Drawing the wrong lessons from Magufuli’s rule in Tanzania

The Tanzania government's brand of heavy-handed state intervention risks fueling skepticism about the role of the state in development.

World Bank President Jim Yong Kim meets with President John Magufuli of Tanzania. Image credit Sarah Farhat for the World Bank via Flickr (CC).

In recent weeks, Tanzania has (again) featured prominently in the international business press, and not in the most flattering light.

The Financial TimesBloomberg and others reported the move by President John Magufuli’s government to block the International Monetary Fund (IMF) from releasing a report critical of government’s economic management. The report took aim at “unpredictable and interventionist policies that worsen the investment climate and could lead to meagre growth.” Now leaked online, the report projects 4-5 percent growth should the government stay its current course. That is down from a decade-long trend of over 6 percent growth and well under the government’s projected 7 percent. Critical observers in Tanzania were quick to lament that the lower growth rate, amidst an ongoing population boom, “is tragic for a very poor country like ours!”

This furore came hard on the heels of another controversy: Parliament’s decision—at the behest of the Speaker—to suspend work with Tanzania’s Comptroller and Auditor General (CAG). The CAG had just released a report of his own raising serious questions about both government economic management and accountability.

Certainly, much has changed since President Magufuli took office in 2015.

The “Bulldozer,” as he is known, came in promising an industrialized “Tanzania of factories,” declared a war on corruption and exploitation by investors, launched a host of new infrastructure projects, and adopted a generally more statist policy orientation.

This change was initially celebrated. It marked an apparent break with the status quo under Magufuli’s predecessor, Jakaya Kikwete, whose administration was criticized for its corruption and seeming lack of policy direction. Magufuli’s ambition also appeared in line with a general shift in ideas about development, both in Tanzania and further afield. For at least a decade, the neoliberal economic consensus of the 1980s and 1990s had been eroding, giving way to a renewed appreciation for the role of state intervention and particularly of active industrial policy in driving economic transformation.

The now waning enthusiasm for Magufuli’s approach is doubtlessly well justified. Tanzania’s economy is suffering, and the country has also taken a sharp authoritarian turn under his watch.

There is, however, a danger that we draw the wrong lessons from the Magufuli experience. The government’s particular brand of heavy-handed state intervention risks fueling a general skepticism about the role of the state in development. As noted, the space to reconsider the value of statist policies reopened only recently. It would be hugely counterproductive to see it close back down, returning us to what Malawian economist Thandika Mkandawire has denounced as the “Manichean discourse” of state versus market.

What we need instead is to analyze what ideas are driving the Magufuli government’s economic approach, the criticisms, and what an alternative might look like. Is that alternative a return to straightforward “market principles,” as the IMF report suggests? Or is it about taking a cue from Mkandawire and imagining something different? That something could involve continued experimentation with industrial policy. It could also go further, though, and embed what has proved a highly unequal, inefficient and often exploitative market economy in more democratic forms of ownership and control.

As Tanzania’s founding President Julius Nyerere once said, we need to keep searching, to keep “groping forward” until we find a “new synthesis,” one that is more democratic and redistributive.

Paradigm shifts in African development

Before delving into the Tanzanian case, it is worth reflecting more on what is at stake, on why we should resist returning to the old “Manichean discourse” about African development.

Since at least the 1980s, much of the discourse, especially non-African writing about African political economy, tended to downplay the significance of ideas in shaping policy. Rather, politics and the management of state resources were supposedly governed by venal interests.

Political scientist Nicolas van de Walle wrote in his influential 2001 book, African Economies and the Politics of Permanent Crisis: “The absence of a developmental project is [due to] the lack of discipline, vision, and patriotism of a ruling elite that has always viewed its own material enrichment as the primary objective of political power” (124).

Van de Walle conceded there was occasional “meaningful intellectual debate about policy,” but he maintained this had a damaging statist bias, which was itself “politically expedient” (128 & 137-141).

This cynicism about the motivations of African politicians and the disregard for statist ideology was in line with mainstream (western) economic thinking on Africa from the 1980s through to the 2000s, championed notably by the IMF and World Bank.

Over that time, an anti-statist, “Washington Consensus” also captured much of the African political elite. This further limited prospects for meaningful intellectual debate, albeit not for the reasons van de Walle cites. Commenting on the apparent lack of ideological difference between Nigeria’s two main parties ahead of the recent elections, political analyst Sa’eed Husaini concludes that the convergence was in fact a sign of the “depth of ideology,” elaborating: “A single vision of how society should be ordered is so dominant that it sways members of the political elite on both sides of the supposed divide.”

This ideological hegemony has always had its challengers, though, however marginalized.

The above-mentioned Mkandawire, a long-standing critic of van de Walle (who responded in kind), was among the prominent African intellectuals to observe that the statist development projects of some African governments did, in fact, succeed, at least until the 1980s when that success was wiped away amidst the debt crisis and externally imposed Structural Adjustment reforms.

It was not until the 2010s, however, that a serious conversation about the potential for more statist interventions returned to Africa, and even then, somewhat hesitantly. In 2016, Carlos Lopes of the UN Economic Commission for Africa commented in an interview:

[African] states need to get involved. The terms “developmental state” or “interventionist state” might be unpopular, but that is exactly what is required for African countries to lift themselves out of poverty, to achieve the kind of economic development required to tangibly improve the lives of hundreds of millions of African citizens.

Meanwhile, as economist Grieve Chelwa noted, the IMF issued its own “half-hearted” mea culpa, a conservative apology for past misguided policy prescriptions.

More recently, the IMF published a working paper with the tantalizing title, “The Return of the Policy that Shall Not Be Named: Principles of Industrial Policy.” Although seemingly an embrace of erstwhile economic heterodoxy, IMF Working Papers “do not necessarily represent the views of the IMF, its Executive Board, or IMF management.” Indeed, as discussed below, the message in this working paper differs significantly from the prescriptions contained in the IMF’s recent unreleased report on Tanzania.

We remain in a period of ideological flux. The idea of an African developmental state is now back on the table. But we are far from a new consensus. External pressures, and the threat of a fresh sovereign debt crisis, could easily undermine any further talk of statist intervention. The misguided policies of some governments could also feed an old narrative of African state dysfunction and political venality.

The last point is a major reason why, turning to Tanzania, we need to take a closer look at Magufuli’s government and its performance. Again, have some interventions worked? What has gone wrong? And where do we go from here?

The Magufuli way

Magufuli’s government has taken measures that discipline and constrain private sector expansion while seemingly empowering the state as a major driver of development. A thoroughgoing review of these economic interventions is beyond the scope of this article, but I nevertheless sketch the general picture.

Regarding the private sector, Magufuli’s government has, in no particular order: launched an anti-corruption campaign, targeting both private businesses and the public sector; increased taxes and ramped up enforcement; introduced new and more stringent regulations, for instance, in Tanzania’s lucrative extractive industry; imposed a range of new import and export bans; cut public sector salaries, indirectly limiting private sector activity; moved government accounts from commercial banks to the Bank of Tanzania, which reduced private bank liquidity and lending capacity; expropriated privately-held land where investors allegedly failed to develop it; and more.

The flip-side of these interventions has been more direct investment and management by state entities. The government has relied on a mix of pension funds, state-owned banks like the Tanzania Agricultural Development Bank (TADB), and its own procurement budget to redirect the flow of credit, turning parastatals and military-owned enterprises into privileged beneficiaries. The government has also intervened to direct private banks to participate in selected projects. It has thus empowered the State to take over from the private sector, for instance: using TADB and the military to buy up last year’s entire cashew crop, thereby displacing “middlemen” traders; directing the Tanzania Building Agency and military-owned  conglomerate Suma-JKT to carry out major construction projects; directing state-owned Posta Bank to take over from privately-owned Forex bureaus, and this after confiscating the bureaus’ assets; investing in sugarpalm oil and cashew processing through the prison service and military; using Tanzania Shipping Agency Corporation to take over from private operators, which were given less than a week’s notice, to manage the import and export of mineral goods; edging out private competitors while investing heavily in state-owned Air Tanzania Company Ltd (ATCL); among other interventions.

There are some signs of a rebalancing to favor private sector actors; however, as the Executive Director of the Tanzania Private Sector Foundation commented, “It has reached a point where the government feels happy to do business with itself instead of with the private sector.”

Where did this statist emphasis come from?

I have discussed the politics driving Magufuli’s statist turn elsewhere, but that alone does not explain its intellectual origins.

As mentioned, Magufuli took office amidst the ongoing international re-valuation of the “developmental state.” There was also ample reason to break from the status quo in Tanzania. Under President Kikwete (2005-2015), what predominated was a “type of primitive accumulation association with corruption in public finance,” which “mainly led to unequal processes of individual enrichment.” Meanwhile, Tanzania’s poverty rate flatlined at around 50 percent of the population during the Kikwete years. Despite GDP growth of seven and even eight percent, there was no economic transformation for Tanzania’s poor.

A minister for 20 years before becoming President, Magufuli also had time to develop his own distinct perspective. While still minister, he was caught on video complaining about investors “stealing” the country’s mineral wealth. He declared should he ever be president, investors would “farm with their teeth,” presumably meaning they would have to work for their profits. Magufuli has since delivered on that promise.

He has also repeatedly affirmed his belief in the efficiency and cost-cutting benefits of working through parastatals and, even more, the military. He was recently quoted saying, “In times of peace, with no war, we must use our military to improve infrastructure because the cost is low, yet if money goes there [to the military], it will help people.” He added that, in favoring the military, procurement laws could be disregarded using the “emergency” loophole. His interpretation of “emergency” is apparently very broad. “Even if you want to build a maize processing factory, call it an emergency,” Magufuli advised, “If you want to build a road, call it an emergency.”

Finally, Magufuli is routinely labeled a “populist” because of his claims to fight against the corrupt and for wanyonge (the exploited, the down-trodden). In a characteristic statement, he affirmed, “We have decided to bring a new Tanzania that defends the people especially the poor so they can take part in development.”

Criticism and its discontents

There is much to criticize about the performance of Magufuli’s government and its statist interventions. But there are also many ways we can get this criticism wrong, recommending alternatives that have little to offer Tanzania apart from the same persistently high poverty rate.

Among the legitimate criticisms, there is the mainstream concern articulated in the unreleased IMF report that Magufuli’s erratic policy-making has depressed economic activity, contributing to the recent slow-down in growth. Moreover, the private sector squeeze does not discriminate between large operators with potentially dubious dealings and a range of small business owners and vendors, who are protesting government policy decisions.

Erratic may also be a euphemism amidst what seem like frankly rogue operations, notably in the earlier referenced case of Tanzania’s forex bureaus.

This gets at a broader issue: lack of accountability and unlawful government activity. For instance, the recent CAG report notes a spike in the total volume of procurement being conducted without following due procedure.

Much of the heterodox economics literature suggests we should perhaps be more relaxed about poor accountability; the idea is that a degree of “rent-seeking” has been a central, perhaps a necessary, feature of the world’s most successful developmental states.

What is less easy to swallow, though, are specific cases like the government’s decision to shift management of the hugely expanded budget for Air Tanzania Company Ltd (ATCL) to the President’s Office, which is not audited by the CAG and can therefore, some fear, conceal corrupt activity. Many observers were critical of the investment in ATCL from the start, deeming it wasteful even as Magufuli insisted that to not have an airline would be a national “shame.”

There are, more generally, notable shortcomings in economic planning and industrial strategy under Magufuli. The government’s enthusiasm for investing in mega-projects with uncertain returns is one concern. Another is an industrial policy that does more to undermine than to help target sectors, although there have been some apparent successes.

With the accumulation of mistakes and poor investments, the sustainability of the government’s current policy orientation is in doubt. Flagging growth and stagnant revenue collection is a problem. The state of Tanzania’s pension funds and development banks is another. As documented in the CAG report, these institutions have large unpaid debts owed them by government and are running at a loss, and this even as they continue to finance government’s flagship initiatives.

While there are more legitimate criticisms I could list, one final one deserves a mention here: Magufuli’s authoritarianism. Far from an asset for development, as sometimes claimed, efforts to centralize power and decision-making have in this case contributed to policy confusion and slow implementation. Controversial legislation like the Statistics Act is also undermining access to accurate information about the economy, necessary for effective planning. And that is leaving aside the obvious normative case against authoritarianism.

If the above points are well-founded, though, how can we get our criticism of Magufuli wrong?

The blocked IMF report offers an important illustration.

It revives the old market versus state narrative all while indulging in excessive praise of what preceded Magufuli. “For more than a decade since the early 2000s,” it affirms, “Tanzania has followed policies that improved competition and fostered growth.” Reading this, remember that poverty levels barely declined over the 2000s even if growth was high.

The report goes on, “More recently, hurried policies that depart from best principles and interfere with markets have cast a cloud over future policies and economic prospects, highlighting the need to preserve market mechanisms […].”

These conclusions risk throwing the proverbial baby out with the bathwater. While there have been major weaknesses in the design of industrial policy under Magufuli, this is not a case for disregarding state intervention in general. Simply returning to “market principles”—that is, to status quo ante—would likely mean, yes, a return to higher growth rates but the same grinding poverty for millions.

Take the example of the cashew nut sector. Magufuli’s decision to buy up the entire crop using the (it transpires) highly ill-prepared military was disastrous. But the historical record suggests that it is also highly unrealistic to expect the IMF’s prescribed “market mechanisms” to expand the cashew processing industry, improve productivity and ensure better returns for small farmers and workers, often exploited in a sector ridden with corrupt trading cartels.

A well calibrated industrial policy with substantial investment in processing, though, could be an important step forward. Once upon a time, Tanzania did have a relatively strong agro-processing sector. That was before the de-industrialization that came along with structural adjustment and privatization.

Imagining an alternative

Ultimately, leaving aside criticism of the Magufuli government, we need an idea of what new development path Tanzania could explore. This means thinking beyond simple dichotomies of past versus present or state versus market.

What then might that path look like? I am obviously in no position to answer that question here, but there are a few ideas worth raising.

As already implied, industrial policy—but better industrial policy—is part of the answer. The earlier-referenced IMF working paper on industrial policy argues that “a standard growth recipe such as improving the business environment […], preserving macro-stability, and minimizing government intervention”—precisely the recipe outlined in the recent IMF report on Tanzania—constitutes a “snail crawl” approach to development. By contrast, a “moonshot approach” calls for a strong commitment to industrial policy. This commitment may not always achieve the desired transformation, but where there have been successes, such as the Asian “miracles,” these were the result of an all-out, state-orchestrated effort.

Is industrial policy enough, though?

For one, we may wonder when this hoped-for “moonshot” is likely to occur. Two, there is a weakness in the industrial policy literature as it currently stands. This work anticipates that industrial expansion and improved productivity, the much-vaunted economic transformation, will ultimately raise the living standards for a large majority of the population. There is thus relatively little direct attention paid to issues of labor and inequality. Yet the expected improvements in living standards take time to materialize, and this even as economic transition is itself a painful, socially dislocating process. At the very least, the persistent poverty and insufficient wages paid to industrial workers in arguably Africa’s most successful “developmental state,” Ethiopia, should give us pause.

One way to address these concerns is to shift focus, to consider not just how to achieve economic change and growth but how to reshape patterns of ownership as well. The best elements of Tanzania’s own history and socialist intellectual tradition provide important insights here.

In his 1962 essay, Ujamaa or African Socialism, Tanzania’s nationalist leader and founding president, Julius Nyerere, wrote: “The basic difference between a socialist society and a capitalist society does not lie in their methods of producing wealth, but in the way that wealth is distributed.” In the absence of an industrial economy, this idea was the basis for advocating a form of agrarian socialism based around Ujamaa villages, which Nyerere initially stipulated should be “socialist organizations created by the people and governed by those who lived and work in them.”

The most successful early villages, such as those belonging to the Ruvuma Development Association, took inspiration from this message. But over time, what historian Leander Schneider refers to as a “lower-case socialism,” which “had room for flexibility, dispersed authority and players other than the state,” was “replaced by upper-case Socialism” of a centralized and authoritarian bent.

Experiments with lower-case socialism have continued, though. We have present day examples, including farmer networks organizing to protect the land and livelihood of smallholders; unionized bus drivers denouncing exploitative commercial bus companies and mobilizing to form worker-owned bus cooperatives; and small street vendors devising new, collective strategies to lend money amongst themselves.

These initiatives are, admittedly, marginal to the wider Tanzanian economy. But with more state support, there is scope to encourage collective, democratic ownership on a larger scale. While imperfect, the record of Africa’s cooperative sector does offer inspiration, and could be nurtured. In their heyday, before they were briefly abolished in a moment of authoritarian folly, Tanzania’s own cooperatives contributed to poverty reduction and industrial expansion. Cooperatives aside, more democratic and accountable forms of public ownership could also play a role, as could reforms to land ownership and agricultural production. Redistributive measures implemented through the delivery of improved services—something Magufuli’s government has invested in but with uncertain results—are another important consideration.

Some of Tanzania’s political elite are already exploring these ideas. In a speech delivered to mark the 50th anniversary of Nyerere’s 1967 Arusha Declaration, left-leaning opposition politician, Zitto Kabwe denounced existing forms of “State Capitalism,” advocating instead a form of “Democratic Socialism.” This would be a system where “many people own parts of the economy through their cooperative unions and associations” and where state-owned enterprises are more accountable to their workers and the people at large.

Tanzania’s current political environment—under President Magufuli’s increasingly authoritarian government—does not offer fertile ground for these ideas to become reality. But as discussed earlier, neither is it proving especially hospitable to “market mechanisms” or effective industrial policy.

Meanwhile, ideas must be cultivated, and this in preparation for the moment when there is a political opportunity to see them through.

A few short years before Tanzania’s independence, Nyerere encouraged precisely this kind of imaginative exercise. As mentioned above, he proclaimed:

There is a need for a new synthesis… We do not know exactly what that will be, [but] we shall grope forward, and it may be that we shall create a new synthesis of individual liberty and the needs of man in society.

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