Tanzania Comoros

COUNTRY REPORT

Tanzania Comoros

2nd quarter 1997

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 50 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.

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Contents

3 Summary

Tanzania 4 Political structure 5 Economic structure 6 Outlook for 1997-98 9 Review 9 The political scene 13 The economy 17 Agriculture 19 Finance 19 Energy and water 20 Manufacturing and transport 21 Foreign trade, aid and payments

Comoros 25 Political structure 26 Economic structure 27 Outlook for 1997-98 28 Review 28 The political scene 31 The economy 32 Foreign trade and payments 33 Mayotte

34 Quarterly indicators and trade data

List of tables 7 Tanzania: forecast summary (domestic) 8 Tanzania: forecast summary (external) 15 Tanzania: Union government budgets 17 Tanzania: selected financial indicators 22 Tanzania: external debt 23 Tanzania: external trade 23 Tanzania: indices of export unit values 24 Tanzania: net official development assistance 34 Tanzania: quarterly indicators of economic activity 34 Comoros: quarterly indicators of economic activity 35 Tanzania: foreign trade 36 Tanzania: UK trade 37 Comoros: foreign trade 37 Comoros: French trade

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List of figures 8 Tanzania: gross domestic product 8 Tanzania: Tanzanian shilling real exchange rates 28 Comoros: gross domestic product 28 Comoros: Comorean franc real exchange rates

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May 24, 1997 Summary

2nd quarter 1997

Tanzania Outlook for 1997-98: The CUF will remain disappointed in its wish for the annulment of the controversial 1995 Zanzibari presidential election. The president, Benjamin Mkapa, will spend 1997-98 consolidating his position in the face of opposition from the old guard of the ruling CCM. The anti-corruption campaign will continue. Drought will compress real GDP growth in 1997, but this should bounce back the following year. The shilling is expected to remain relatively strong as macroeconomic fundamentals improve.

Review: The former CCM secretary-general, Horace Kolimba, launched a fierce attack on Mr Mkapa and his government, and then died suddenly. Divisions within the CCM have deepened as a cabinet reshuffle turned out to be a disap- pointment. Concern has been expressed over public ethics, law and order, and organised crime. The CUF has continued to allege human rights violations in Zanzibar, and is suffering from internal rifts, as is another opposition party, the NCCR. By-elections have been won by both the CCM and the opposition UDP. The IMF has authorised another drawdown under the ESAF. The introduction of VAT has been postponed, although other tax reforms are in the 1997/98 budget. A new investment code has also gone back to the drawing-board. Inflation is resurgent as drought forces food prices up: cash crops are also affected. The restructuring of the National Bank of Commerce has been confirmed. Dar es Salaam has suffered severe water shortages. The trade balance has improved and export prices remain steady.

Comoros Outlook for 1997-98: The opposition will be cautious about talks with the president, Mohamed Taki Abdulkarim. France may delay sorely needed aid while Comoros’ relations with the IMF remain uncertain. The water and power parastatal, EEDC, is set for private management.

Review: Unrest and strikes have challenged Mr Taki’s authority. Opposition politicians have been harassed and demonstrations crushed by force. Violent clashes on Anjouan island have left at least one protester dead. The cabinet has been reshuffled. More conservative Islamic measures have been enforced. An IMF-monitored economic programme has been instituted and pay cuts imposed on civil servants. France’s Sogea is the preferred bidder for EEDC. The MPM has suffered an election setback in Mayotte.

Editor: Andrew Manley All queries: Tel: (44.171) 830 1007 Fax: (44.171) 830 1023

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Tanzania

Political structure

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 (nine women appointees), which legislates on internal matters

National elections October-November 1995 (legislative and presidential); next elections due 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 reshuffle February 1997

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 Communications & transport William Kusila Community development, women’s affairs & children Mary Nagu Defence Edgar Majogo Education Juma Kapuya Energy & minerals Abdallah Kigoda Finance & planning Daniel Yona Foreign affairs Jakaya Kikwete Health Aaron Chiduo Home affairs Ali Ameir Mohammed Industry & trade William Shija Justice & constitutional affairs Bakari Mwapachu Labour & youth development Sebastian Kinyondo Lands, housing & urban development Gideon Cheyo Natural resources & tourism Zakia Meghji Science, technology & higher education Jackson Makweta Water & livestock development Pius Ng’wandu Works Anna Abdallah

Central bank governor Idris Rashidi

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Economic structure

Latest available figures

Economic indicators 1992 1993 1994 1995 1996 GDP at market pricesa TSh bn 1,131 1,404 1,823 2,395 n/a Real GDP growtha % 3.8 3.9 3.0 4.5 4.7 Consumer price inflationa % 21.8 25.3 33.0 29.8 19.6 Population m 27.2 28.0 28.8 29.7b 30.6b Exports fob $ m 400 439 519 683 762 Imports cif $ m 1,510 1,465 1,505 1,541 1,394 Current account $ m –704 –770 –681 –629 –575b Reserves excl gold $ m 327.3 203.3 332.1 270.2 440.1 Total external debt $ m 6,495 6,655 7,095 7,333 7,658b External debt-service ratio (paid) % 39.7 28.5 18.7 17.4 17.2b Coffee productionc ’000 tons 47.1 47.9 48.5 43.5 52.0 Cotton (lint) productionc ’000 tons 76.5 68.8 48.4 44.5 84.2 Manufacturing indexa (1985=100) 110 110 101 n/a n/a Exchange rate (av) TSh:$ 298 405 510 575 580

May 24, 1997 TSh611.2:$1

Origins of gross domestic product 1996b % of total Components of gross domestic product 1994b % of total Agriculture, forestry & fishing 55.7 Private consumption 89.6 Mining 1.4 Government consumption 7.7 Manufacturing 6.5 Gross fixed capital formation 27.5 Construction & utilities 7.0 Increase in stocks 3.2 Trade & hotels 7.1 Exports of goods & non-factor services 26.4 Transport & communications 14.7 Imports of goods & non-factor services –54.4 GDP at factor cost incl others 100.0 GDP at market prices 100.0

Principal exports 1996 $ m Principal imports 1996 $ m Coffee 137.8 Machinery & transport equipment 458.5 Cotton 137.6 Consumer goods 361.8 Manufactures 110.8 Industrial raw materials 349.3 Cashew nuts 93.8 Petroleum & products 158.4 Minerals 50.4 Building materials 42.5

Main destinations of exports 1995d % of total Main origins of imports 1995d % of total Germany 9.2 UK 9.6 Japan 8.2 Kenya 9.0 India 8.1 Japan 7.2 Belgium-Luxembourg 6.5 Saudi Arabia 6.3 UK 5.4 China 4.9 a Mainland only. b EIU estimates. c Crop years ending June. d Based on partners’ trade returns; subject to a wide margin of error.

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Outlook for 1997-98

No change in Zanzibar From the day that the official results of the rigged Zanzibari presidential election were announced in late 1995, it was evident that every week Salmin Amour survived as re-elected president of the islands, the more remote became the chances of the opposition Civic United Front (CUF) succeeding in its campaign to see him removed. With the CUF alliance now coming apart over whether to accept the status quo, Mr Amour seems safe until the Union president, Benjamin Mkapa, achieves a more secure grip on his and Mr Amour’s party, the Union-wide Chama cha Mapinduzi (CCM—“party of the revolution”). The Mkapa government has earned such deserved plaudits from the international community for almost every other aspect of its first 18 months in power that donors have pulled their punches over Zanzibar, aware that to drive the new government into a corner over this issue would be to threaten its stability by provoking a profound schism within the CCM.

The president will seek to It was the CCM vice-chairman and former prime minister, John Malecela, who consolidate his position— most recently rehearsed the government line of “no deal” with the Zanzibari opposition. Mr Malecela is a key personality among those former bearers of high office who have not found favour with the new president but who remain powerful within the party. Having consigned so many heavyweights to the backbenches in his effort to appoint a new ministerial team untainted by the corrupt habits of the past, Mr Mkapa has created many powerful enemies. Launching a programme of internal CCM elections beginning at grass-roots level in April, the president called for a “new breed” of leader. A consolidation of his position within the party is certainly needed if the president is to be freed from the need to watch his back at every turn.

—as homegrown forces Mr Mkapa’s first cabinet reshuffle reflected his restricted room for manoeuvre, as maintain the anti-graft does the fact that his anti-corruption drive, while apparently sincere, has yet momentum to result in the formal indictment of any high-profile personality. But convictions—which are costly in terms of the enemies created—are not an end in themselves. The aim is a clean-up of Tanzanian public life, and the hauling of former ministers before the courts would justify its inherent dangers only in so far as it is necessary to achieve this wider goal. In any case, in terms of the day-to-day exercise of public authority, much has already been achieved. Graft is no longer a macroeconomic problem, as it was when tax exemptions were traded on a scale large enough to have a clear impact on the budget deficit, so multilateral and donor pressure in this area is likely to ease. It seems, however, that the campaign will come to derive its impetus more from domestic sources, such as the newly formed Tanzanian chapter of Transparency International (the German-based corruption-monitoring non-governmental organisation).

Drought will cause a Economic growth may be no more than 3.5% this year, as the result of the wobble— drought which has affected the country. Rain-fed agriculture (which accounts for virtually the entire sector) will be particularly badly affected. However, this climatic reversal hits Tanzania at a time when the economy is in fundamentally better shape than it has been for many years. The leading export crops—the last to be liberalised—have yet to show any real sign of sustained recovery, but

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historically smaller crops such as tobacco and cashew nuts are forging ahead. As a result, the agricultural sector may still be expected to expand this year, despite the drought’s impact.

Sound macroeconomic policy should provide the basis for Tanzania to ride out the storm. In 1998, assuming better 1997/98 rains, a bounceback in growth is on the cards. In economies such as Tanzania’s, real output grows sharply in a recovery from drought, and the EIU expects growth to reach 5% next year. More fundamentally, towards the limit of our forecast horizon and through to the end of the decade there is a real prospect of the underdeveloped industrial sector beginning to show strong underlying growth, as a result of privatisations and inward investment in new projects. Past spurts of industrial growth have derived from irregular construction projects, recoveries from power shortages and the accounting impact of the reform of minerals marketing, not from any sustain- able boost to aggregate industrial output. As new mining ventures come on stream, we put industrial-sector growth at 8% in 1998.

—but a sound budget As the newly confirmed finance minister, Daniel Yona, prepares to present his should hold the course first budget for the 1997/98 fiscal year (July-June), the turnaround already effected in Tanzania’s public finances is of an order that nobody believed likely two years ago. Stabilisation of the macroeconomy can be said to have been accomplished (although this must now be sustained under somewhat adverse conditions in 1997); the longer-term task of structural reform continues. The overall budget framework is already public knowledge, although the numbers may yet be adjusted for budget day itself. Of greater interest is quite what tax reforms lie behind the revenue totals. It seems that business lobbies had perhaps extracted too much from the minister in pre-budget consultations and that some of these concessions have since been written out. The private sector must this year see some reflection of its input in the government’s proposed tax reforms, however, if the nascent social partnership between the two is not to turn sour.

Inflation remains The drought has put paid to hopes of a further sharp fall in the rate of inflation stubborn but the rate will this year. Trends over the first quarter and the price outlook for the rest of the decrease year—especially where food prices are concerned—suggest that prices may rise overall by an average of 18% or so in 1997. A sharper decline in inflation is then likely in 1998, assuming better 1997/98 rains, because food prices would ease considerably. The country could still achieve single-digit inflation in this way next year, although we do not expect that to be the case at this stage.

Tanzania: forecast summary (domestic)a (% real change) 1995b 1996b 1997c 1998c GDP at factor cost 4.5 4.7 3.5 5.0 of which: agriculture 7.0d 5.4d 3.5 4.5 industrye –6.8f 4.8f 4.0 8.0 services 4.9f 3.5f 3.0 4.0 Consumer prices 29.8 19.6 18.0 12.0

a Mainland only. b Actual. c EIU forecasts. d National estimate. e Includes mining and construction. f EIU estimate.

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Tanzania: forecast summary (external) ($ m unless otherwise stated) 1995a 1996a 1997b 1998b Merchandise exports fob 683 762 780 850 of which: coffee 143 138 120 125 cotton 120 138 100 115 manufactures 109 111 105 120 Merchandise imports cif 1,541 1,394 1,450 1,550 Current-account balance –629 –575c –550 –500 Average exchange rate (TSh:$) 575 590 610 625

a Actual. b EIU forecasts. c EIU estimate.

Tanzania: gross domestic product Tanzania: Tanzanian shilling real % change, year on year exchange rates (c) 6 Tanzania (a) 1990=100 Africa 120 5 TSh:$ 110 4 KSH:$ 100 3

90 2 R:$ 1 80

NUs:$ 0 70 1994 95 96 97(b) 98(b) (a) Mainland only. (b) EIU 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 96 97(b) Economic Outlook.

The trade recovery will be Last year lower cotton prices were offset by higher production, but the drought- interrupted— affected 1997/98 crop will depress export earnings from the second quarter of 1997. Coffee prices have been stronger than expected, but here again depressed production is likely to reduce earnings. With a similar pattern expected in manufactured exports, it will be underlying growth among the historically smaller export earners that will raise total merchandise trade receipts perhaps as high as $850m next year. The need to make commercial imports of basic foodstuffs to offset the effects of drought will raise the import bill this year and, after the anomalous 1996 result, imports should return to 1995 levels next year. A poorer trade outlook than forecast last quarter suggests annual current- account deficits of at least $500m in 1997-98, although some relief will result from that part of the recent Paris Club debt restructuring that applies to current (interest) rather than capital (principal) payments.

—but a strong shilling New aid and investment flows, export recovery, and recent direct experience may be in order suggest that there is no shortage of dollars on the horizon. The shilling apprec- iated in real terms last year, and is likely to do so again in 1997, leading to a probable cumulative appreciation of nearly 29% in 1994-97. This may be no cause for alarm, because, as the external position improves, a higher real exchange rate becomes consistent with macroeconomic balance. The problem in the past was that the nominal exchange rate was defended as inflation soared,

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and the export base and investment inflows crumbled. Now, with slower relative inflation and stronger external accounts, a period of real appreciation may not be out of order. By the end of the decade, however, the trend may begin to have wider competitiveness effects and an effort to steer the shilling lower is likely.

Review

The political scene

Mr Mkapa has a difficult The quarter under review has seen difficult times for the ruling Chama Cha few weeks— Mapinduzi (CCM) party and the president, Benjamin Mkapa. In early February the former CCM secretary-general, Horace Kolimba, turned on his party, denouncing it for lack of vision (see below). Mr Kolimba’s outburst exacerbated divisions within the ruling party amid fears that he might defect to the opposition, and emotions ran higher still when he died suddenly in March. Although foul play was almost certainly not involved, the political rumour mill ran over- time on this latest death in the political arena. In January the CCM member of parliament for Morogoro North was murdered in his home, in an attack symp- tomatic of a general deterioration in domestic security. Against this backdrop, the president has carried out a cabinet reshuffle so limited as to have satisfied no one, and the government has lost another by-election to the opposition.

—as Mr Kolimba As the CCM prepared to mark the 20th anniversary of its creation in February, denounces his own party— the disaffected Mr Kolimba charged that the ruling party lacked “the direction and vision to steer Tanzania into the 21st century”. His comments were the culmination of several months’ progressive divergence from the party line, from a political heavyweight consigned to the wilderness in the “third-phase” administration of Mr Mkapa (following the first and second “phases” of independent rule under Julius Nyerere, to 1985, and Ali Hassan Mwinyi, in 1985-95).

Branded a traitor to the party for his statements, Mr Kolimba countered: “Those lashing at me are yet to grasp the new culture of democratic pluralism.” This was a bit rich from a confirmed stalwart of the CCM old guard; a columnist in the independent weekly Business Times tartly characterised his outburst as “political claptrap designed for self-marketing”. However, as the column went on to point out, opposition parties were “falling all over each other buying the product”.

—flirts with the Earlier comments from the former CCM leader in support of calls for a broad- opposition— based process of constitutional review heightened speculation that he might defect to the principal mainland opposition movement, the National Convention for Construction and Reform (NCCR-Mageuzi). Led by the former CCM figure, deputy prime minister and runner-up in the 1995 presidential election, Augustine Mrema, the NCCR had identified as its primary goal during 1997 the formation of an all-party national conference to draw up a new constitution to replace the country’s current, distinctly threadbare, model. The CCM has been firmly opposed to this suggestion. Mr Kolimba was reported to have met NCCR leaders in March, but consistently denied that he was

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planning to leave the CCM. Other rumours had it that, needing to find a political vehicle that he could run as his own, Mr Kolimba would defect to the moribund Tanzania Democratic Alliance Party (Tadea).

—then dies a sudden death In the event, the speculation was academic. Summoned to a grilling by the CCM central committee at its March meeting, Mr Kolimba collapsed in the meeting room and died shortly afterwards in hospital. A post-mortem was ordered by the president to confirm early reports that Mr Kolimba’s sudden death was related to a history of high blood pressure, but rumours of foul play could not be averted. The likes of opposition rabble-rouser Christopher Mtikila screamed allegations of poisoning from the lunatic fringe. The NCCR’s secretary-general, Mabere Marando, was more circumspect, levelling the kiSwahili charge that, figuratively, “mbwa amekula mwanae” (“the dog has eaten its child”).

CCM divisions deepen— It is necessary to hark back to November 1994 to understand the background to the divisions that formed around the late Mr Kolimba. It was then that Tanzania’s founding president, Mr Nyerere, in his ad hoc role as “Father of the Nation”, took control of the process by which the CCM was preparing for the succession to Mr Mwinyi, by calling for the replacement both of Mr Kolimba as CCM secretary-general and of the then prime minister, John Malecela (4th quarter 1994, page 9). Both men had been lobbying for the CCM presidential nomination, which Mr Nyerere eventually secured for his chosen candidate, Mr Mkapa. Mr Kolimba’s disaffection, hardened by his exclusion from the Mkapa cabinet (along with many others among the CCM old guard) may be traced to this date, and his political allies will keep the rivalry alive. The party is now more deeply riven than ever before, and holds together only for lack of any credible alternative as a political home for potential defectors from its higher echelons.

—as the corruption list The sole policy innovation of Mr Mkapa’s campaign platform at the 1995 stays under wraps— elections was a once-and-for-all end to corruption in public life. Freedom from involvement in official graft was to be a necessary condition for inclusion in the new administration, but it turned out to be impossible to find enough clean hands to crew the ship of state. A report from the Warioba Commission (named after its chairman, the former prime minister Joseph Warioba) on official corruption was delivered in December last year. Names were named in its 500-plus pages and the tourism minister, Juma Alifa Ngasongwa, resigned shortly afterwards (1st quarter 1997, page 9). Along with the main report, however, Mr Warioba also handed the president a shorter document dealing not with corruption as an issue, but with specific instances of suspected graft among individuals within the administration. The contents of this document were not made public. It hangs over the country’s leaders like the Sword of Damocles, and more heads were expected to roll among those at the top table in public life in Mr Mkapa’s first cabinet reshuffle (see below). In the event, however, it seems that the president may have found himself so besieged by forces within his own party—even before Mr Kolimba’s death—that his room for manoeuvre was severely limited.

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—and a cabinet reshuffle At the beginning of February Mr Mkapa announced cabinet changes, the prin- satisfies no one cipal significance of which was that they involved not a single departure from the Council of Ministers. Daniel Yona was confirmed as finance minister, after holding the portfolio in an acting capacity for three months, combining his responsibilities with those for planning. The minister for energy and minerals, William Shija, swapped places with Abdallah Kigoda at industry and trade. Zakia Meghji was moved from health, where she effected a controversial mass deregistration of private clinics in December, to the vacant tourism post. Her removal permitted the return to cabinet of more experienced hands, in the form of Aaron Chiduo, a minister of health under Mr Mwinyi until 1990.

The changes thus set aside any implications of Mr Warioba’s list, while add- itional deputy-ministerial postings increased the size of the government slightly. World Bank sources welcomed the confirmation of the finance minister in his post, but Reuters reported diplomats to be “less than enthusiastic” about the other changes and the opposition criticised the administration’s enlargement.

A toothless ethics Ministers, regional and district commissioners, and departmental and parastatal commissioner— chiefs have been given until the end of June to present to the prime minister their proposals for countering corruption in the light of the Warioba report. In the meantime, attempts are being made to give teeth to the Public Leadership Code of Ethics, which applies to these same officers. Established by act of parliament in 1995, the code and the office of the “ethics commissioner”, held by Justice William Maina, have achieved little to date, although there is no shortage of material on which to act.

—is taken to task by Under fire, Justice Maina proposed that the code’s scope be widened to include Transparency middle-ranking civil servants. No doubt well-intentioned, the suggestion International was nevertheless vulnerable to interpretation as a cynical attempt to blur the essential focus on high-level corruption, and the commissioner was swiftly taken to task by a new force in Tanzanian affairs, a local chapter of the German- based corruption watchdog, Transparency International. Writing to the regional weekly newspaper, The EastAfrican, in March, the interim chief executive of TI-Tanzania (TI-TZ), Brian Cooksey, asserted that existing civil service regulations were adequate for sanctioning the behaviour of run-of-the-mill bureaucrats. Mr Cooksey urged the commissioner to overcome his reluctance to “open the most ‘sensitive’ files first” or “the Tanzanian public will draw its own conclusions about the usefulness of the Ethics Commission”.

Concerns mount over law The main focus of the clean-up of Tanzanian public life has been on the and order— executive and the civil service, but the judiciary and the security establishment raise parallel concerns. For several years already, the CCM government has not been able to count on the courts to respect party-political expediency in their judgments and rulings, but it seems that hard cash still works in steering the course of justice. Recently lawyers have been quoted in the independent press as claiming that “any judgment can be bought” or that an advocate does not need law books in court “if his pockets are full”. In February, however, a lawyer-cum-journalist, Robert Rweyemamu, reported in his column in The EastAfrican a High Court judge’s public rejection of the gift of a diary from an

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advocate bringing an application on which he was due to rule. The judiciary is bound by the 1984 Code of Conduct for Judges and Magistrates, another dead letter that seems ripe for resurrection and updating.

—as professional crime Corruption within the judiciary and the police force has meant that organised becomes a growth industry crime has flourished in the country during the 1990s, and there is no doubt that global players in the criminal underworld have been attracted by Tanzania’s conducive environment. An estimated $83m worth of cannabis and heroin was awaiting destruction in Dar es Salaam at the beginning of 1997, the snow on the tip of an iceberg. In parallel with these flourishing trades, there has been a series of clumsy “professional” murders of public figures. The latest was that of the Morogoro North CCM member of parliament, Nicas Mahinda, who was gunned down by multiple assailants in his Dar es Salaam home in January. His murder remains a mystery.

By-election contests are Mr Mahinda’s killing necessitated the second of two by-elections fought during settled one-all March. Mr Mahinda’s CCM heir, Suleiman Sadik, retained Morogoro North for the ruling party, but only after the CCM had suffered a reverse in a by-election contest in the Magu constituency of Mwanza Region. The Magu campaign was another ugly shouting match along the lines of last October’s Temeke by- election (4th quarter 1996, page 9). The NCCR-Mageuzi candidate in the 1995 general election defected to the CCM early in the by-election campaign and the NCCR’s figurehead, Mr Mrema, waded in with the allegation that the ruling party was offering cash for votes. Mr Mrema was hauled up before a local district court for use of abusive language before the campaign was over, but in the end tribal loyalties took the day. John Cheyo, leader of the United Democratic Party and representative of the locally predominant waSukuma people, was returned as the member of parliament. His success mirrored the party’s regionally strong showing in the 1994 local government elections (1st quarter 1995, page 10).

The CUF is divided in Widely believed to have been cheated of victory in the 1995 election for the Zanzibar— Zanzibari presidency (4th quarter 1995, page 11), the opposition Civic United Front (CUF) has pursued an energetic campaign to remove the islands’ CCM president, Salmin Amour. A year ago it seemed that its goal might be achieved but, as the months have worn on with Mr Amour still in his post, elements of the opposition movement have come to believe that an acceptance of the status quo is long overdue. The mainland branch of the party has little direct interest in the islands and would now like to make the most of the CUF’s position as the leading opposition movement in the Union legislature (the National Assembly). Historically, the CUF is a marriage of convenience between quite separate mainland and Zanzibari organisations, both of which needed representation in the other half of the Union in order to be able to meet the criteria for registration as a political party.

—over accepting the At the end of January the state-owned Radio Tanzania Dar es Salaam (RTD) inevitable— reported that the CUF’s central committee had accepted Mr Amour’s declared victory as “genuine” and “recognised the legitimacy of the government” he led. This somewhat overstated the position: according to the often speculative

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Paris-based fortnightly Indian Ocean Newsletter, two of the party’s mainland executives—Michael Nyaruba and Pawa Musa—had issued a statement recog- nising the Amour government. Although this was apparently a pragmatic step avoiding comment as to the regime’s legitimacy or the genuineness of the official election result, their position was immediately disowned by the CUF in Zanzibar, where the two were denounced as “traitors”.

—prompting an In mid-February a letter from the Zanzibari CUF headquarters was circulated to impassioned open letter embassies and donor organisations over the signature of Mr Amour’s opponent from Seif Shariff Hamad— in the 1995 election debacle, the CUF’s vice-chairman, Seif Shariff Hamad. In it he alleged that mainland CUF leaders had been “bought” by Mr Amour in order to sow discord in party ranks, that the islands’ government was system- atically discriminating against schoolchildren and students from the northern island of Pemba, the core of the CUF’s support in Zanzibar, and that it was misappropriating money destined for non-governmental organisations.

Meanwhile, Mr Nyaruba had complained of being intimidated by thugs directed by the CUF secretary-general, Shabaan Mloo, and confrontation between the two factions degenerated into punch-ups at party meetings. The CUF is thus badly divided at a time when it should be attempting to lay the foundations of an incontrovertible victory at Zanzibar’s next polls, in 2000.

—while the NCCR runs Whether the CUF’s internal conflict is orchestrated by CCM fixers or not, the into personality problems NCCR seems to be doing a good job of tearing itself apart with no outside assistance. Reports circulated in late May of a serious falling-out between its two leading personalities, Mr Mrema and the founding secretary-general, Mr Marando. Both men’s supporters lined up behind them, as Mr Marando alleged that Mr Mrema was not sufficiently intellectually endowed to confront Mr Mkapa and senior colleagues in parliament or in the country’s next elections. The argument could paralyse the party: if it splits in two, neither faction could function legally, as they would both count as new parties and require re-registration.

The economy

The IMF approves a second Without even needing formally to convene to discuss the matter, the IMF board ESAF drawing— of directors approved a second drawing against Tanzania’s Enhanced Structural Adjustment Facility (ESAF) credit at the end of April. In the wake of a successful Paris Club restructuring of the country’s debt in January (see Foreign trade, aid and payments), the Fund’s country representative in Dar es Salaam, Festus Osunsade, described the directors’ decision to initial their approval of the Tanzania board paper without debate as reflecting “an all-time high” in the IMF’s confidence in the Tanzanian government’s reform programme. The approval made available a further $35m equivalent from the SDR162m ($234m) credit granted by the Fund in November last year (4th quarter 1996, page 13). A $100m World Bank structural adjustment credit was expected to follow on the heels of the ESAF drawing, swelling the country’s foreign exchange reserves to new records. With sharply improved trade results and renewed donor support,

EIU Country Report 2nd quarter 1997 © The Economist Intelligence Unit Limited 1997 14 Tanzania

Tanzania’s reserves had already reached $440m, the equivalent of 16 weeks’ import cover, by December last year—up from $270m only 12 months earlier.

—although the The IMF happily approved the ESAF credit despite significant slippage on a introduction of VAT is major element of the agreed policy programme—the introduction of value- postponed— added tax (VAT). The Tanzania Revenue Authority (TRA), which last year inher- ited responsibility for the VAT project from the Treasury, handed a draft VAT bill to the attorney-general at the beginning of 1997, and the National Assembly had been expected to pass it during April so that the new tax would form part of the budget for fiscal 1997/98 (July-June) and achieve its pro- grammed introduction date of January 1, 1998. It was a rush job, but the government has been taking its commitments to the IMF seriously and was pressing ahead. In mid-April, however, the Fund’s Mr Osunsade broke the news that implementation had been put back by six months.

—to avoid a repeat of Speaking in Dar es Salaam, Mr Osunsade referred to a “widely shared view” that Kenyan and Ugandan a delay would be “prudent”. It is clear that the IMF is impressed with the experiences— Tanzanian government’s commitment to reform, and a raft of other tax reform measures is expected in the coming budget (see below), but such flexibility on a major policy measure is rare, and for the IMF to have its own country representative handle the spin applied to an announcement of this kind is practi- cally unheard of. It seems that Tanzania is benefiting from the experience that the Fund has had with similar VAT schemes introduced at its urging elsewhere in the region. The Ugandan scheme, introduced last year, led to uproar and determined protest from the business community. Preparations for the launch of VAT in Kenya proved to be inadequate, leading to duplication between the new tax and existing levies, and it seems that a similarly bad start was feared in Tanzania. The Tanzanian implementation is further complicated by the relationship between the mainland and Zanzibar. Only since the beginning of the year have import tariffs been harmonised between the two in order to stem the haemorrhage of revenue via the infamous “Zanzibar route” loophole (4th quarter 1996, pages 13-14), and it could not even be taken for granted that the two halves of the Union would necessarily be ready to apply the same rate of VAT.

—as part of a tax Although the introduction of VAT thus slips beyond the 1997/98 fiscal plan- overhaul— ning horizon, an overhaul of other aspects of the existing tax regime was expected to form part of the June budget. For the second year running the Treasury has sought the input of the business community in preparing the budget. This time round, however, a formalised consultative structure was created, in the shape of a task force bringing together Treasury, planning and TRA officials from the government side with representatives from the Bank of Tanzania (BoT, the central bank), and members of the Tanzanian Chamber of Commerce, Industries and Agriculture (TCCIA) and the Confederation of Tanzanian Industries (CTI, the main employers’ body). There is general agreement on the need to reduce the multiplicity of taxes levied, to achieve a simplified regime applied to a widened tax base and to promote compliance. However, tax breaks to protect certain domestic business sectors, and the uncertain benefits of tax holidays applied to inward investment, are more

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contentious. The latter were being written into Tanzania’s new investment code (see below), and rounds of fairly delicate negotiations with visiting IMF fiscal policy specialists resulted during March, with IMF sources describing the tax proposals as “loaded with too many giveaways”.

—in the coming 1997/98 The IMF’s intervention worried business leaders, who believe that the opinions budget sought from them last year were ignored in the 1996/97 budget presented by the then finance minister, Simon Mbilinyi. His successor, Daniel Yona, had promised a “taxpayer-friendly” budget this time and the comment of the TCCIA’s spokesman, Elvis Musiba, on the Fund’s input was that “we hope it will not water down the consensus reached by the task force”.

While the detail of the final tax reform decisions has been kept under wraps, the outline budget frame was made public well in advance. The figures may still be altered before the minister stands up in parliament, but the proposed 1997/98 budget, at TSh780bn ($1.3bn), would be just 3% larger than the revised 1996/97 spend. Depending on the way prices evolve in coming months, this would represent a decline in real terms of some 5-15%. The latest inflation figures and the impact of the drought (see below) raise the possibility that planners may have underestimated the pace of price increases over 1997/98. On the income side, a greater reliance upon Tanzania’s own resources is forecast, with recurrent revenue projected to increase by 20% as foreign loans and grants decline by 22%.

Tanzania: Union government budgets (TSh bn; fiscal years Jul-Jun) 1996/97 1997/98 Original Revised Proposeda Total resources 758.9 756.5 780.4 Recurrent revenue 563.8 572.0 683.7 Foreign loans & grants 187.5 186.2 145.6 Privatisation proceeds 0.0 14.8 0.0 Non-bank borrowing 24.3 0.2 0.0 Bank borrowing –16.7 –16.7 –48.9 Total spending 758.9 756.5 780.4 Recurrent spending 631.9 631.9 663.7 Capital spending 127.0 124.6 116.7

a Subject to alteration before formal presentation.

Source: Planning Commission.

A new investment code is Along with the delayed implementation of VAT, a draft law to replace the put on hold— National Investment Promotion and Protection Act of 1990 was removed from the legislative timetable in April. After a first reading in January, the bill was due to be considered again by parliamentarians at their April sitting, but has now been returned to the drawing-board and is not expected to be read again until October.

Nobody was happy with the bill, particularly where it dealt with the balance between tax holidays for inward investment and the general rate of corporation tax. Local business groups were incensed not to have been consulted in its preparation and described tax-holiday proposals more generous than those contained in the 1990 act as favouring foreign capital over local investors.

EIU Country Report 2nd quarter 1997 © The Economist Intelligence Unit Limited 1997 16 Tanzania

TCCIA and CTI spokesmen argued that, if tax holidays were required to attract investment, then the existing tax burden was clearly too heavy and pressed instead for a reduction in the current 40% rate of corporation tax. The IMF, for its part, clearly believed the bill to be too generous to be consistent with longer- term government revenue targets. A Fund source confided to the international news organisation Reuters in Dar es Salaam: “The hope is this act won’t see the light of day for a while.”

—and changes are needed Although there was general relief that the investment bill was sent for redraf- ting, measures to facilitate the process of investing in Tanzania are urgently needed. A restructuring of the Investment Promotion Centre (IPC) as a “one- stop shop” is planned. Certificates of approval for proposed investments are to be processed to a tighter timetable (30 days maximum) or a reasoned refusal given, and it is proposed that a certificate, once granted, will secure for the investor wider freedoms as to how to proceed with the project than under the 1990 legislation.

It remains to be seen, when the changes eventually do take effect, whether the process of investing in Tanzania will actually become any easier. Under the present code, a decision on an investment approval is supposed to be turned round within 60 days, and yet, according to an “investor road-map” survey undertaken recently on behalf of the US Agency for International Development (USAID), the average investment project in the country takes up to three years to get off the ground. Generally taking 545-1,095 days in Tanzania, the same process averaged 730 days in Uganda, the consultants found, and just 183-365 days in Namibia. The greatest single stumbling-block, however, is quite beyond the remit of any successor to the IPC: the complexity of Tanzanian land law. In the past, corruption within the lands ministry developed because it was often the only method of getting any land deals done, but land reform—long overdue—will soon have to address the problems directly in the new era of clean government.

Inflation nudges higher— The rate of consumer price inflation in mainland Tanzania nudged higher in March, after four months of steady decline. In the year to March prices rose by 17.5%, the highest year-on-year rate of increase since October 1996. To an extent, seasonal factors were at work. Towards the end of the agricultural marketing year, before the new crops begin to be collected, food prices (which dominate the Tanzanian consumer price index) tend to rise, taking the overall price level with them. This year, however, drought conditions (see Agriculture) exacerbated the trend. Food prices rose by 28.5% in the year to March, while non-food items saw price increases of just 12.5%. The central bank now describes non-food price rises as representing the rate of “underlying inflation”, but by this measure also the March figures were the highest since late 1996.

—leaving the central bank The reversal of inflation’s declining trend emphasised the fact that the BoT had red-faced been overoptimistic when announcing a surprise halving of the Statutory Minimum Reserve (SMR) requirement in January (1st quarter 1997, page 13). Amid fears that the decision would compromise the campaign to reduce inflation, the government disowned the step, which it claimed the BoT had

EIU Country Report 2nd quarter 1997 © The Economist Intelligence Unit Limited 1997 Tanzania 17

taken without consultation. Under pressure from the international sponsors of the reform programme, the bank reversed the decision in February and the SMR was returned to 12% from the beginning of March.

Tanzania: selected financial indicators (% change unless otherwise indicated) 1996 1997 Oct Nov Dec Jan Feb Mar Inflationab 18.8 16.2 15.4 14.0 13.8 17.5 Money supply (M3)b 12.3 12.4 8.6 9.9 8.7 11.0 Treasury-bill yieldc 16.5 14.8 13.8 12.7 10.0 8.6 Exchange rate (TSh:$)d 598.9 601.3 595.6 603.3 605.4 606.2

a National consumer price index; mainland only. b Year on year. c Weighted average across all maturities. d Period averages.

Source: Bank of Tanzania.

Agriculture

The country is struck by Although no overall measure of its severity is yet available, a drought widely drought— described as the worst for 40 years has hit Tanzania and neighbouring territories. The extent of the problem varies across the country’s far-flung regions, but the northern coffee- and cotton-growing areas have seen low or poorly distributed rainfall since the beginning of the 1996/97 short rains in the last quarter of 1996 (see below). The commercial capital, Dar es Salaam, has seen water supplies to domestic and commercial premises cut (see Manufacturing and transport), and in mid-April the president, Mr Mkapa, estimated that as many as four million Tanzanians were facing famine. When heavy rains did fall in some areas in late March and April, the streets of Dar es Salaam were immediately flooded and 46 villagers were drowned in Kilwa District of the southern coastal region of Lindi.

—and the government In mid-March the agriculture minister, Paul Kimiti, called upon the private looks to the private sector sector to mobilise commercial imports, but as many as 700,000 people are estimated to need food aid to replace subsistence production, and would not be able to purchase their needs at market prices. A traders’ task force was established in response to the minister’s request, and soon busied itself with pressing the government for tax breaks and other special measures to “facilitate” its work. The holdings of the Strategic Grain Reserve (SGR) stood at 83,000 tons (compared with a storage capacity of 150,000 tons) at the time Mr Kimiti met traders. In April Mr Mkapa indicated that a 140,000-ton deficit would need to be plugged by imports and food aid. The need for emergency relief was being assessed by the UN World Food Programme, but it is a reflection of the changes wrought in Tanzanian society that the first appeal was to the private sector.

Coffee output is expected The poor 1996/97 rains are expected to result in lower coffee production in the to fall— 1997/98 crop year, with the arabica crop of the northern growing regions (on the slopes of Mount Kilimanjaro) being particularly badly affected. Recent estimates confirm the 1996/97 crop at around 41,000-43,000 tons (already down by

EIU Country Report 2nd quarter 1997 © The Economist Intelligence Unit Limited 1997 18 Tanzania

some 20% on the previous season), but no credible source has yet been bold enough to put a figure to the drought-affected 1997/98 crop.

—as the industry lobbies The plight of the estimated 20,000 smallholder producers in the northern for tax relief region was highlighted by a new voice in the Tanzanian coffee sector, the recently formed Tanzania Coffee Traders’ Association (CTA). Aiming to bring together the full range of the industry’s producers, processors and traders, the CTA has quickly emerged as an important lobby under the energetic leadership of its honorary secretary, Jeremy Lefroy. In the run-up to the 1997/98 budget, the CTA has been pushing for tax relief for the coffee sector, arguing that it is too heavily taxed at present. On the association’s calculations, the various levies applied to coffee production and trade imply that some 30-35% of a producer’s income net of production costs is taken by the Treasury in one way or another. The result, according to Mr Lefroy, is that the modest earnings of smallholder coffee producers are effectively subject to the highest tax burden applied to any income group nationwide.

Meanwhile, Tanzania’s ageing coffee bomas (enclosures) are delivering some of the lowest yields recorded worldwide. These are reckoned to average no more than 200 kg per hectare, as against 500 kg/ha in Kenya and as much as 2,000 kg/ha in Vietnam, where coffee production has grown rapidly in recent years. A $14m EU grant made last October is financing a replanting scheme, but discouraged smallholders are reported to be tearing out bushes in favour of bananas, a staple food in the northern regions.

Cotton is also affected by Northern cotton-growing regions on the shores of Lake Victoria have also drought suffered from the lack of rain and the 1997/98 crop is expected to be a poor one. According to the UK-based industry newsletter Cotton Outlook, the failure of the short rains in November-December 1996 led to reduced plantings, with the eastern lake shore (Mara Region) being particularly badly affected. The principal cotton-growing regions—Mwanza and Shinyanga, to the south of the lake—were believed to be less badly affected, but lint production in the coming season is forecast to be as low as 50,000 tons (down almost 30% from the estimated 70,000 tons of the 1996/97 campaign).

The tea industry is The history of Tanzania’s tea crop is characteristic of the fortunes of the agricul- restructured tural sector and wider economy. From some 4,000 tons per year at independence, output rose steadily to touch 18,000 tons of made tea at the end of the 1970s, before slumping through the 1980s. In the current decade growth has returned, and a provisionally recorded 26,000 tons was produced in the 1996/97 (July-June) crop year. Describing expansion plans to The EastAfrican in February, the managing director of the Tanzania Tea Authority (TTA), Salum Mijinga, explained that the TTA was to be split up into a new Tanzania Tea Board and a separate agency to promote development of the smallholder subsector. Small- holders supply roughly half of national output, but yields are low. The TTA’s six tea factories are to be sold off and, in Mr Mijinga’s estimation, “by December 1997 the entire tea industry will be fully privatised”. Via a levy on sales, new resources are being devoted to research under the control of the industry itself to complement the research undertaken by the long-time backbone of the plantation subsector, the UK tea company Brooke Bond.

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Finance

The NBC is to be split up After six years of restructuring the one-time state banking monolith, the National Bank of Commerce (NBC), the government has finally given up the effort to turn the institution around in anything like its original form and will now carve it up into three smaller institutions before the end of 1997. Announc- ing the decision in January, the finance minister, Mr Yona, acknowledged that the government was finally adopting a key recommendation of the Nyirabu Commission, which reported on the state of the banking system in 1990. The commission did not propose that any functional demarcation should separate the new banks, but that they should simply provide competition for one another. Seven years later, there is no need to create competition in the banking sector—the multiplicity of new private institutions provides that already. There- fore, the NBC’s parts are now each to inherit a distinct part of its remaining 70% or more share of the market for banking services, as follows.

• A microfinance bank will inherit most of the NBC’s rural branch network, providing savings products and small-scale credit. It is unlikely to be profitable and will remain largely (if not exclusively) government-owned.

• A trade bank will service larger corporate clients, with a particular emphasis on international trade. Private-sector equity participation is anticipated.

• A “regional bank” will provide ordinary retail banking services to private and business clients in the main urban centres. Again, joint-venture partners are to be sought.

Meanwhile, voting with its feet, Tanzania Breweries Limited (TBL) has moved some of its business from the NBC to the new private-sector banks, several of which have strong South African connections or are South African-owned. TBL, which is run and partly owned by South African Breweries, denied that it had left the state-owned bank altogether, but the decision was expected to presage the NBC’s loss of other high-profile clients.

Energy and water

“Nor any drop to drink”— The recent drought has pitched Dar es Salaam into a renewed water crisis. (Heavy rains a year earlier had clogged riverside pumping facilities, with the same result; 4th quarter 1995, page 20.) The commercial capital is almost entirely dependent for its water supply on the Ruvu River, some 60 km away, where falling water levels reduced offtake and were compounded by the contin- ual interruption of supplies due to frequent failures in the creaking water-supply infrastructure. According to the independent weekly Business Times, water demand by the city’s 3 million inhabitants and commercial users amounts to some 90m gallons (410m litres) per day, while only 40m gallons were being pumped on a good day and by mid-March the flow had been reduced to 26m gallons. With taps dry, 20-litre containers of water were reportedly being sold for TSh400-500.

—as water solutions are In February the government formed a crisis committee with representation from sought— foreign diplomatic missions and multilateral agencies to mobilise financial

EIU Country Report 2nd quarter 1997 © The Economist Intelligence Unit Limited 1997 20 Tanzania

support for a TSh7bn ($12m) emergency programme of well-sinking and rehabilitation in the city. Relief into the medium term will be provided by a $280m five-year rehabilitation and expansion programme for which backing from the African Development Bank (ADB) was announced in the same month. The ADB is to contribute $22m to the first phase of the programme, which will focus on patching mains leakages and performing repairs to pumping facilities. These measures alone, it is estimated, will increase water flow to the city by 40-50%.

—including the unlikely Dar es Salaam’s water crisis broke just as the promoters of a pipeline link prospect of a pipeline between Dar es Salaam and Lake Victoria launched a hard sell of their scheme from Lake Victoria to potential investors. Although parallel water and gas conduits had been mooted earlier, the project as presented was for a single pipe to deliver oil products to the lake port of Mwanza for onward water-borne transport to Uganda and the other landlocked lakeshore states. However, speaking at a promotional event held at the Dar es Salaam Sheraton in January, the then minister for energy and minerals, William Shija, was preoccupied with water (responsibility for which came under the energy portfolio until the end of 1995). Mr Shija made an emotional appeal for the project to incorporate a water supply for Dar es Salaam, throwing the event into some confusion.

The addition of a water pipe is unlikely, but, in its intended form, the $390m project to build a 1,150-km oil pipeline appears to be gathering support. The Ugandan government, keen to ease dependence on overland supplies from Kenya, has indicated its willingness to participate in the scheme.

Manufacturing and transport

Water shortages hit Tanzania’s manufacturing industry is concentrated in Dar es Salaam, and when Dar industry— the city runs dry all manner of businesses can do nothing but put up the shutters. Tanzania Breweries Limited (TBL), Tanzania Distilleries and the recently established Associated Breweries all lost production, but even Simba Plastics was affected and leading hoteliers feared that their facilities might have to close.

—but TBL continues to Water problems aside, TBL goes from strength to strength, announcing a second perform— dividend payment in February. The government stood to receive TSh3.2bn ($5m), to add to TSh2bn paid in 1996. By contrast, the administration’s dividend receipts from all remaining parastatal ventures were expected to be no more than TSh15.6bn during the 1996/97 fiscal year (July-June), more than half of which will derive from the BoT’s uniquely profitable position as central bank.

—as tobacco companies The South-African-owned cigarette company, Rothmans, unsuccessful bidders fight for the lungs of in the privatisation of the Tanzania Cigarette Company (TCC), has entered the East Africa Tanzanian market through Zanzibar. In April it was announced that an existing management contract had been replaced by Rothmans’ acquisition of a 90% stake in the Zanzibar Cigarette Company (ZCC). The company now plans to add to the local brands that ZCC makes from imported tobacco, by moving to production of its internationally known names. The move will allow Rothmans to compete with R J Reynolds (the successful bidder for TCC) in the larger

EIU Country Report 2nd quarter 1997 © The Economist Intelligence Unit Limited 1997 Tanzania 21

mainland market, via existing distribution agreements with the powerful JV Group. The company also says it will begin to use locally grown tobacco, a significant symbolic step, since otherwise only TCC can claim to add value to the country’s domestic crop.

Both companies believe that they face unfair competition from informal imports of cigarettes produced by the Kenyan associates of British American Tobacco (BAT) and Philip Morris, whose brands are widely smuggled into the country, avoiding import duties.

Infighting continues Convinced that a merger with the regional airline, Alliance Air, would put between ATC and Alliance them all out of their jobs, the board of the national carrier, Air Tanzania Corporation (ATC), has threatened to resign en masse in the event that a joint-ministerial decision in February to merge Alliance with ATC and Uganda Airlines goes ahead. It might be supposed that this would suit the Alliance team very nicely, but they argue that a separate ATC board could still be necessary after the merger.

Launched in 1995 (3rd quarter 1995, page 17), Alliance is a South African Airways (SAA)-led joint venture in which the Tanzanian and Ugandan governments have minority stakes. Originally expected simply to assume the role of national carrier, Alliance has been under fire from ATC from the start. The transport minister, William Kusila, apparently indicated Tanzania’s willingness to go ahead with the merger at a meeting with his Ugandan counterpart and Alliance in February, but the decision was not ratified by the Tanzanian cabinet when it met in early April. ATC is pressing for bilateral privatisation proposals to be sought from overseas airlines, but there is little prospect of anyone looking seriously at the company while the wrangle with Alliance over merger and route rights continues. The Ugandan government is keen to press ahead, meanwhile, and parallel talks are under way with Rwanda.

Foreign trade, aid and payments

The Paris Club writes Convened more or less biennially from 1986 to 1992, the Paris Club of off $1bn— Tanzania’s official bilateral creditors (foreign governments) had not met for five years when it gathered in Paris in late January to consider restructuring the country’s debt (1st quarter 1997, page 19). Applying the “Naples Terms”, dele- gates agreed to recommend to their governments the writing-off of two-thirds of eligible obligations and the rescheduling of the remainder over 23 years with six years’ grace.

Of Tanzania’s external debt of $7.7bn, the 12 Paris Club members accounted for $2.3bn. Of this figure, some $1.7bn was “eligible” debt falling due during the three years of the IMF Enhanced Structural Adjustment Facility (ESAF) programme running to November 1999—obligations deriving from previous Paris Club reschedulings are typically not eligible for renewed treatment—and it is two-thirds of this debt, roughly $1bn, that is to be written off. The immediate benefit to Tanzania is more modest, given that it has been obvious for a decade that the bulk of these borrowings would never be repaid, but the

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government expects to save TSh56bn ($92m) by the end of the 1996/97 fiscal year in debt-service payments which will now not have to be made.

—the World Bank debt Recent data on external debt provided by the World Bank in its Global snapshot is modestly Development Finance (formerly World Debt Tables) underline the severity of encouraging— Tanzania’s debt overhang. Total external debt stood at $7.3bn at the end of 1995, nearly $1bn of this in interest arrears. By the Bank’s reckoning, external debt equalled 207% of GNP, against 76% for sub-Saharan Africa as a whole. The ratio of total debt to exports of goods and services was put at a staggering 585% (against an already disquieting 236% for the region as a whole). However, the figures could be worse: 1995 debt totals roughly $300m less than our previous estimates, and the debt/export ratio was sharply down from its level in 1991: an astounding 1,247%. With the exception of an unidentified $135m forgiven in 1995, virtually no debt was restructured, the result of poor relations with creditor nations (who also tend to be major donors of aid) over tax exemption scandals, corruption and macroeconomic policy drift. Against this background, the Paris Club initiative seems timely. However, the government still has something over $250m in debt-servicing funds to find in 1997/98.

Tanzania: external debta ($ m unless otherwise indicated) 1993 1994 1995 Total external debt 6,655 7,095 7,333 Long-term debtb 5,671 5,977 6,129 Short-term debt 769 906 1,007 of which: interest arrears on long-term debt 708 825 948 Use of IMF credit 215 212 197 Public and publicly guaranteed long-term debtb 5,659 5,965 6,086 Official creditors 5,281 5,581 5,716 Multilateral 2,434 2,667 2,868 Bilateral 2,222 2,479 2,713 Private creditors 379 384 370 Total debt service paid 222 180 218 Principal 106 111 132 Interest 116 69 86 of which: short-term debt 4 5 4 Ratios (%) Total external debt/GNP 188.2 218.8 207.4 Debt service/exports of goods & services 28.5 18.7 17.4 Short-term debt/total external debt 11.6 12.8 13.7 Concessional long-term loans/ long-term debt 70.0 72.0 72.9

a Totals may not sum exactly due to rounding. b Long-term debt is defined as having an original maturity of one year or more.

Source: World Bank, Global Development Finance.

—and the trade balance After a spectacular increase in export earnings in 1995 (a 32% rise, albeit from improves— a low base), merchandise trade earned the country a record $762m in 1996 and receipts in the first quarter of 1997 were 20% up on the same period during the previous year. Fully disaggregated figures for the first months of 1997 were not

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available at the time of writing, but the 1996 data revealed particularly strong performance among the second rank of traditional agricultural export crops. Tobacco earnings climbed by 73% to $47m and those from cashew nuts by 47% to reach $94m. Tobacco is hence earning almost as much as the entire minerals sector, and cashew (which earned just $6m in 1990) is now approach- ing the importance to the economy of cotton or coffee.

Meanwhile, the trade deficit narrowed to $632m in 1996, a hefty gap but a great improvement from the $1bn deficits recorded as recently as 1993. Last year the recorded import bill also fell—by 10%, to $1.4bn—contributing to the trade balance’s recovery. A protracted technical problem with equipment transferring crude oil from visiting tankers to the Tiper oil refinery in Dar es Salaam contrib- uted to a $45m decline in crude imports, only partially made up by increased imports of refined products. Otherwise the recorded decline in imports, which was also reflected in lower capital and consumer goods purchases, is difficult to account for.

Tanzania: external trade ($ m) 1995 1996 1997 Year 1 Qtr Year 1 Qtr Exports 682.9 191.1 761.7 229.8 Imports –1,540.8 –376.6 –1,393.8 –343.4 Trade balance –857.9 –185.5 –632.1 –113.6 Source: Bank of Tanzania.

—with prices steady The EIU’s combined index of export unit values was unchanged in the final quarter of 1996, at 107 (against a base-period value of 100 in 1989-90), but the price indices of individual commodities among the country’s leading export earners all shifted. Coffee prices recorded a further decline, although coffee still emerged as the only commodity on the list to be worth more at the end of 1996 than in 1989-90. In trends too recent to be captured by the index, a unexpected pick-up in world coffee demand raised international prices once more during the first quarter of 1997.

Tanzania: indices of export unit valuesa (1989-90=100) 1995 1996 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr Coffee 153 128 124 130 121 118 Cotton 114 113 108 105 98 97 Tea 75 87 86 86 85 94 Tobacco 82 84 89 91 95 96 Gold 101 101 105 102 101 98 Combined indexb 126 115 112 114 107 107

a In dollar terms. b Average weighted according to 1989-90 export values.

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

With depressed cotton prices steady, the main performer among the export markets into which Tanzania exports was tea. Average realisations, as measured at London auction, rose by more than 10% in the final quarter of last year. The

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continued recovery in tea prices from an historical low in 1995 is encouraging at a time when the Tanzanian tea industry itself is in recovery (see Agriculture).

Aid holds up well despite The anger of creditors and concessional lenders with Tanzania in 1992-94, due donor impatience to the incompetence of the then finance minister, Kighoma Ali Malima, and maladministration of various kinds, is reflected surprisingly little in recent figures recorded by the OECD’s Development Assistance Committee (DAC) for aid flows during this period. Total net inflows of aid actually increased in 1994, the year donors began turning off the taps, with Japan and the multilaterals making increased net grants, presumably in honour of previous phased agreements. The impact is clearer in 1995, however, as the suspension of balance-of-payments aid began to bite: although overall bilateral net flows increased, key donors such as Denmark scaled back transfers and multilateral flows were sharply down. The fact that, in 1993, grants clearly exceeded net overall flows is probably explained by higher than normal inflows of grants and outflows of concessional project debt repayments. Just under 90% of net inflows in the period came in grant form. This tallies with World Bank data showing that the average annual interest rates attached to fresh inflows of concessional debt continued to fall during the same period: from 1.9% to 0.8%.

Tanzania: net official development assistancea ($ m) 1993 1994 1995 Bilateral 649.6 576.2 590.8 of which: Japan 88.8 104.8 124.3 Netherlands 55.1 57.8 77.4 Germany 72.0 64.4 67.2 Denmark 80.9 76.6 59.6 Multilateral 303.6 392.4 291.0 of which: IDAb 136.9 172.3 147.8 EU 69.5 87.3 63.8 ADFc 43.9 23.7 23.1 Total 953.2 968.5 881.8 of which: grants 1,024.9 776.4 717.4

a Disbursements minus repayments. Official development aid is defined as grants and loans with at least a 25% grant element, provided by OECD and OPEC member countries and multilateral agencies, and administered with the aim of promoting development and welfare in the recipient country. IMF loans, other than Trust Fund facilities, are excluded, as is aid from the former Eastern bloc. b International Development Association, the World Bank’s soft-loan affiliate. c African Development Fund, the African Development Bank’s soft-loan window.

Source: OECD Development Assistance Committee, Geographical Distribution of Financial Flows to Aid Recipients.

EIU Country Report 2nd quarter 1997 © The Economist Intelligence Unit Limited 1997 Comoros 25

Comoros

Political structure

Official name République fédérale islamique des Comores

Form of state Federal Islamic republic

Legal system Based on Code Napoléon, the 1996 constitution and Sharia (Islamic law)

National legislature Assemblée fédérale, deputies from each of the 43 electoral wards are chosen by universal adult suffrage for a term of two years

National elections December 1996 (legislative); March 1996 (presidential); next elections due December 1998 (legislative); 2002 (presidential)

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

State legislatures Each island has a governor, appointed by the president, and a directly elected council

National government The president and cabinet; last reshuffle March 1997

Main political parties In October 1996 leaders of 24 pro-government parties and movements merged to form the Rassemblement national pour le développement (RND); leading parties in the merger included the Union nationale pour la démocratie aux Comores (UNDC), the Rassemblement pour la démocratie et le renouveau (RDR), Udzima, Uwezo and Maecha Bora. Main opposition groups include Front pour le redressement national (FRN), Chuma, Forces pour l’action républicaine (FAR) and Front national pour la justice (FNJ—an Islamist movement)

Head of state Mohamed Taki Abdulkarim Prime minister Ahmed Abdou

Key ministers Administrative reform, decentralisation, labour & parliamentary relations Nidhoim Attoumane Agricultural, marine resources & environment Issamidine Adaine Economics, trade & commerce Harimiya Ahmed Education, culture, scientific research, government spokesman Mouzawoir Abdallah Finance, budget & planning Mohamed Ali Soilih Foreign affairs, cooperation & francophone relations Mouthar Ahmed Charif Health & population Nourdine Bourhane Interior Achirafi Saïd Hachim Justice & penal affairs Ali Hassanali Transport, tourism, crafts, posts & telecommunications Ibrahim Halidi Urbanisation, housing & regional development Abdulhamid Affretane

Central Bank governor Mohamed Halifa

Economic structure

Latest available figures

Economic indicators 1992 1993 1994 1995 1996a GDP at market prices Cfr bn 69.9 74.6 80.4 84.1 n/a Real GDP growth % 7.7 3.8 –2.3 –2.3 –7.0 Consumer price inflation % –6.8 2.9 10.2 7.1b n/a Population ’000 580 610 630 647 671 Exports fob $ m 21.5 21.5 10.8 11.2 9.2 Imports fob $ m 58.2 49.4 44.7 44.5 35.7 Current account $ m –14.4 9.5 –8.4 –19.0 –16.0 Reserves excl gold $ m 27.1 38.6 44.0 44.5 41.2 Total external debt $ m 188 184 189 203 n/a External debt-service ratio % 6.2 1.8 3.1 0.9 n/a Exchange rate (av) Cfr:$ 264.7 283.2 416.4 374.4 383.7

May 24, 1997 Cfr426.7:$1

Origins of gross domestic product 1995 % of total Components of gross domestic product 1994 % of total Agriculture, fishing & forestry 39.1 Private consumption 74.4 Industry 12.6 Government consumption 21.1 Manufacturing 4.4 Gross domestic investment 21.3 Services 48.9 Exports of goods & non-factor services 17.8 GDP at market prices 100.0c Imports of goods & non-factor services –34.7 GDP at market prices 100.0

Principal exports 1995 $ m Principal imports 1995 $ m Vanilla 6.2 Rice 14.0 Ylang-ylang 2.3 Petroleum products 7.7 Cloves 0.4

Main destinations of exports 1995d % of total Main origins of imports 1995d % of total France 54.5 France 60.1 Germany 18.2 South Africa 9.8 USA 18.2 Kenya 5.2 Singapore 3.9 a EIU estimates. b As measured by the GDP deflator. c Total does not sum in source. d Based on trading partners’ returns; subject to a wide margin of error.

Outlook for 1997-98

The opposition will be Opposition leaders are likely to treat overtures from the president, Mohamed wary of overtures from Taki Abdulkarim, with caution. Mr Taki’s performance to date suggests he has Mr Taki no serious interest in consensus politics and would be only too willing to pin the blame for unrest on opposition politicians. Given Mr Taki’s dominance of the political system, and the power he now enjoys through the revised constitution, the opposition Front pour le redressement national (FRN) alliance is in a weak bargaining position. The FRN’s leader, Abbas Djoussouf, is likely to pose as a responsible critic, trying to avoid putting himself in a position where he could be accused of fomenting unrest. He has refrained from indulging in easy popu- list rhetoric during the recent upheavals. With the next elections a long way off, he has little to gain either from a confrontational stance or from a rush into talks in which the president is almost certain to concede nothing of substance.

The IMF-World Bank deal Comoros’ recent agreement to a six-month programme monitored by the IMF may persuade France to and the World Bank may persuade France to release some interim funding in release some aid— order to prevent a further deterioration in state finances. But the willingness of Paris to do this will not have been increased by Mr Taki’s concentration, during the past year, on political and social issues rather than the economy. The previous government, led by Caabi El Yachroutu, made considerable progress in rebuilding state finances, but Mr Taki neglected to build on this legacy while it was still intact. France is unlikely to release a full-scale package of budget aid unless and until Comoros successfully completes the early stages of the IMF- monitored programme. Indeed, given the country’s erratic record, Paris may hold back until a formal Enhanced Structural Adjustment Facility (ESAF) has been approved by the Fund.

—and the EEDC deal is It now seems likely that the planned handover of Eau et électricité des Comores on course (EEDC) to be operated by private concession will take place later this year. The Caisse française de développement (CFD, the French state development bank) has played a key role in the talks about EEDC and is poised to provide a FFr20m ($35m) funding package to finance essential investments, should a deal go ahead with the French company Sogea. Donors might also insist that the fuel parastatal, Société comorienne des hydrocarbures (SCH), be put under private management or sold off, or that a competing fuel supplier be brought in, to drive down fuel costs and thus allow an improvement in EEDC finances. But it is unclear whether the government would agree to give up its rich stream of income from SCH. One parastatal which does have forward-looking plans and may even have some of the money needed to implement them is the Société nationale des postes et des télécommunications (SNPT), which last year achieved a net financial surplus double that seen in 1995. It has plans to extend the domestic telephone network and to improve international links to a level that would give Comoros access to the Internet.

Comoros: gross domestic product Comoros: Comorean franc real exchange % change, year on year rates (b) 8 1990=100 Comoros 120 6 Africa 4 110 2 KSh:$

0 100 R:$ -2

90 -4

-6 Cfr:$ 80 -8 1992 93 94 95 96 (a) (a) EIU estimates. (b) Nominal exchange rates adjusted for changes in relative consumer prices. Sources: EIU; IMF, World Economic Outlook. 1990 91 92 93 94 95 96(a)

Review

The political scene

Unrest poses a first serious The president, Mohamed Taki Abdulkarim, faced little serious challenge to his challenge for Mr Taki policies during 1996; demoralised opposition parties failed to make much head- way and Mr Taki seemed able to impose changes more or less at will. But during the early months of 1997 he has been given a much rougher ride, as public service employees have staged mass protests at salary arrears, provoking the authorities into an intemperate and often violent response, notably on Anjouan island. A president who previously seemed sure-footed, if high-handed, has not really found a political answer to these tensions. The scale of the protests, and the harshness with which they have been met by security forces, have marked a significant worsening of the political climate. During the presidency of Saïd Mohamed Djohar (1990-96) there were periodic strikes and demonstrations, but confrontations were rarely—if ever—as fierce as they have been during recent months.

The wave of unrest began on January 1, when several hundred public servants began a strike to protest at ten-month arrears in salary payments. Mr Taki had failed to live up to his repeated promises to clear the pay backlog by the end of 1996, although the government had signed an agreement with the teachers’ union over the issue. General popular resentment towards the government had, by this stage, been further stirred by three months of frequent power cuts and water shortages, due to operational problems at the troubled utility Eau et électricité des Comores (EEDC): in some areas there is no water or power for up to three days at a time and crowds gather each time any water is available at public taps or fountains. Some small businesses were forced to shut down.

The government responds Faced with growing discontent, the government began to harass opposition by targeting opposition politicians, an authoritarian reaction which is becoming typical of the Taki politicians— regime; other opposition figures were briefly detained before the parliamentary

election (1st quarter 1997, pages 25-26). The restrained and moderate leader of the Front pour le redressement national (FRN) alliance, Abbas Djoussouf, was detained by security forces for several hours on January 15, shortly after opposition parties accused the government of “dictatorial drift”, calling on Mr Taki to resign. The government also banned an opposition member and former minister, Oukacha Elarif, from travelling abroad. Tensions rose and strikers began to erect barricades and burn tyres in the streets of the capital, Moroni.

—and using force to crush The prefect of Moroni, Salim Allaoui, gave approval for a fresh trade union demonstrations demonstration in late January. When the interior minister, Achirafi Saïd Hachim, intervened to impose a ban, union leaders decided to hold a protest meeting on private premises instead. But the government seemed determined to prevent even this from taking place: it arrested the general secretaries of the teachers’ and hospital workers’ unions and deployed police, gendarmes and soldiers, who attacked the meeting with whips and tear-gas. Strikers moved to the streets, where they were joined by local youths, and barricades were erected; security forces responded with batons and gunfire. About 30 people were injured, up to 20 with gunshot wounds.

A ville morte protest is Opposition parties and the unions collaborated in organising a nationwide widely followed— “dead city” (ville morte—a strike combined with business closure) protest on February 13. This was widely followed, particularly in Moroni. The government began negotiations with the striking teachers and Mr Taki held a low-key meeting with an opposition leader and former prime minister, Mohamed Abdou Madi. But the authorities also detained about 40 young opposition supporters for five days and banned a demonstration scheduled for February 18. When protesters in Anjouan ignored the ban, there were violent clashes with security forces, leaving a trade unionist critically injured.

—and a mysterious group Further signs of the tensions and resentments still bubbling came with a round mounts sabotage attacks of sabotage attacks in February, echoing those seen on the eve of the parliamentary elections in late 1996 (1st quarter 1997, page 25). A self-proclaimed “Groupe de résistance” distributed tracts criticising Mr Taki and claiming responsibility for arson attacks on February 23; these caused minor damage to the foreign ministry building and destroyed several official vehicles. A power station was also sabotaged, causing further disruption to Moroni’s already erratic electricity supply.

Mr Taki makes overtures Mr Taki put out feelers to the opposition at this point, inviting Mr Djoussouf to to the opposition— a meeting in early March. The FRN leader accepted in principle, but remained justifiably suspicious that Mr Taki’ s overtures might be no more than a public relations gesture rather than signifying a real willingness to engage in serious discussions. Mr Djoussouf played for time, indicating that he would set conditions for the meeting.

—as strikes widen and Strikes continued, however, despite mass protests in March by school pupils French socialists express demanding the resumption of classes. Taxi and public transport drivers concern launched a stoppage on March 10 in protest at a wave of official checks on vehicles ordered by Colonel Moilimou Djoussouf, the retired French army

sergeant recently appointed commander of the Forces unifiées de sécurité (in which the gendarmerie and the old Force comorienne de défense have been merged). France’s opposition Parti socialiste publicly expressed its concern over the “brutal” way in which the Comorian government had responded to recent protests.

A sacking threat stirs By mid-March tensions were particularly acute on Anjouan and Mohéli islands, protests on Anjouan— where Mr Taki, a native of Grande Comore, has never been popular; both islands have seen their autonomy eroded under the new constitution introduced by the president last year (3rd quarter 1996, pages 27-28). Private schools were by then out on strike in sympathy with the public sector, and pupils and parents took over government offices in Mutsamudu (Anjouan’s main town) on March 10; three days later the airport was shut. The home on Anjouan of the prime minister, Ahmed Abdou, was the target of an arson attack. The immediate cause of the fresh flare-up was a threat by the government to suspend February salary payments to striking teachers and health workers, and to recruit new staff in their place.

—provoking a violent The governor of Anjouan, Ahmed Abdallah Sourette, and the island’s prefect, Ali response by security Oicheha, were away at the time and the locally based security forces seemed forces— unable to defuse the new wave of protest. Locals soon took over effective control of the whole island, and anger was at boiling-point. The government sent 100 extra troops to the island to regain control. Talks promised for March 14, a Friday, the day of weekly Muslim prayers, failed to take place. Instead, some 3,000 demonstrators clashed with troops clearing barricades in the streets of Mutsamudu. There were further clashes the next day and a protester was shot dead. Mass arrests and a curfew only aggravated tensions.

—amid support for Protesters received a crucial boost when imams (prayer leaders) in local mosques protesters from the began to call for demonstrations in protest at the detention and beating up of mosques 50 young protesters by the police. Mutsamudu port and airport were closed, effectively cutting off Anjouan from the rest of the country. Telephone reports to Paris indicated that security forces had shot and wounded a dozen people, at least three seriously, besides the one fatality. It was harder to assess whether the violence represented a deliberate attempt to intimidate locals or was the panic reaction of soldiers when faced with a mass of determined demonstrators. The security forces also arrested a number of prominent local political figures including a former member of parliament for Anjouan, Ahmed Fouad, his brother, Mohamed Alaoui, and a prominent member of the opposition Front démocratique (FD), Abdou Zakaria. The FD is part of Mr Djoussouf’s FRN and its leader, Moustoifa Saïd Cheikh, was briefly detained before last December’s election (1st quarter 1997, page 26). There were widespread reports of beatings and looting by soldiers in Anjouan. By March 17 a Paris-based Comorian human rights group, SOS-démocratie, was reporting that 70 people had been arrested and four had been shot dead, with 20 wounded.

Mr Taki reshuffles the Eventually, Mr Taki decided sweeping personnel changes were required in government— government: he dismissed all the senior figures in the Anjouan administration and appointed a new island governor, Mahamoud Saïd Attoumane, who had

been governor under Mr Djohar. He also reshuffled the cabinet, scrapping the separate portfolios for industry, employment and youth and sports (for which a later reorganisation was promised), and separating the finance and budget portfolio from the economics ministry. The latter went to Harimiya Ahmed, formerly the justice minister. In mid-May Mr Abdou easily survived a no- confidence vote in parliament over the government’s handling of the Anjouan unrest.

—declares two days’ The death in February of the paramount Chinese leader, Deng Xiaoping, was mourning after Deng greeted by the government of Comoros with a declaration of two days’ official Xiaoping’s death— mourning—probably motivated by Mr Taki’s wish not to lose the diplomatic credit earned through his visit to Beijing in December 1996 (1st quarter 1997, pages 27-28). China has promised to build government offices and a television station in Comoros.

—and closes schools for The authorities have finally begun to enforce firmly the ban on the sale and Ramadan consumption of alcohol outside hotels and diplomatic premises, formally announced last August but largely ignored until recently. On January 20 soldiers from the presidential guard raided two bars and two shops in Moroni and publicly destroyed their stocks of alcohol in the street outside, in spite of claims by the proprietors that they had all the necessary official permits. Mr Taki seems to have decided that some gestures in the direction of intolerant, conservative populism are needed to stop the drift of support to the Islamist Front national pour la justice (FNJ), which now has three seats in parliament. The government also decided to close all schools for the holy month of Ramadan, other than Koranic schools and the French expatriate school.

Mr Taki has always presented himself as committed to traditional Islamic mores but may now fear being outflanked. Muslim clerics certainly scent an opportun- ity to reinforce adherence to conservative values. In a broadcast marking the start of Ramadan in January, the spiritual leader of Muslims in Comoros and chairman of the council of Ulema (senior Muslim jurists and theologians), Saïd Mohamed Charif, called for police action over women wearing “obscene” clothes. He was clearly targeting local women and girls who wear miniskirts and other Western-style clothes.

The economy

An IMF-monitored The finance minister, Mohamed Ali Soilih, has reached agreement with the programme is agreed— World Bank and IMF on a six-month programme of austerity measures aimed at restoring the country’s run-down public finances. The programme, agreed on February 8 with a visiting mission of Bank and Fund officials, does not amount to a formal Fund facility, but it will be monitored by officials from both Bretton Woods bodies. It could eventually lead to a fully-fledged IMF Enhanced Structural Adjustment Facility (ESAF) of the kind already granted to most other Franc Zone countries during the past three years. The Fund had begun to step up the pressure on Comoros in late 1996, reportedly warning the government that the country’s economic and financial performance remained short of expectations. But a first round of talks about a programme had faltered

over Mr Taki’s reluctance to hurry forward with privatisation. Key elements of the new programme include: a drive to increase customs and tax revenue; moves towards privatisation; and a reduction in the public-sector payroll from $26m per year to $22m. Recent strikes (see The political scene) will help the government to save on salaries, because employees will not be entitled to payment for the periods during which they have not been working. The impact will be limited, though, because the upheaval in the public sector may lead to even greater lapses than usual in revenue collection.

—as salary cuts exacerbate Eventually, pressure from outside financiers drove the government to impose inter-island tensions cuts of 5-10% in civil service pay; state employees right up to the prime minister were affected, and high-ranking civil servants saw their accommodation allowances suspended. There was particular resentment among the many Anjouanais and Mohéliens employed in civil service posts in central government in the capital, Moroni, on Grande Comore, when the government cancelled the special allowances they receive for working away from their home islands. Many felt they were being deliberately pressurised, in the hope that they would return to Mohéli and Anjouan (where resentment of the Moroni government is already deeply entrenched). Rumours at the time of computer errors being responsible for some of the more swingeing reductions may have been a cover for a tactical retreat by Mr Abdou, allowing him to abandon planned cuts once the strength of political opposition became apparent.

Sogea is chosen as EEDC’s Tenders from foreign investors interested in taking over the troubled water and preferred bidder power utility, Eau et électricité des Comores (EEDC), were opened in February. Two French companies, Sogea (a subsidiary of Générale des eaux) and Lyonnaise des eaux (Elyo), were in the running and the government chose Sogea as the preferred bidder. Detailed talks about a contract have been under way since then. The government had been reluctant to press ahead with privatisation because the EEDC is a major source of jobs; once under private management, it is likely to operate tight staffing policies. Sogea will need to improve ramshackle billing operations and maintenance work, and invest in training the 370 staff, of whom only 40 or 50 may have relevant technical qualifications, according to some reports. Another issue on the agenda will be the money owed to EEDC by the government, which is by far the company’s largest debtor. Also facing Sogea is the challenge of ending the embezzlement and charging exemptions which have eroded the parastatal’s finances. Finally, there is the awkward question of the price at which the parastatal Société comorienne des hydrocarbures (SCH) supplies EEDC with fuel. SCH has kept prices artificially high, which has had a correspondingly inflationary effect on electricity prices. However, SCH is a rich source of income for the government—a factor its own management has stressed in lobbying against privatisation—and it may not be easy to secure an end to the high-price regime.

Foreign trade and payments

Mr Taki is resentful of The president, Mr Taki, has been complaining privately about the lack of French caution over aid— economic support from France at a time when Comoros is in desperate financial straits. But the conservative French stance on aid to Comoros is entirely

consistent with its policy elsewhere in Africa—that large-scale budget and balance-of-payments aid is conditional on a country’s readiness to sign up for an IMF-sponsored economic reform programme.

—as efforts to seduce Comoros’ monthly salary bill is Cfr600m ($1.41m). However, the Swiss-based donors prove largely customs inspection firm Cotecna, which recently took over supervision of the fruitless country’s customs, has reported that customs revenue in December totalled only Cfr800m. Even a marked improvement in revenue collection, to generate Cfr1bn per month, would leave government finances under pressure, with Cfr6bn or more in salary and other domestic arrears yet to be cleared. There seems little chance that large-scale foreign aid will come to an early rescue: Kuwait has indicated that it may support some projects, and help set up a new bank, but there is no sign of progress as yet. The European Commission has just signed the outline protocol for a five-year European Development Fund (EDF) programme covering 1996-2000. This promises Ecu27.5m (more than FFr180m), of which 70% is immediately available. But four-fifths of the money is earmarked for transport, communications and the environment, with the rest divided between local projects, the private sector and training, and will not help ease strains on the government’s current expenditure budget. EU funding for that would be treated separately and would almost certainly be subject to the same requirement for an IMF ESAF programme as applies to French aid.

Mayotte

MPM support slips badly Council by-elections on March 16 on the French-ruled island of Mayotte (part in a narrow election of the Comorian archipelago which has remained under French administration victory since Comoros’ independence in 1975) saw the territory’s leading party, the Mouvement populaire mahorais (MPM) suffer a painful loss of support. The party still topped the poll, but secured only 35% of the vote—12 percentage points down on its score in the previous local elections in 1991. The Rassemblement pour la république (RPR), the metropolitan-based party of France’s president, Jacques Chirac, polled 29%, only 1.5 percentage points down on its 1991 vote. The big gainers were an assortment of right-wing candidates, who picked up a combined 21% of the vote. The slippage in support for the MPM may reflect frustration among local voters who want to see Mayotte more closely integrated with France itself, something the MPM has failed to deliver.

EIU Country Report 2nd quarter 1997 © The Economist Intelligence Unit Limited 1997 34 Quarterly indicators and trade data

Quarterly indicators and trade data

Tanzania: quarterly indicators of economic activity

1994 1995 1996 1997 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 34 ( 40 ) ( 43a ) n/a Cotton, lint “ 48 ( 45 ) ( 60a )n/a Sisal ” 26 ( 30a ) ( 30a ) n/a Prices Monthly av Consumer prices: 1990=100 289.9 324.4 329.4 335.7 353.0 406.6 408.2 397.2 412.3 468.1 change year on year % 37.0 34.7 27.0 27.4 21.8 25.3 23.9 18.3 16.8 15.1 Money End-Qtr M1 TSh bn 303.24 345.82 359.00 370.21 394.01 387.19 419.73 433.38 424.74 446.78 change year on year % 33.3 32.5 30.1 27.8 29.9 12.0 16.9 17.1 7.8 15.4 Foreign trade Qtrly totals Exports fob TSh m 93,431 104,849 85,158 64,606 135,765 103,925 98,704 88,429 150,286 137,590 Imports cif “ 214,653 176,062 287,742 252,133 252,974 204,887 162,403 209,782 231,195 205,646 Exchange holdings End-Qtr Bank of Tanzania: foreign exchange $ m 317.5 263.7 239.2 220.8 255.3 211.6 224.8 311.9 425.6 389.3 Exchange rate Market rate TSh:$ 523.45 544.54 602.91 613.80 550.36 542.02 620.19 590.48 595.64 600.14

Note. Annual figures of most of the series shown above will be found in the Country Profile. a Estimate.

Sources: FAO, Quarterly Bulletin of Statistics; IMF, International Financial Statistics.

Comoros: quarterly indicators of economic activity

1994 1995 1996 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr Money End-Qtr M1, seasonally adj: Cfr m 13,349 11,846 11,131 11,267 10,813 11,327 12,325 12,367 12,893 13,423a change year on year % n/a 14.6 3.0 10.2 –19.0 –4.4 10.7 9.8 19.2 n/a Foreign tradeb Annual totals Exports fob $ m ( 56 ) ( 11 ) ( n/a ) Imports cif “ ( 115 ) ( 153 ) ( n/a ) Foreign exchange End-Qtr Central Bank $ m 40.65 43.22 48.36 46.66 47.89 43.58 47.75 46.01 53.62 48.29a Exchange rate Market rate Cfr:$ 396.11 400.95 363.68 363.98 368.59 367.50 377.36 386.44 387.86 392.78c

Note. Annual figures of most of the series shown above will be found in the Country Profile. a End-November. b Source: DOTS. c End-1 Qtr 1997, 423.26, end-April 1997, 436.67.

Source: IMF, International Financial Statistics.

EIU Country Report 2nd quarter 1997 © The Economist Intelligence Unit Limited 1997 Quarterly indicators and trade data 35

Tanzania: foreign trade TSh m Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec 1992 1993 1994 1995 1996 Imports cif Food & beverages 14,838 38,566 64,753 44,738 36,710 Fuels 45,217 69,607 75,771 54,309 92,075 Textiles & clothing 102,124 88,966 118,058 86,348 201,676 Metals 34,684 45,327 54,620 39,454 24,428 Machinery 61,245 114,568 155,399 104,167 147,803 Transport equipment 101,188 103,426 122,589 83,815 116,870 of which: cars 69,004 70,329 83,361 56,994 70,122 Total incl others 449,480 615,990 765,757 968,910 804,950 Domestic exports fob Cashew nuts 6,487 9,133 26,507 36,077 53,508 Coffee 17,301 39,428 58,765 81,168 79,649 Cotton, raw 28,367 31,697 53,425 69,238 79,996 Sisal 391 1,441 2,643 3,535 2,780 Minerals 12,920 28,074 15,390 25,545 29,288 Petroleum products 2,487 5,632 2,791 6,215 6,415 Manufactured goods 18,439 21,625 39,162 63,042 64,506 Total incl others 123,966 181,474 265,177 390,378 441,344

$ m $ m Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Exports foba 1992 1993 1994 1995 Imports cifa 1992 1993 1994 1995 Germany 47 48 50 66 UK 152 180 139 160 India 34 40 53 58 Kenya 49 103 122 150 Japan 30 37 45 49 Japan 120 123 90 119 Belgium-Luxembourg 34 34 40 47 Saudi Arabia 131 131 93 104 UK 34 35 31 39 China 119 38 72 82 Rwanda 21 25 30 36 India 82 69 76 78 Netherlands 20 21 25 36 South Africa n/a 20 57 70 Portugal 22 22 22 27 Italy 74 60 66 62 Total incl others 472 494 550 719 Total incl others 1,512 1,421 1,438 1,659 a Derived.

Sources: Bank of Tanzania, Economic Bulletin; IMF, Direction of Trade Statistics, yearly.

EIU Country Report 2nd quarter 1997 © The Economist Intelligence Unit Limited 1997 36 Quarterly indicators and trade data

Tanzania: UK trade (£ ’000) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Feb Jan-Feb 1993 1994 1995 1996 1996 1997 UK exports fob Food, drink & tobacco 2,444 1,458 2,377 2,644 202 607 Textile fibres & waste 6,217 6,150 6,870 7,538 1,247 1,159 Petroleum & products 516 255 77 98 3 455 Chemicals 8,899 8,277 8,792 8,997 1,684 1,408 Rubber manufactures 774 651 844 507 71 80 Paper & manufactures 1,064 979 1,170 546 164 250 Textile yarn, cloth & manufactures 639 441 522 652 183 204 Non-metallic mineral manufactures 1,410 804 986 1,671 231 43 Iron & steel 2,241 2,340 1,608 1,809 325 305 Non-ferrous metals 471 299 405 181 24 16 Metal manufactures 3,788 3,351 2,139 2,556 330 470 Machinery incl electric 34,709 28,837 28,562 28,057 3,297 3,892 Road vehicles 21,121 14,310 20,209 14,091 5,442 1,041 Other transport equipment 13,887 1,033 2,192 1,548 114 199 Clothing 418 383 969 669 133 83 Scientific instruments etc 2,233 2,504 2,566 3,289 1,036 733 Total incl others 108,943 82,312 87,412 81,851 15,379 12,287 UK imports cif Sugar & products 4,624 4,458 4,846 5,802 5,315 5,021 Coffee, tea & spices 5,781 3,652 3,475 4,293 670 653 Tobacco & manufactures 2,714 1,270 4,131 7,611 185 1,534 Textile fibres & waste 1,211 1,340 1,502 1,185 230 433 Textile yarn cloth & manufactures 1,946 1,518 926 556 149 130 Non-ferrous metals 313 1,199 1,486 0 0 121 Machinery & transport equipment 3,317 1,350 4,519 1,011 379 116 Clothing 3,896 5,390 4,222 5,255 670 271 Total incl others 25,633 22,452 27,480 28,983 7,849 9,163 Source: UK HM Customs & Excise, Business Monitor, MM20.

EIU Country Report 2nd quarter 1997 © The Economist Intelligence Unit Limited 1997 Quarterly indicators and trade data 37

Comoros: foreign trade ($ m) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Exports fob 1990 1991 1992 1993 Imports cif 1990 1991 Cloves 1.33 3.87 0.41 1.08 Meat & preparations 2.03 4.47 Vanilla 9.39 15.89 15.59 19.42 Rice 8.33 7.18 Essential oils 6.33 3.68 4.35 3.34 Petroleum products 6.13 6.24 Total incl others 17.96 24.91 22.14 25.06 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 Jan-Dec Jan-Dec Exports foba 1992 1993 1994 1995 Imports cifa 1992 1993 1994 1995 Colombia n/a 32 38 n/a France 65 61 66 92 France 11 10 8 6 South Africa n/a 12 12 15 USA 10 9 6 2 Kenya 5 6 7 8 Germany 3 2 1 2 Singapore 5 5 5 6 Malaysia 2 n/a n/a n/a Belgium-Luxembourg 3 4 4 5 Total incl others 27 54 56 11 Total incl others 105 107 115 153 a Derived.

Sources: UN, International Trade Statistics, yearbook; IMF, Direction of Trade Statistics, yearly.

Comoros: French trade ($ ’000) Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec 1991 1992 1993 1994 1995 French exports fob Cereals & preparations 1,292 841 815 937 1,408 Chemicals 5,342 5,831 7,250 7,670 8,451 Rubber & manufactures 609 550 502 449 671 Textile yarn, cloth & manufactures 1,186 772 726 399 578 Iron & steel 1,630 1,705 1,098 1,262 1,489 Metal manufactures 3,142 3,215 3,462 3,330 4,740 Machinery incl electric 14,371 16,990 15,263 14,393 24,415 Transport equipment 12,421 11,284 8,896 8,593 14,781 Scientific instruments etc 1,478 1,476 1,905 1,766 2,954 Total incl others 56,973 59,282 57,991 59,924 86,632 French imports cif Coffee, tea, cocoa, spices 6,785 5,231 6,417 2,790 1,197 Chemicals 7,054 6,913 5,042 5,664 5,216 Total incl others 14,253 12,304 11,523 8,704 6,525 Source: UN, External Trade Statistics, series D.