineral Resource Development, Mr Williamson chose to find his own way and raise finance on his own terms for the development of the mine in the 1940s. Independent-minded Canadian prospectors have been to the fore again in recent weeks.

“Financiers fight, Under the headline “Financiers fight, Tanzania waits”, the London-based Tanzania waits”— newsletter, Africa Analysis, reviewed the internal tussles of Canada’s Sutton Resources at the beginning of April. An extraordinary general meeting and shareholders’ proxy vote over control of the company was held in Vancouver on April 11. A central theme of the wrangle between the camps of the chairman, James Sinclair, and the company president, Michael Kenyon, was how best to develop the Bulyanhulu gold deposits in Tanzania’s Shinyanga Region. Under Mr Sinclair’s direction, Sutton had been considering joint-venture partners in this project; Mr Kenyon and supporters felt that the strike should be developed by Sutton alone. In the meantime the Tanzanian authorities took a side seat, and the country waited to see just who would extract its gold (the government holds a minority stake itself).

—as Sutton and BHP part The April vote was claimed as a victory by both sides—neither camp was able to remove the other from the board—but Mr Kenyon’s management team stays in place and the go-it-alone strategy remains company policy. In the meantime Sutton has been busily raising additional capital to finance mining operations at Bulyanhulu itself.

Coincidental with the events at Sutton, an Australian-owned mining house, Broken Hill Proprietary (BHP), substantially withdrew from partnership with Sutton in the development of the Kabanga and Kagera South nickel and cobalt deposits in Kagera Region. Sutton was reported to be happy with this development and assessing concrete expressions of interest in the project received from several other major mining houses. There is no question of the company attempting to go it alone in developing this much larger project.

The Songosongo pipeline In mid-March prospective bidders were invited to apply for prequalification to goes to tender— bid for the Songosongo pipeline contract. Three km of flow lines will pipe gas from offshore wells to a processing plant on Songosongo Island in Lindi Region. A further 25 km of marine pipeline will bring processed volumes ashore, to join the 207 km of land pipeline that will run north to Ubungo power station on the outskirts of Dar es Salaam. Invitations to bid were expected to be sent out by the end of June. Ubungo is reportedly still facing generating difficulties after the installation of two aviation-fuel-powered turbines in 1995 and powercuts remain a feature of Dar es Salaam’s daily routine (see Transport and tourism).

—but power supplies A second 220-kw power line into Ubungo from Kidatu power station in the remain chancy— south was inaugurated in late May, according to Radio Tanzania, which hoped that power cuts would be “greatly reduced”, the implication being that power from Kidatu would be used to beef up Ubungo’s erratic output. Upheavals and presidentially inspired sackings at the state-run Tanzania Electric Supply

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 18 Tanzania

Company (Tanesco, a byword for mismanagement in recent years) will take time to feed through into greater efficiency, even on an optimistic reading. This, and the chaotic nature of Dar es Salaam’s telecommunications infrastructure, will continue to act as a drag on manufacturing and services in the economic capital, while the promised anti-corruption drive could, paradoxically, cause even more disruption in the short term than exists already.

—while a face-off brews The Songosongo project enjoys World Bank backing, but the multilaterals are over Tiper keen to see Dar es Salaam’s Tiper oil refinery closed down; they allege that it is decrepit and uneconomically small. The plant is likely to become a symbolic issue in negotiations between Tanzania and its Washington partners. Visiting the refinery at the end of February, the energy minister, William Shija, said that the government was not ready to see the company privatised (although this statement did not expressly deny the prospect of its closure).

Manufacturing

Beer is a privatisation The remarkable pan-continental success of South African Breweries (SAB) success continues in Tanzania, where the company’s 46%-owned Tanzania Breweries Limited (TBL) reportedly announced in March that it would pay a TSh4.4bn ($7m) dividend from 1995 post-tax profits of TSh8.4bn ($14.6m). A taxable profit is something of a novelty in the first place, but the Dar-based Business Times reports that the dividend will in addition be the first return on its capital that the Tanzanian government has enjoyed from TBL in 20 years. The government retains a 40% stake in the breweries, the equity buffer between it and SAB’s Indol International being held by the International Finance Corporation (IFC, the World Bank’s private-sector investment wing) and a handful of other development-finance bodies.

However, what SAB has bought in Tanzania, as elsewhere, is as much a market as a producer. Much of the existing plant and equipment has been scrapped and replaced, and now the company is advertising for agents in Kenya, with a view to developing an export market in Kenya and beginning to reverse the long- unbalanced bilateral flow of beer in trade with Tanzania’s northern neighbour.

“Education” is used to sell The TBL dividend will go some way to easing popular mistrust of a privatisation the PSRC process which, it must be said, generally leaves indigenous business firmly out in the cold. Some 1,300 jobs were cut at TBL in 1994-95, but the remaining workforce has seen the company’s lowest monthly wage rise from TSh9,000 (a derisory $22 at the time) to TSh55,000 since 1993. Tanzania’s neighbours have run advertising campaigns showing the surviving workforces of privatised industries happily collecting fattened pay packets and the country’s own Parastatal Sector Reform Commission (PSRC) began consciously to promote the privatisation process when it established a press office early this year.

In February the PSRC announced plans to launch a newsletter in order to “educate opinion leaders” on the hows and whys of public-sector divestiture. In the context of an economy in transition from state-led central planning, “education” is one step on from the mindset that proposes “re-education”, towards that which speaks in terms of plain “marketing”. It appears to be

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 Tanzania 19

dawning on the PSRC that privatisation needs to be sold as a concept. How- ever, the commission’s directorate clearly still sees this as a matter of drawing away the veil of ignorance that, in its terms, apparently blinds some poor, uneducated “opinion leaders” to the new truth that inheres in CCM policy. The single-party mentality lingers on.

Transport and tourism

A new tourism policy is In London in mid-April for the launch of a marketing campaign, the minister unveiled— for tourism, Juma Ngasongwa, announced that the country was overhauling its tourism policy after consideration of the proposals of the Integrated Tourism Master Plan prepared recently by Irish consultants (1st quarter 1996, page 16). The minister spoke of a $150m five-year programme, but gave few details. Meanwhile, back in Tanzania, the industry was organising itself around a new sectoral umbrella organisation, the Interim National Tourism Council, formed in Arusha earlier in the month. There remains some division between competing tour operators’ associations (the one grouping indigenous black-African business people, the other with a wider and bigger-business membership), but the new body pulls together most of the main players, including the influential chairman of the Tanzania Tourism Board, Hatim Karimjee.

—as Tanzania climbs According to World Tourism Organisation figures, between 1985 and 1994 continental rankings Tanzania clawed its way from sixteenth to seventh in the rankings of African tourism destinations by gross annual receipts. In the first division of African destinations are South Africa, Morocco and Tunisia (each enjoying 20% and more of continent-wide earnings), followed by Kenya, Mauritius—and even Ghana—ahead of Tanzania.

Alliance bids for partner Relations among the Tanzanian, Ugandan and South African partners in Africa airlines— Joint Air Services (AJAS), which flies under the name of Alliance, have cooled since the regional carrier took to the air last year (3rd quarter 1995, page 17). The interministerial agreement under which AJAS was formed apparently des- ignated the new airline as national carrier of the two East African states, but Air Tanzania Corporation (ATC, the original national carrier) and Uganda Airways continue to deny Alliance access to potentially lucrative routes, such as that to Dubai. In March AJAS’s secretary, Fred Ochieng-Obbo, told The EastAfrican that these markets constituted the “strategic value” expected from the regional partners in return for the money and equipment put in by South African Airways (SAA), which holds a 40% stake in the venture. SAA has now made formal expressions of interest in the purchase of both the Tanzanian and Ugandan national airlines, its equity partners in AJAS.

—as the lights go out at Dar es Salaam International Airport suffered an 18-hour power blackout in Dar International— early February when the Tanesco line failed during daylight. Incredibly, no technician could be found to work on the problem until the following morning and the country’s premier international gateway was closed down overnight as back-up generators failed to provide sufficient power to operate runway lighting.

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 20 Tanzania

—and Tazara workers go The Tanzania-Zambia Railway Authority (Tazara) line linking Dar es Salaam to on strike the Zambian copper belt came to a halt in April when 2,000 workers on the Zambian segment went on strike in support of a pay claim. Zambia Consoli- dated Copper Mines (ZCCM), whose metals represent the line’s main source of revenue and important business for the port of Dar es Salaam, switched ton- nages to Mozambican and South African termini. Stranded Tanzanians travel- ling by the parallel passenger service were forced to sell their belongings to feed themselves and find alternative ways home. It has not been a particularly good quarter for Tazara’s paying customers; more than 900 of them drowned when a Tazara-owned ferry sank on Lake Victoria in late May (see The political scene).

Foreign trade and payments

Export prices bottom out There was a further fall in the EIU’s index of Tanzania’s export prices in the final quarter of 1995, but the first months of this year showed signs that the decline in the average unit value of the country’s main commodity exports had bottomed out. From a peak of 158 in the third quarter of 1994, the combined index slumped to 117 in the final months of last year, driven downwards by coffee prices, but was steady at 118 two months later. In New York coffee trade, the “other milds” indicator price fell to 104 cents/lb in December, but climbed back to 124 cents/lb by February. Robusta quotations dipped later and recov- ered less. Ugandan robusta was trading in New York at 100 cents/lb in February. Index of export prices 1989-90=100 Some three-quarters of the Tanzanian crop is of mild arabica varieties.

160 Indices of export unit valuesa (1989-90=100) 140 1994 1995 1996 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr Feb 120 Coffee 195 185 176 153 127 131 100 Cotton 100 128 134 114 113 110 Tea 89 83 79 75 87 88 80 Tobacco 112 113 109 115 116 116 60 Gold 101 99 101 101 101 106 Combined indexb 145 148 145 128 117 118

Q3.Q1...Q1... a b 1993 94 95 In dollar terms. Average weighted according to 1989-90 export values.

Source: EIU. Source: EIU, based on IMF, International Financial Statistics.

Multilaterals move to On April 23 the joint IMF-World Bank Development Committee agreed on “a write off debts— set of principles and a framework to address the problems of the heavily indebted poor countries”—among them Tanzania, whose external debt touched $8bn at the end of March, according to figures from the Bank of Tanzania (BoT, the central bank) released in April. Reached as part of the round of IMF-World Bank spring meetings in Washington, the Development Committee’s agreement was cast in neutral terms. However, the underlying issue was not so much debt distress in general, but the contribution to this distress represented by the poor countries’ debts to the IMF and World Bank themselves. Prodded by non-governmental organisations, public opinion and some Western governments, the multilateral institutions have made their first tentative steps

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 Tanzania 21

towards a possible write-off of the outstanding obligations of some of their “best behaved” and poorest debtors.

Debt relief has been a faltering and inadequate process spanning a decade and a half since the international debt crisis broke in the early 1980s. Throughout, however, it has focused on national borrowing from bilateral and commercial donors (foreign governments and banks), with the inevitable result that the share of total debt represented by the multilateral agencies has risen steadily. In Tanzania’s case, borrowing from multilateral sources represented 28% of total external debt in 1980. The 1994 figure was 38%, and national data for mid- 1995 suggest a higher share still. More telling, however, is the preponderance of flows to the multilaterals in actual debt-service payments.

—as their loans emerge as Initially, it must be recalled, the debt crisis posed a threat to the entire financial the heaviest burdens— system of which the Bretton Woods institutions were the ostensible guarantors, outside the then-Soviet sphere of influence. That borrowers remained current in their payments to these “international” and “world” institutions thus appeared Disbursed external debt, June 30 1995 at times to be a matter of survival for the Bretton Woods system itself.

% of total, by creditor The World Bank in particular has also been fearful that any debt-reduction difficulties could harm its credit rating, and thus its ability to source cheap funds to finance concessional lending. More recently, the imperative has been that of securing the turnkey approval of the Washington institutions as a sine qua non of bilateral aid. Indeed, in recent months Tanzania has been accorded Swedish Multilateral 43 aid with which to meet its obligations to the World Bank (1st quarter 1996, Bilateral 47 page 12).

Commercial 5 Other private 5 The outcome of this combined effort to pay is that almost two thirds of the $174m that Tanzania paid in debt service during 1994 went to its multilateral creditors. Given the stated aims of Bretton Woods initiatives in sub-Saharan Africa, particularly the World Bank’s recent emphasis on poverty reduction and Source: Bank of Tanzania. related measures, such outflows are increasingly a source of privately expressed embarrassment among international financiers.

Multilateral and total debt service, 1994

$ m % Interest payments 68 39.1 Multilateral 34 19.5 Other 34 19.5 Principal repayments 106 60.9 Multilateral 79 45.4 Other 27 15.5 Total debt service 174 100.0 Multilateral 113 64.9 Other 61 35.1 Source: World Bank, World Debt Tables.

—and Tanzania is Having acknowledged that some borrowers might one day have a case for being reckoned to be “possibly granted debt relief by the multilaterals, the question becomes: “Who and on stressed” by its debt what terms?” For the moment the suggested framework would accord relief to a country with an “unsustainable debt burden”—defined as projected debt- service obligations still in excess of 20-25% of export proceeds ten years hence.

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 22 Tanzania

Eight countries (seven of them African) fall into this category. According to Bank and Fund forecasters, Tanzania’s debt-service ratio (payments due) should fall beneath the 20-25% range within five to ten years. (Regarding debt service actually paid, the $174m Tanzania paid its creditors in 1994 represented 20.4% of export earnings according to the World Bank, but something like twice this figure fell due that year, the balance being added to arrears). In the new vocab- ulary of debt crisis, Tanzania’s forecast debt-service burden translates into the somewhat laconic phrase, “possibly stressed”. Twelve countries are similarly categorised; nine of them are in Africa.

EIU Country Report 2nd quarter 1996 © The Economist Intelligence Unit Limited 1996 Comoros 23

Political structure: Comoros

Official name: République fédérale islamique des Comores

Form of state: federal republic

Legal system: based on Code Napoléon and the 1992 constitution

National legislature: Assemblée fédérale, deputies from each of the 42 electoral wards are chosen by universal adult suffrage for a term of two years

Last elections: March 1996 (presidential); December 1993 (legislative)

Next elections: expected 2002 (presidential) October 1996 (legislative)

Head of state: president, elected by universal suffrage for a term of five years

State legislatures: each island has a directly elected council which decides all local issues; there is also a governor on each island, previously appointed by the president, but in future to be elected

National government: the president and cabinet

Main political parties: Rassemblement pour la démocratie et le renouveau (RDR, the former presidential alliance); Front pour le redressement-national (FRN); Union nationale pour la démocratie aux Comores (UNDC); Chuma; Udzima; Uwezo

Head of state Mohamed Taki Abdulkarim Prime minister Tadjidine Ben Saïd Massoundi (Udzima) Minister of state territorial & town planning, housing Soigri Salim Madi

Key ministers agriculture, livestock, fishing, forests & environment Saïd Ali Mohamed economy & finance Prince Saïd Ali Kemal (Chuma) education, professional training, francophone affairs, culture, scientific research, youth & sport Mouzaoir Abdallah (Uwezo) foreign affairs, cooperation & external commerce Saïd Omar Saïd Ahmed (RDR) industry, labour & mining research Madi Ahamada (UNDC) interior & information Saïd Mohamed Saïd public health, population & social affairs Ibrahim Halidi Abdérémane transport & tourism, posts & telecommunications Omar Tamou (Udzima)

Governor of the Central Bank Mohamed Halifa

Economic structure: Comoros

Latest available figures

Economic indicators 1991 1992 1993 1994 1995a GDP at market prices Cfr bn 68.3 69.1 70.2 n/a n/a Real GDP growth % 2.1 1.6 1.9 0.9 1.2 Consumer price inflationb % 0.8 –0.4 –0.4 50.0 7.0 Population ’000 560 580 610 630 647 Exports fob $ m 24.4 21.5 21.5 11.3 11.3 Imports fob $ m 49.3 58.2 49.4 52.6 62.5 Current account $ m –1.4 –14.3 2.8 –9.4 –21.2 Reserves excl gold $ m 29.2 27.1 33.0c n/a n/a Total external debt $ m 180 188 184 189 n/a External debt-service ratio % 13.2 8.7 3.1 4.7 n/a Exchange rate (av) Cfr:$ 282.1 264.7 283.2 416.4 374.4d

May 31, 1996 Cfr389.4:$1

Origins of gross domestic product 1994 % of total Components of gross domestic product 1994 % of total Agriculture & fishing 36.9 Private consumption 74.4 Industry 11.3 Government consumption 21.1 Manufacturing 3.9 Gross domestic investment 21.3 Services 51.8 Exports of goods & non-factor services 17.8 GDP at market prices 100.0 Imports of goods & non-factor services –34.7 GDP at market prices 100.0

Principal exports 1994 $ m Principal imports 1994 $ m Vanilla 6.6 Rice 6.3 Ylang-ylang 2.2 Petroleum products 6.1 Cloves 1.2 Cement 4.0 Transport equipment 3.9

Main destinations of exports 1994e % of total Main origins of imports 1994e % of total Colombia 65.4 France 57.9 France 14.5 South Africa 10.5 USA 10.9 Kenya 6.1 Germany 1.8 Singapore 4.4 a EIU estimates. b As measured by the GDP deflator. c End-June. d Actual. e Based on trading partners’ returns; subject to a wide margin of error.

Comoros

Outlook

France will cope with Although wary of his supposed Islamist thinking and sceptical about his Mr Taki— commitment to the tough economic reforms sought by the IMF, France has adapted to the reality of Mohamed Taki Abdulkarim’s victory in the presidential election held in March. It seems likely that the French president, Jacques Chirac, will build a reasonable working relationship with Mr Taki—both are political veterans who have followed a flexible policy path in the long march to satisfy their ambitions of becoming head of state. Sources in Paris indicate that this year’s aid allocation, at FFr168.9m ($32.4m), will actually be higher than the FFr155.5m provided last year (see Foreign trade and payments). In any case, Mr Taki could hardly be viewed in a worse light than his predecessor, Saïd Mohamed Djohar, who had lost all credibility with Paris.

—who may have the Abroad, Mr Taki is widely regarded as a representative of traditional Comorian powerbase that Mr Djohar personality politics, while the defeated Abbas Djoussouf is viewed as someone lacked with a clearer, more reformist policy agenda. But it is arguable that Mr Taki, thanks to his strong personal following, is in fact better-equipped to carry through any difficult measures demanded by international donors. Mr Djoussouf does not ap- pear to enjoy the same level of grass-roots support in the villages and family networks that underpin Comoros’ social and economic structure. At least, Mr Taki may be better-placed to hold a consistent policy line than the erratic and enfeebled Mr Djohar, whose performance in office demonstrated the problems that result when a Comorian head of state lacks a strong personal powerbase.

Donors will want France and other key donors were impressed by the progress made by the continued austerity and outgoing prime minister, Mohamed Caabi El Yachroutu, towards getting nat- privatisation ional finances back in order, after the erosions suffered during the earlier years of the Djohar regime, when corruption was widespread. They now expect Mr Taki to pursue a similar course and are likely to impose strict conditions on budgetary aid. When the French cooperation minister, Jacques Godfrain, visited Comoros shortly after Mr Taki’s accession to office, he stressed the need for the government to reach agreement with the IMF and the World Bank (which will insist on continued structural adjustment measures). The supply of good- will will be strictly limited. Donors are likely to show little patience with any signs of slackness in the collection of revenue; they will probably exert heavy pressure for the inspection and revenue collection agency, Cotecna, to be given solid political backing in the collection of taxes from the powerful family trading businesses that have traditionally dominated import traffic. In spite of Mr El Yachroutu’s efforts, and the presence of Cotecna, many imports still evade customs duty control.

Gross domestic product Real exchange rates (b) % change on previous year 1990=100 3.5 210 Comoros 200 3.0 Cfr:$ Africa 190 180 2.5 170 2.0 160 150 1.5 140 130 1.0 120 R:$ 110 0.5 100 0.0 90 KSh:$ 1991 92 93 94 95(a) 80 (a) Estimates. (b) Nominal exchange rates adjusted for changes in relative consumer prices. Sources: EIU; IMF, World Economic Outlook. 1990 91 92 93 94 95

Review

The political scene

Voters are offered variety There were 15 candidates on the ballot for the first round of the presidential but little real choice election on March 6, as Comoros’ 290,317 registered voters prepared to select a successor to the outgoing head of state, Saïd Mohamed Djohar. In the previous presidential election, in 1990, there were only eight first-round candidates. The shambolic state of political institutions has now lowered hurdles that might discourage those with no real hope of victory, competing only to raise their profile and increase their bargaining power in the post-electoral scene: the size of the deposit payment for a candidacy has been reduced, and the absence of a functioning legislature has effectively removed the requirement to get nomination signatures from a minimum number of parliamentary deputies.

Those expected to achieve a significant vote were: Abbas Djoussouf, representing the Forum pour le redressement national (FRN) and a close ally of Mohamed Caabi El Yachroutu, head of the national union government; Mohamed Taki Abdulkarim of the Union nationale pour la démocratie aux Comores (UNDC); Omar Tamou of Udzima; the leader of Chuma, Prince Saïd Ali Kemal, who is the grandson of the last sultan of Comoros; Saïd Athoumane of the Rassemblement pour la démocratie et le renouveau (RDR); Mouzaoir Abdallah of Uwezo; and Saïd Ali Youssouf of the Rassemblement pour le changement et la démocratie (Rachade). Throughout the brief official campaign, traditional nationalist themes repeatedly cropped up, including corruption, national unity and demands for France to hand over the neighbouring island of Mayotte, a French overseas territory.

Mr Djoussouf is the target Although it kept troops in Comoros during the election campaign, to guard of populist criticism against a repeat of last year’s mercenary adventures (4th quarter 1995, page 28), France was careful to remain officially neutral. However, Mr Djoussouf was attacked by rivals as “France’s candidate”, because of his support for the Yachroutu government’s economic reforms. He also suffered from being seen

as the representative of the urban middle-class of the capital, Moroni. His lack of a popular support base in the villages contrasted with the position of traditional clan leaders such as Mr Taki. Mr Taki, known for his connections in the Middle East, presented himself as “Islam’s candidate”.

Polling is properly The UN sent an electoral specialist, a Malian, Abderhamane Niang, to Comoros organised and the vote is in November 1995, to help the government prepare for the election; after he deemed fair had completed a report for the UN, the government asked him to stay on. Foreign donors—among whom Mr Yachroutu was already well-regarded—took this as a sign of commitment to a fair vote. France, the USA, the UN, the EU, the Organisation of African Unity (OAU) and, curiously, North Korea, chipped in a combined $322,000 towards organising the poll; the government provided a further $185,000. About 60 international observers came, from France, the USA, the UN, the EU, Australia and—at the request of the government—the Arab League. With the run-down local administration having failed to provide citizens with identity cards, and 700 citizens listed twice on the electoral roll, voters were asked to dip their index fingers in indelible ink as an additional security measure. In the event, voting proceeded smoothly: observers concluded that polling had been fair.

Mr Taki and Abbas The first-round results saw Mr Taki, Mr Djoussouf and Mr Tamou emerge as the Djoussouf go through to top three candidates; turnout was a respectable 64%. Mr Taki won 21.03% of round two— the votes cast, while Mr Djoussouf got 15.65% and Mr Tamou took 13.05%. Prince Kemal got 8.74% and Mtara Maecha 6.37%. None of the candidates representing the RDR, the party created to support the old Djohar regime, attracted much support. There were significant regional variations in voting: Mr Tamou led the field on Anjouan island, while Mr Djoussouf topped the poll on Mohéli (where there is widespread discontent with rule from Moroni, and support for the FRN and the left has always been strong). Mr Taki was well ahead in Grande Comore.

—and Mr Taki wins Under Comoros’ French-style electoral system, only the top two candidates convincingly went through to the run-off. Most of those eliminated in round one concluded that Mr Taki had a decisive lead and hurried to join his camp, in the hope of government posts and favours afterwards. Only Halifa Houmadi (2.26%), one of Comoros’ many ex-prime ministers, pledged support for Mr Djoussouf. The other 12 signed a joint declaration of support for Mr Taki, in spite of their past bitter criticisms of him. Mr Djoussouf’s campaign team, claiming bias in the first round, tried in vain to secure the right to appoint half the polling station chairmen. However, their candidate already seemed to expect defeat, promis- ing to lead a “constructive opposition”. The second round, on March 16, produced the expected victory for Mr Taki, who got 113,485 votes—64.16% of those cast. Turnout was 62%. This was a fairly solid endorsement, and a much larger winning margin than in many other elections in other African countries, under the French-style two-round system. It gives Mr Taki a strong personal mandate, after a first round in which he had secured the votes of little more than one-tenth of the electorate.

Mr Taki takes office, Mr Djohar formally handed over power on March 25. The new president is a fulfilling a long-held political veteran who has been pursuing the presidency since at least the late ambition— 1980s. Aged 60, he was born at Mbéni, a village in the north of Grande Comore. He qualified as an engineer at the elite Ecole nationale des ponts et chaussées in France and first became involved in politics in 1967. He served as agriculture, and then education and infrastructure, minister during early island adminis- trations, rising to become interior minister in the first post-independence government of Ahmed Abdallah. He was imprisoned during the socialist regime of Ali Soilih (1975-78). After Mr Abdallah’s mercenary-backed return to power, Mr Taki served as speaker of the Assemblée federale until 1984, when he broke with Mr Abdallah and went into exile in France. There he campaigned for the overthrow of the regime, returning after Mr Abdallah’s death in 1989 to challenge for the presidency. He was defeated by Mr Djohar in the second round of the 1990 elections. He claimed victory had been stolen from him and went back off to France. A short-lived reconciliation with Mr Djohar saws him serve briefly as quasi-prime minister before being sacked in July 1992 over his links to an alleged French mercenary. Accused of involvement in the failed putsch of September that year, he took refuge in Mbéni, where the authorities opted not to pursue him. After last September’s mercenary putsch he reappeared as “co-president” of the short-lived administration installed by the coupistes, a role that does not seem to have damaged his popularity. Regarded as having strong Islamic convictions, he is thought to have close connections with key Arab states. His victory statement gave few clues as to future policy, merely stating that he wished to be the president of all Comorians and calling for international support, notably from France.

—and moving quickly to On March 29 Mr Taki announced his new government, appointing five of the choose a government defeated presidential candidates who rallied to his camp for the second round. The five are:

• Prince Kemal, who was named minister of economy and finance (a key position for which, despite a brief stint in the post under Mr Djohar, he appears to have few qualifications);

• Omar Tamou (transport, tourism, post and telecommunications);

• Ibrahim Halidi Abdérémane (public health, population and social affairs);

• Ali Ben Ali (deputy minister for administrative reform); and

• Mouzaoir Abdallah (an omnibus portfolio including education, youth, culture, sport and research).

The prime minister, Tadjidine Ben Saïd Massoundi, aged 63, is a member of Udzima. He was finance minister under Mr Soilih; he later held a series of senior Treasury posts and has a reputation for honesty. His appointment may reassure donors disappointed not to see Mr El Yachroutu remain as head of the government. As a native of Anjouan, Mr Massoundi may help to broaden the appeal of the government in Comoros’ second island, where Mr Taki did not do particularly well in the first round of the election. The 57-year-old head of Mr Taki’s private office, Moktar Ben Ahmed Charif, served as minister for agriculture, then for health and education under Mr Abdallah. He has also worked

at the UN World Health Organisation. He is an old ally of Mr Taki and supported him in his previous unsuccessful presidential bid in 1990. Mr Taki named members of his UNDC party to his private office and to several ministe- rial posts: interior and information (Saïd Mohamed Saïd Hassani); foreign affairs (Saïd Omar Saïd Ahmed); budget (junior minister Dahilous Omar); industry, labour and mining research (Madi Ahamada); and state secretary for defence (Ali Abdallah). However, the government also has members with personal or family links to the two big losers in the election, the defeated Mr Djoussouf and the clique around Mr Djohar. The education minister, Mouzaoir Abdallah, is Mr Djoussouf’s brother-in-law, while the foreign minister is the brother of Saïd Athoman Saïd Ahmed, the man who led the delegation to bring Mr Djohar back from exile.

An overture comes from The French were wary of Mr Taki, yet realised they needed to establish a working France— relationship with him should he win the presidential election. During the run- up to the poll, discreet feelers were put out by Jacques Foccart and Fernand Wibaux, Gaullist advisers on Africa policy who retain contacts with the president, Jacques Chirac, although not part of his official Elysée Palace Africa team. They apparently engaged in the necessary bridge-building with Mr Taki, while France stuck to its officially neutral stance vis-à-vis the presidential election candidates. In February Mr Wibaux met Mr Taki in Paris, according to the usually well-informed Paris-based Indian Ocean Newsletter. Contacts seem to have been facilitated by Gabon’s president, Omar Bongo, who reportedly helped win Mr Taki round to the idea of accepting a continued French military presence in Comoros. Once Mr Taki’s victory had been announced, Mr Wibaux went to Moroni, where he secured Mr Taki’s confirmation of assent to the defence links with Paris, and to French assistance in reforming the fiscal administration. In return Mr Taki sought aid, particularly to clear public-sector pay arrears.

—which may maintain a When it came down to detailed discussions after Mr Taki’s victory, it was the military presence new Comorian leader who appeared keen to strengthen military ties, to guard against any fresh mercenary adventure: Comoros has endured 17 coups and putsch attempts in its 21 years of independence, most recently in September 1995. French officials were cagey on this point, in spite of Mr Wibaux’s earlier contacts. This may reflect the fact that although individual Gaullists like Mr Wibaux are keen to see France take a high military profile in Africa, the actual French government is faced with practical realities—namely, the need to prune public spending and limit the cost of the military presence in Africa. Interviewed by Radio France internationale after the election, Mr Taki said: “External defence will be entrusted to France”. He added that the bilateral defence accord would have to be reviewed so that one or more detachments of French troops could be stationed in Comoros on a permanent basis. The French foreign ministry rapidly confirmed that the accord would remain in force if Comoros wanted it to, yet officials had also indicated that the 100 troops now based in Comoros would be withdrawn after some months. However, France is well-aware that the Comoros defence force largely sided with the mercenaries in the September putsch and had to be disbanded. Sources within the French security establishment seem willing to contemplate the cost of a limited long- term military presence; they indicate that this may take the form of a unit to

retrain former Comorian defence force soldiers as policemen, and two small units to provide for the islands’ defence and to act as a presidential guard.

Mr Taki tries to play Meanwhile, Mr Taki has moved to reassure France by asking the Libyan ambas- down his Islamist image— sador to move out of the premises he has been occupying next to the presidential palace. Already, during the election campaign, Mr Taki had rejected the “fundamentalist” label, commenting that: “Fundamentalism is anti- religion. Religion, by contrast, preaches tolerance and freedom.” Relations with France are underpinned by cultural and family connections: there are tens of thousands of Comorians by birth or descent resident in France. There are 40,000 in Marseilles (compared with a total of only 35,000 people in Moroni), where they represent a significant force in local politics. Dunkerque also has a large community. The Banque de France estimates that in 1992 remittances of funds home by Comorians in France were equal to about one-third of Comoros’ national budget. In mid-May France’s cooperation minister, Jacques Godfrain, made a three-day visit to Comoros, meeting Mr Taki on three occasions.

—promises reform and On April 12 Mr Taki announced the dissolution of the assembly and called dissolves parliament fresh legislative elections for October 6, in the hope of building a powerbase of parliamentary support. (The largest group in the outgoing assembly was the RDR, supportive of Mr Djohar and his son-in-law, the speaker of the assembly, Mohamed Saïd Mchangama.) Mr Taki, who is thought to regard the existing federal structure as expensive and unwieldy, also promised a constitutional referendum by the end of June. But any reduction in the autonomy enjoyed by individual islands may provoke an angry reaction on Anjouan and Mohéli, particularly as the president is a native of Grande Comore.

The economy

The new president On the evening of May 3 the new president, Mohamed Taki Abdulkarim, gave inherits a dire economic a long radio broadcast denouncing corruption in the civil service and an- situation nounced the dissolution of the administration and the dismissal of 6,000 civil servants (many of whom had not been paid for several months anyway). The new president confronts a difficult economic outlook, in spite of the efforts of the outgoing prime minister, Caabi El Yachroutu, to restore national finances—for example, through the appointment of a respected import inspection agency, Cotecna, which has boosted customs revenue. Progress was set back by last year’s mercenary putsch (see The political scene), which disrupted normal economic activity and financial administration, and dealt a further blow to Comoros’ credibility as a safe destination for foreign tourists. There are public-sector salary arrears of up to seven months. Many families still depend heavily on the Cfr10bn ($26.5m) sent annually by the 100,000 Comorians resident abroad (mainly in France). During the pre-electoral period France refused to provide funds to help clear the salary arrears, lest this be interpreted as an attempt to bolster the electoral fortunes of Mr Djoussouf, by helping his ally Mr El Yachroutu.

The EU also held back budget aid, although it did release Cfr280m ($750,000) for health and education. However, the drive to boost customs revenue began

to make an impact in late 1995. Fiscal revenue for the year may have been as high as 75% of the target agreed with the IMF, in spite of the coup; tax revenue from private-sector firms was well up, although payments by parastatals were low.

The salary bill shoots up Estimates from the finance ministry put the 1995 salary bill at Cfr7.7bn ($20.6m), well above the Cfr6.5bn average for recent years and in spite of a reduction in the number of names on the payroll from 8,000 in 1992 to just 5,510 last year. The main causes seem to have been increased payments of allowances; the end of a freeze on promotions, allowing people to take on new jobs commanding higher pay rates; and the recruitment of 286 new staff (150 for the education service, 100 for health and 36 for the interior ministry). These recruitments added Cfr19m per month to the bill.

The World Bank approves The World Bank sent a letter to the outgoing prime minister, Mohamed Caabi privatisation plans— El Yachroutu, on January 18, praising his proposals for privatisation, particularly in regard to air transport. A Belarus-based company, Belavia, has filled the gap left by the now-defunct Air Comores; marketing itself as Amicale Comores Air, it has cut prices and has plans for services to destinations such as Kenya, Madagascar, Mayotte, Tanzania (including Zanzibar) and even Jeddah in Saudi Arabia. However, Air Comores is still awaiting legal liquidation, Belavia is reportedly still waiting for payments due in May and there are suspi- cions that Mr Taki is procrastinating, and that progress may have been delayed by lobbying by influential local personalities who want to get their hands on the defunct carrier’s routes and landing rights.

Another priority for sell-off is the water and power parastatal, Eau et électricité des Comores (EEDC). However, privatisation will still not guarantee that the government pays its power bills; its failure to do so has sometimes led EEDC to cut supplies to the public sector, forcing hospitals and other key installations to rely on emergency generators. Shortly before the presidential election in March, the government began preparations to invite tenders for EEDC and the company could be sold by the end of the year. Other privatisation targets include the Société comorienne des hydrocarbures (SCH, petroleum distrib- ution) and Socopotram (inter-island ferry services).

—and sends a mission to A World Bank team is expected in Moroni on June 18. The confidence of key Moroni— international partners—France, the IMF and the World Bank—is yet to be won by Mr Taki, although he has made efforts to reassure donors of his political reliability. The new president has set up committees of dignitaries to report back on economic and financial issues; members are mostly community elders, respected and regarded as honest, but with little understanding of the companies and the issues they are supposed to be investigating.

—although Mr Taki’s The finance minister, Prince Saïd Ali Kemal, appears personally committed to policy direction remains continuing the policies initiated by the IMF-friendly Mr El Yachroutu, but has unclear not been the given the political go-ahead that he needs from Mr Taki. Mr El Yachroutu himself has been taking a well-earned rest, on holiday on Anjouan island.

There are hopes of new In spite of Comoros’ chequered history, Southern African and French firms trade and investment— seem interested in investing. French investors are interested in EEDC and some have even talked of creating a small industrial estate or bringing in new banks. Zimbabwean and South African investors have looked at developing a Coca- Cola bottling plant (but may have eventually opted for Mayotte instead).

—although 1995 was a bad Further proof of the daunting task facing Mr Taki comes with the release of year figures implying real GDP growth of a mere 1.2% in 1995, far below the rate of population increase (2.7%) and also below the growth rates of most other Franc Zone countries. The average inflation rate was reduced to a mere 7%, from 50% in 1994. However, the external position is bleak: merchandise exports, at a mere Cfr4.24bn ($11.3m), were massively outstripped by merchandise imports of Cfr23.4bn. Some Cfr9bn of this total was food produce, especially rice, sugar and flour, highlighting the continuing inability of domestic farmers to feed the population. The main locally produced export commodity remains vanilla (Cfr2.3bn in 1995). Sales of cloves were a mere Cfr130m, while ylang-ylang earned even less (Cfr78m). French perfume buyers are no longer buying much ylang-ylang, leaving Comoros dependent upon markets such as Italy and Germany. With tourism growth hamstrung by a record of regular coup attempts and other services sectors equally weak, the country is estimated by donors to have notched up a current-account deficit equivalent to SDR14m ($21.2m) in 1995.

Debt relief, and more aid, The moves by bilateral creditors to ease the debt burden on Africa’s poorest is a possibility nations could benefit Comoros. The country is not usually regarded as a target for the most generous forms of relief. However, the granting, by the Paris Club of official bilateral creditors, of 67% “Naples terms” debt-stock write-offs to other countries, such as Mali (in May 1996), is having a knock-on effect: terms for other debtors are also being improved, if to a lesser extent. Recent World

Trade with OECD countries Bank figures show Comoros’ total external debt at $188.7m at the end of 1994, FFr m, monthly averages and debt-service payments that year at $2.8m. The $140.9m owed to multi- Exports 60 lateral official creditors, such as the World Bank, is not currently eligible for Imports rescheduling or write-down. 50 France has budgeted FFr168.9m ($32.4m) in aid for 1996, of which FFr51.3m is 40 allocated to debt write-offs. In terms of positive aid spending, the French 30 cooperation ministry has allocated FFr26.2m in technical assistance, and the Caisse française de développement (CFD, the French state development bank) 20 will provide FFr42.4m, of which FFr24.9m is military cooperation. Other than 10 defence, priorities for the CFD include warehousing for farm inputs, rural development on Mohéli, roads on Anjouan, airport terminals on Anjouan and 0 1992 93 94 95(a) Mohéli, equipment for EEDC, a land and maritime radio telephone network (a) Jan-Sept. Source: World Bank, La devaluation du Franc CFA. and automation of accounting in the post and telephone services. France may Un premier bilan en decembre 1995. also consider the provision of some budget aid.

Appendix 1

Quarterly indicators of economic activity in Tanzania

1993 1994 1995 1996 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr Production Annual totals Coffee ’000 tons 57 ( 44 ) ( n/a ) n/a Cotton, lint “ 56a ( 53a ) ( n/a ) n/a Sisal ” 33a ( 30a ) ( n/a ) n/a Prices Monthly av Consumer prices: 1990=100 211.6 240.9 259.4 263.5 289.9 324.4 329.4 335.7 353.0 n/a change year on year % 26.1 32.6 30.3 36.3 37.0 34.7 27.0 27.4 21.8 n/a Money End-Qtr M1 TSh bn 247.33 254.20 260.22 294.18 327.90 335.39 n/a n/a n/a n/a change year on year % 32.9 23.1 25.6 28.2 32.6 31.9 n/a n/a n/a n/a Foreign trade Qtrly totals Exports fob TSh m 57,097 60,070 75,578 36,097 93,431 104,849 85,158 64,606 135,765 74,050b Imports cif “ 265,189 217,873 190,409 142,822 214,653 144,590 203,695 237,925 234,097 149,955b Exchange holdings End-Qtr Bank of Tanzania: foreign exchange $ m 189.6 277.7 290.0 323.9 317.5 263.7 239.2 220.8 255.3 236.5c Exchange rate Market rate TSh:$ 479.87 494.41 519.49 525.15 523.45 544.54 602.91 613.80 550.36 541.53c

Note. Annual figures of most of the series shown above will be found in the Country Profile. a Estimate. b Total for January-February. c End-February.

Appendix 2

Quarterly indicators of economic activity in Comoros

1991 1992 1993 1994 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr Money End-Qtr M1, seasonally adj: Cfr m 9,532 9,799 10,014 9,922 10,439 10,789 9,364 n/a n/a n/a change year on year % –9.0 7.8 4.7 –2.6 9.5 10.1 –6.5 n/a n/a n/a Foreign tradea Annual totals Exports fob $ m 28 ( 27 ) ( 54 ) 55 Imports cif “ 119 ( 105 ) ( 107 ) 114 Foreign exchange End-Qtr Central Bank $ m 29.15 25.44 26.21 31.08 26.38 29.23 32.20 n/a n/a n/a Exchange rate Market rate Cfr:$ 259.00 278.38 256.63 238.25 275.33 273.95 284.75 283.15 294.77 428.25b

Note. Annual figures of most of the series shown above will be found in the Country Profile. a Source: DOTS. b End -2 Qtr 1994, 410.36; end-3 Qtr 1994, 396.11; end-4 Qtr 1994, 400.95; end-1 Qtr 1995, 363.68; end-2 Qtr 1995, 363.98; end-3 Qtr 1995, 368.59; end-4 Qtr 1995, 367.50; end 1 Qtr 1996, 377.36.

Appendix 3

Foreign trade of Tanzania ($ m) Jan-Dec Jan-Dec Jan-Dec 1989 1990 1991 Imports cif Food, drink, tobacco 48.0 34.6 55.2 Fuels 190.9 66.4 164.0 Textiles & clothing 32.7 18.0 305.0 Metals 121.5 92.5 125.8 Machinery 230.7 172.4 305.1 Transport equipment 169.0 103.9 407.3 of which: cars 9.3 3.0 280.7 Total incl others 1,023.3 697.7 1,533.1 Domestic exports fob Cashew nuts 3.2 5.3 16.1 Coffee 98.0 82.1 75.5 Cloves 25.6 0.0 3.3 Cotton, raw 77.4 75.8 62.2 Sisal 3.5 16.0 2.2 Minerals 6.4 18.6 38.7 Petroleum products 13.9 5.1 6.3 Manufactured goods 66.6 16.3 56.7 Total incl others 359.0 331.0 340.9

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Exports foba 1992 1993 1994 Imports cifa 1992 1993 1994 Germany 47 48 50 UK 152 180 139 Japan 30 37 45 Saudi Arabia 131 131 134 Belgium-Luxembourg 34 34 38 Kenya 49 103 117 India 34 40 31 Japan 120 123 90 UK 34 35 31 Germany 124 85 81 Rwanda 21 25 28 India 82 69 75 Netherlands 20 21 25 Italy 74 60 66 Portugal 22 22 22 South Africa n/a 20 57 Total incl others 442 459 494 Total incl others 1,420 1,315 1,330 a Derived.

Appendix 4

UK trade with Tanzania (£ ’000) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Feb Jan-Feb 1992 1993 1994 1995 1995 1996 Exports fob Food, drink & tobacco 1,373 2,444 1,458 2,377 264 202 Textile fibres & waste 4,568 6,217 6,150 6,870 1,005 1,247 Petroleum & products 273 516 255 77 2 3 Chemicals 9,534 8,899 8,277 8,792 949 1,684 Rubber manufactures 1,066 774 651 844 20 71 Paper & manufactures 1,562 1,064 979 1,170 164 164 Textile yarn, cloth & manufactures 434 639 441 522 12 183 Non-metallic mineral manufactures 771 1,410 804 986 69 231 Iron & steel 1,259 2,241 2,340 1,608 92 325 Non-ferrous metals 803 471 299 405 60 24 Metal manufactures 3,881 3,788 3,351 2,139 454 330 Machinery incl electric 28,801 34,709 28,837 28,562 4,939 3,297 Road vehicles 12,294 21,121 14,310 20,209 9,798 5,442 Other transport equipment 910 13,887 1,033 2,192 942 114 Clothing 593 418 383 969 28 133 Scientific instruments etc 3,484 2,233 2,504 2,566 250 1,036 Total incl others 78,545 108,943 82,312 87,412 20,467 15,379 Imports cif Sugar & products 4,095 4,624 4,458 4,846 4,422 5,315 Coffee, tea & spices 5,652 5,781 3,652 3,475 371 670 Tobacco & manufactures 2,473 2,714 1,270 4,131 1,018 185 Textile fibres & waste 1,322 1,211 1,340 1,502 82 230 Textile yarn cloth & manufactures 1,732 1,946 1,518 926 161 149 Non-ferrous metals 1,488 313 1,199 1,486 200 0 Machinery & transport equipment 739 3,317 1,350 4,519 220 379 Clothing 2,046 3,896 5,390 4,222 442 670 Total incl others 21,140 25,633 22,452 27,480 7,285 7,849

Appendix 5

Foreign trade of Comoros ($ m) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Exports foba 1990 1991 Imports cifa 1990 1991 Cloves 1.33 3.87 Meat & preparations 2.03 4.47 Vanilla 9.39 15.89 Rice 8.33 7.18 Essential oils 5.42 3.52 Petroleum products 6.13 6.24 Total incl others 17.96 24.91 Cement 3.56 3.27 Iron & steel 1.11 1.72 Road vehicles 3.87 5.75 Total incl others 52.02 58.25

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Exports fobb 1992 1993 1994 Imports cifb 1992 1993 1994 Colombia n/a 32 36 France 65 61 66 France 11 10 8 South Africa n/a 12 12 USA 10 9 6 Kenya 5 6 7 Germany 3 2 1 Singapore 5 5 5 Malaysia 2 n/a n/a Belgium-Luxembourg 3 4 4 Total incl others 27 54 55 Total incl others 105 107 114 a Source: UN. b Source: DOTS. Derived.

Appendix 6

French trade with Comoros ($ ’000) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec 1990 1991 1992 1993 1994 Exports fob Cereals & preparations 837 1,292 841 815 937 Chemicals 4,903 5,342 5,831 7,250 7,670 Rubber & manufactures 480 609 550 502 449 Textile yarn, cloth & manufactures 934 1,186 772 726 399 Iron & steel 1,407 1,630 1,705 1,098 1,262 Metal manufactures 2,574 3,142 3,215 3,462 3,330 Machinery incl electric 14,071 14,371 16,990 15,263 14,393 Transport equipment 10,247 12,421 11,284 8,896 8,593 Scientific instruments etc 1,526 1,478 1,476 1,905 1,766 Total incl others 48,756 56,973 59,282 57,991 59,924 Imports cif Coffee, tea, cocoa, spices 3,934 6,785 5,231 6,417 2,790 Chemicals 9,845 7,054 6,913 5,042 5,664 Total incl others 13,865 14,253 12,304 11,523 8,704