Maintenance and Reinforcement during the Crisis

  • Gun Eriksson Skoog


The Tanzanian socialist system was plagued by inherent weaknesses. By the end of the 1970s, when the system was firmly established, its performance problems culminated in an acute economic crisis. However, in spite of the crisis, which lasted into the mid-1980s, the system remained remarkably stable throughout the period. As an informal institution, the soft budget constraint was now part of this system. The present chapter studies the development and operation of the soft budget constraint during the economic crisis, and the story continues by describing how and why the soft budget constraint prevailed within the socialist system.


Informal Institution Senior Staff External Finance Behavioural Rule Informal Rule 
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  1. 1.
    See Tables 3.10 and 3.11 in Chapter III.Google Scholar
  2. 2.
    Calculations by Ndulu (1988), p. 11, and Table 5, p. 49, reveal that the Tanzanian barter terms of trade deteriorated by 38 and the income terms of trade by 53 per cent between 1977 and 1982.Google Scholar
  3. 3.
    Cf. Ndulu (ibid.), pp. 3–17, who accounts for the systemic and other causes of the crisis.Google Scholar
  4. 4.
    Bureau of Statistics (1989), p. 21.Google Scholar
  5. 5.
    Calculations based on Maliyamkono and Bagachwa (1990), Table 1. 1, p. 139.Google Scholar
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    See Ndulu (1988), pp. 3–5 and 13–14, on the relationship between the budget deficit, money supply and the rate of inflation in Tanzania, and for references.Google Scholar
  7. 7.
    Bevan et al. (1987b), p. 41, illustrate the problem. Deliveries of imported Matsushita radios, for instance dropped by 40 per cent between 1977 and 1982 in urban areas, and by 73 per cent in rural areas. In 1983, 90 per cent of peasant households in four regions reported that there had been times when they wanted to buy some 21 basic consumer goods, but were unable to so because the goods were not available in the market. (Bevan et al., 1988b, pp. 12–14.)Google Scholar
  8. 8.
    Lipumba and Ndulu (1987), p. 17.Google Scholar
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    Maliyamkono and Bagachwa (1990), p. 93.Google Scholar
  10. 10.
    Bevan et al. (1988a), referred to by Sarris and van den Brink (1993), p. 146 (quotation).Google Scholar
  11. 11.
    Although markets for consumer goods grew increasingly controlled during the 1970s, Bevan et al. (1988b), pp. 2, 9 and 11, consider the official prices to have been fairly close to the equilibrium levels prior to 1978, when shortages became acute.Google Scholar
  12. 12.
    Ödegaard (1985), pp. 156–157. Cf. the discussion on the marketing parastatals in Chapter III.Google Scholar
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  14. 14.
    According to Kiondo (1990), Table 3, p. 33, referring to Lofchie (1988), Table 1, p. 212, the parallel-market exchange rate (TSh/USD) increased from 1.6 times the official rate in 1978, to 10.1 times in 1984. However, data differ. Havnevik (1993), p. 10, calculated the parallel exchange rate to be 3.9 times the official rate in 1984.Google Scholar
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    See, for instance, a field survey by Tripp (1988), referred to by Kiondo (1989), pp. 223–224, for details on these types of activity and their characteristics in Dar es Salaam during 1987/88.Google Scholar
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    Some of these will be discussed later in this chapter.Google Scholar
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    Maliyamkono and Bagachwa (1990); who define the second economy as including informal (very small scale), parallel (due to price control) and black market (trade in illegal goods) activities.Google Scholar
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    Ibid., pp. 154–190, passim.Google Scholar
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    The Tanzania Audit Corporation (1988–1991) claims to have audited 96 per cent of all parastatals, at least during the period 1987/88–1990/91. Parastatal domination is illustrated by the fact that of the 215 major loss- of profit-disclosing accounts audited in 1987/88, only 11(5 per cent) were from private of ‘other’ nonparastatal organisations, and their losses and profits were minor, (Tanzania Audit Corporation, 1988.)Google Scholar
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    As revealed by a comparison between the first and the third columns in Table 4.2.Google Scholar
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    We examined the Tanzania Audit Corporation (1981–1992) data on all accounts reporting losses or profits in excess of 5 million TSh (20 million TSh if audited in 1991/92), audited during the whole period 1980/811991/92. These accounts amounted to around half of the total number of accounts audited in several years. In Table A.7 in the appendix, the result of an attempt to relate losses audited in one year (for instance, 1980/81) to the official GDP two years and a half earlier instead of one (in this case 1978) are shown in column three.Google Scholar
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    The Tanzania Audit Corporation (TAC) has partly corrected for the flaw that losses audited in one year reflect losses made during several different years. The columns 5–7 of Table A.7 in the appendix show losses actually incurred by so-called commercial parastatals in a certain financial year and their relative size, regardless of when the accounts were audited. Data are only available from 1984, however, which is why they are presented in the following chapter. The TAC definition of commercial parastatals appears to correspond fairly well to the one used in this study, which was presented in Chapter lI and refers to parastatal enterprises that are formally independent of the government budget. The TAC definition excludes some parastatal enterprises, however, mainly agricultural marketing boards/crop authorities and other agricultural parastatals, which is an important divergence from our definition. The overwhelming majority of the TAC clients nonetheless appear to be classified as commercial parastatals.Google Scholar
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    Agriculture was the largest contributor to official GDP, and manufacturing and trade the second largest, during the whole period 1976–1986. (Tanzanian Economic Trends, 1988, Table 1, p. 45.)Google Scholar
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    Data on the losses of parastatals within communication and transport are shown in Table A.8 in the appendix.Google Scholar
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    This is revealed by a comparison with Table 4.6 below and Table A.8 in the appendix.Google Scholar
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    As discussed in the previous chapter, their unit costs increased, with rising overheads for administration and employment and lower volumes traded. The lower volumes were partly due to weak incentives for peasant producers, who resorted to parallel markets.Google Scholar
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    Skarstein and Wangwe(1986), Table 6.10, p.211.Google Scholar
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    Ibid., Table 6.8, p. 208.Google Scholar
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    Tanzania Audit Corporation (1992), pp. 12–21. See Eriksson (1993), pp. 8–13, for a more detailed discussion on biases in parastatal financial performance data audited and reported by the TAC.Google Scholar
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  38. 38.
    National Bank of Commerce (1977), Table 18, p. 26.Google Scholar
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    Calculations based on Mtango (1981), Tables 1–4. The three parastatals are the National Milling Corporation, the Coffee Authority of Tanzania and the Tanzania Sisal Authority.Google Scholar
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    We know from the previous chapter that in 1980/81 the government relieved the National Bank of Commerce of about 2,000 million TSh worth of bad debts, owed by the National Milling Corporation.Google Scholar
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    Ndulu (1988), pp. 26–33, briefly accounts for the different programmes.Google Scholar
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    Cf. the discussion of agricultural marketing in Chapter III. Another major organisational change was the reintroduction of elected local governments–urban councils already in 1978, and district (rural) councils in 1982–1983–that had been abolished in the early 1970s. See Kiondo (1989), pp. 175–180.Google Scholar
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  49. 49.
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  51. 51.
    On the number of goods under price control, see Table 4.14 below.Google Scholar
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  55. 55.
    See Schyberger (1987), Appendix A, pp. 176–181, for details on the contents of the policy.Google Scholar
  56. 56.
    Kimei (1987), p. 107.Google Scholar
  57. 57.
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    Havnevik (1993), p. 58.Google Scholar
  59. 59.
    Maliyamkono and Bagachwa (1990), pp. xii-xiii. See pp. xiii-xv for examples.Google Scholar
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    Marketing Development Bureau (1979), p. 78. See further pp. 40–83, passim.Google Scholar
  63. 63.
    World Bank (1988a), p. 24.Google Scholar
  64. 64.
    Banking Commission (1989a), p. 15.Google Scholar
  65. 65.
    Discussed in Chapter II.Google Scholar
  66. 66.
    Recurrent expenditure is separated into consolidated fund services, which are mainly used for foreign debt servicing, regional supply and ministerial supply. The major posts within ministerial supply are personal emoluments, other charges, grants, and contractual and contingent liabilities (to be explained below).(Word Bank, 1989a,p.16 ff.)Google Scholar
  67. 67.
    As shown by Table 4.5 above.Google Scholar
  68. 68.
    See the discussion in Eriksson (1993), pp. 23–28, passim, on the difficulties of obtaining a clear picture of direct government subsidies and on the problems associated with the varying definitions of subsidies.Google Scholar
  69. 69.
    World Bank (1989a), p. 10. Handling Tanzania’s Strategic Grain Reserve was to become one of the major tasks of the National Milling Corporation.Google Scholar
  70. 70.
    Not shown here, but in Table A.21 in the appendix.Google Scholar
  71. 71.
    United Republic of Tanzania (n.d.), pp. 57–58.Google Scholar
  72. 72.
    Personal communications with senior staff at the Tanzania Fertiliser Company, 26 November, and at the Department of Public Investment of the Ministry of Finance and Economic Affairs, 2 December, 1992, Dar es Salaam.Google Scholar
  73. 73.
    In Table A.1 1 in the appendix such subsidies to the National Milling Corporation are specified.Google Scholar
  74. 74.
    United Republic of Tanzania (n.d.), p. 57.Google Scholar
  75. 75.
    See Table A.11 in the appendix. During the period 1976–1984, the Tanzania Fertilizer Company received two different types of direct budgetary subsidies. Besides the subsidy on the product price of between 29 and 67 per cent, the government granted ‘a 100% subsidy on transportation from the factory or port depot to regional or district distribution centres’. (Marketing Development Bureau, 1985, p. 3.)Google Scholar
  76. 76.
    In Tanzania, ministerial powers were extensive. Ministerial orders on discretionary tax exemptions were government decisions and had the status of subsidiary legislation. (Ndulu et al., 1987, p. 8.)Google Scholar
  77. 77.
    The table is based on ministerial orders on discretionary tax exemptions listed together with other subsidiary legislation. Without access to the individual orders, it was in some cases impossible to determine whether or not the decision concerned a tax exemption. All uncertain cases are excluded from the table.Google Scholar
  78. 78.
    Ministry of Justice (1992a-1992d). The identity of the tax-exemption recipients was sometimes difficult to determine, which made it impossible to draw firm conclusions about their distribution.Google Scholar
  79. 79.
    See Ndulu et al. (1987), pp. 8–10 and 39, for details.Google Scholar
  80. 80.
    The official gave additional reasons for why discretionary tax data were unavailable. Since exemptions were often granted in advance, it was difficult - if not impossible - to quantify their value. For instance, tax exemptions on imports could be granted for a coming six-month period, without restrictions on the amount or value of such imports. In addition, registration of such tax exemptions was not computerised. Although data might have been available, they were ‘scattered all over’. (Personal communication with staff at the Revenue Department of the Ministry of Finance and Economic Affairs, Dar es Salaam, 22 October and 12 November, 1992.)Google Scholar
  81. 81.
  82. 82.
  83. 83.
    Marketing Development Bureau (1979), pp. 112–113.Google Scholar
  84. 84.
    Ödegaard (1985), pp. 135–136.Google Scholar
  85. 85.
    Daily News (1982), quoted by Schyberger (1987), p. 138.Google Scholar
  86. 86.
    de Valk (1992), note 12, p. 193.Google Scholar
  87. 87.
    Marketing Development Bureau (1985), p. 2, and (1986), pp. 1 and 15.Google Scholar
  88. 88.
    Rice (1979), p. 97.Google Scholar
  89. 89.
    Mbelle (1992), p. 194.Google Scholar
  90. 90.
    This is suggested by Table 4.20 below, which shows that several textile parastatals were among the major loss makers during the crisis.Google Scholar
  91. 91.
    Hyuha and Ndulu (1989), p. 21, and Table 1, p. 22.Google Scholar
  92. 92.
    See further Rice (1979), p. 96.Google Scholar
  93. 93.
    Collier and Gunning (1991), p. 534; who examined the banking system during the period 1983–1988.Google Scholar
  94. 94.
    Kimei (1987), Table 6.6, p. 139 (data for the period 1977–1980), and Nyagetera (1992), Table 2, p. 77 (data for the period 1981–1984 ).Google Scholar
  95. 95.
    Although not explicitly stated in the original source, there is little doubt that only non-central government credit is considered, as revealed by a comparison with related sources.Google Scholar
  96. 96.
    Cf. Kimei (1987), p. 138.Google Scholar
  97. 97.
    Since the National Bank of Commerce had a virtual monopoly in commercial banking on the mainland, total commercial bank lending can approximate its lending. Cf. Kimei (1987), pp. 126 and 138–141.Google Scholar
  98. 98.
    Bank of Tanzania (1989), Table 14, p. 50.Google Scholar
  99. 99.
    For further details, see Table A.18 in the appendix.Google Scholar
  100. 100.
    Personal communication with senior staff at the Corporate Banking Department of the NBC head office, Dar es Salaam, December, 1992.Google Scholar
  101. 101.
    Cf. the discussion in Chapter III. Principal Secretary is a top position within the state bureaucracy. Such an official may be a secretary to the president or the prime minister, or the most senior public official in the ministries.Google Scholar
  102. 102.
    Personal communication with senior staff at the Project Preparation and Monitoring Bureau of the Ministry of Agriculture and Livestock Development, Dar es Salaam, 25 November, 1992.Google Scholar
  103. 103.
    Personal communication with a senior official at the Short Term Finance Department of the Cooperative and Rural Development Bank, Dar es Salaam, 30 November, 1992.Google Scholar
  104. 104.
    For instance by the Bank of Tanzania (1991c), pp. 25–26, and not least the Banking Commission (1989a), p. 14, and (1990), p. 2.Google Scholar
  105. 105.
    Personal communication with senior staff at the Corporate Banking Department of the NBC head office, Dar es Salaam, December, 1992.Google Scholar
  106. 106.
    Personal communication with a senior official at the Short Term Finance Department of the Cooperative and Rural Development Bank, Dar es Salaam, 30 November, 1992.Google Scholar
  107. 107.
    Bank of Tanzania (1990c), p. iv.Google Scholar
  108. 108.
    Mtango (1981), p. 109, noted that if the National Bank of Commerce had applied commercial principles for lending, none or very little would have been lent to three of its major clients during the 1970s: the National Milling Corporation, the Tanzania Sisal Authority and the Coffee Authority of Tanzania.Google Scholar
  109. 109.
    Price Waterhouse (1992a), p. 32. Although the study was conducted in the early 1990s, its findings are likely to have applied to earlier years also, not least because of the general information problem.Google Scholar
  110. 110.
    Collier and Gunning (1991), p. 533.Google Scholar
  111. 111.
    Bank of Tanzania (1991c), pp. 48–49.Google Scholar
  112. 112.
    Personal communication with senior staff at the Corporate Banking Department of the NBC, Dar es Salaam, December, 1992.Google Scholar
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    Personal communication with senior staff at the Credit Review Department of the NBC head office, Dar es Salaam, December, 1992.Google Scholar
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    Personal communication with a senior official at the Short Term Finance Department of the Cooperative and Rural Development Bank, Dar es Salaam, 30 November, 1992. Up to 1985, the bank operated under the name of the Tanzania Rural Development Bank (Rutayisire, 1992, p. 95). It will nonetheless be incorrectly referred to as the CRDB here, since it is under this name that it has been referred to in the sources used.Google Scholar
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    Coopers & Lybrand Associates Limited (1989), p. 15.Google Scholar
  116. 116.
    Ibid., p. 14 and Table 3.3.Google Scholar
  117. 117.
    Bank of Tanzania (1990c), p. 27.Google Scholar
  118. 118.
    Personal communication with a senior official at the Short Term Finance Department of the Cooperative and Rural Development Bank, Dar es Salaam, 30 November, 1992.Google Scholar
  119. 119.
    Coopers & Lybrand Associates Limited (1989), p. 27.Google Scholar
  120. 120.
    Ibid., p. 17, and Bank of Tanzania (1990e), pp. iv, vii and 5.Google Scholar
  121. 121.
    Banking Commission (19896), p. 16, and personal communication with senior staff at the Corporate Banking Department of the National Bank of Commerce, Dar es Salaam, December, 1992.Google Scholar
  122. 122.
    Ödegaard (1985), Table 4. 4, p. 114.Google Scholar
  123. 123.
    To be distinguished from other forms, discussed in Chapter V.Google Scholar
  124. 124.
    For a more detailed presentation of the official goals, see Eriksson (1995), pp. 18–22. For the official goals of Dutch, Norwegian and Swedish import support, see van den Andel (1992), pp. 30–31, Skarstein et al. (1988), pp. 38–40 and 44, and Eriksson (1987), pp. 7–9.Google Scholar
  125. 125.
    Doriye et al. (1993), p. 56.Google Scholar
  126. 126.
    Calculations based on Tanzanian Economic Trends (1989/90), Table 4, p. 75.Google Scholar
  127. 127.
    van den Andel (1992), p. 4.Google Scholar
  128. 128.
    Kiondo (1989), Table 5. 13, p. 216.Google Scholar
  129. 129.
    The amounts disbursed are to be distinguished from the amounts allocated, which in the Swedish case refer to the amounts approved by SIDA.Google Scholar
  130. 130.
    van den Andel (1992), pp. 30–37, passim.Google Scholar
  131. 131.
    Bhaduri et al. (1993), p. 9, and Table 1.2, p. 10.Google Scholar
  132. 132.
    These recipients were among the 16 largest recipients of Swedish import support (those allocated total amounts worth 12 million SEK or more) out of a total of 118 recipients during the period 1988/89–1991/92, shown in Table A.15 in the appendix. It is likely that they were also among the major recipients during the preceding period discussed here.Google Scholar
  133. 133.
    See Eriksson (1995), pp. 27–29, and Tables 5–6, pp. 105–106.Google Scholar
  134. 134.
    Skarstein et al. (1988), pp. 39–40 and 45.Google Scholar
  135. 135.
    Hansen et al. (1987), pp. 34–35.Google Scholar
  136. 136.
    van den Andel (1992), pp. 34–35. For a survey of the formal criteria for allocation of import support, see Eriksson (1995), pp. 18–23.Google Scholar
  137. 137.
    See Eriksson (1995), pp. 14–18, for details on the allocation mechanism, particularly in relation to Dutch, Norwegian and Swedish import support.Google Scholar
  138. 138.
    In addition to the Swedish, Norwegian and Dutch donors, the British, Canadian and European Economic Community agencies in Dar es Salaam describe how firms lobbied for import support. (Personal communication with senior staff of the Planning Secretariat of SIDA, the NORAD office, the Royal Netherlands Embassy, the Canadian High Commission, the EEC Delegation and the Overseas Development Agency, in Dar es Salaam, between 26 October and 17 November, 1992.)Google Scholar
  139. 139.
    Personal communication with senior staff at the Planning Secretariat of SIDA, in Dar es Salaam, 26 October, 1992.Google Scholar
  140. 140.
    Personal communication with senior staff at the Department of External Finance of the Ministry of Finance and Economic Affairs, Dar es Salaam, 13 November, 1992.Google Scholar
  141. 141.
    Hansen et al. (1987), p. 40.Google Scholar
  142. 142.
    van den Andel (1992), p. 41.Google Scholar
  143. 143.
    Personal communication with senior staff at the Tanzania Fertilizer Company, Dar es Salaam, 26 November, 1992.Google Scholar
  144. 144.
    See Table 4.18 above, Table A.14 in the appendix, and Eriksson (1995), Table 5, p. 105.Google Scholar
  145. 145.
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  146. 146.
    See, for instance, van den Andel (1992), Annex 4.Google Scholar
  147. 147.
    Personal communication with senior staff at the Tanzania Fertilizer Company, Dar es Salaam, 26 November, 1992; emphases added.Google Scholar
  148. 148.
    Doriye et al. (1993), p. 26.Google Scholar
  149. 149.
    Mtatifikolo and Luvanga (1988), pp. 12, 19 (quotation) and 22.Google Scholar
  150. 150.
    For instance, by Hansen et al. (1987), p. 18, Skarstein et al. (1988), p. 34, and van den Andel (1992), p. 3.Google Scholar
  151. 151.
    Elgström (1992), p. 105.Google Scholar
  152. 152.
    Ibid., p. 134.Google Scholar
  153. 153.
    Ibid., pp. 62 and 142.Google Scholar
  154. 154.
    This is one of Elgström’s central theses, to which he returns throughout the book (ibid.).Google Scholar
  155. 155.
    The projects are the Tanzania Coffee Marketing Board, the TANELEC, the Steel Rolling Mills and the Sao Hill Saw Mills, of which the first two, together with the Tanzania Fertilizer Company, were major loss makers according to Table 4.20 below.Google Scholar
  156. 156.
    For details on Dutch allocation, see Eriksson (1995), pp. 27–29, and Tables 5–6, pp. 105–106.Google Scholar
  157. 157.
    van den Andel (1992), pp. 76 and 80 (quotation).Google Scholar
  158. 158.
    Calculations based on the Bank of Tanzania (1990a), Table 18, p. 57.Google Scholar
  159. 159.
    Eriksson (1995), pp. 55–56.Google Scholar
  160. 160.
    The author (ibid.), pp. 49–55, examined the existing data on cash-cover payments. More details are presented in Chapter V.Google Scholar
  161. 161.
    Netherlands Economic Institute (1982), referred to by van den Andel (1992), pp. 33, 41 and 64.Google Scholar
  162. 162.
    Personal communication with senior staff at the Royal Netherlands Embassy, Dar es Salaam, 18 November, 1992.Google Scholar
  163. 163.
    Personal communication with senior staff at the Department of External Finance of the Ministry of Finance and Economic Affairs, Dar es Salaam, 13 November, 1992.Google Scholar
  164. 164.
    Personal communication with senior staff at the Planning Secretariat of SIDA, Dar es Salaam, 26 October, 1992.Google Scholar
  165. 165.
    Bhaduri et al. (1993), pp. 12 and 28.Google Scholar
  166. 166.
    Personal communication with senior staff at the Department of External Finance of the Ministry of Finance and Economic Affairs, Dar es Salaam, 13 November, 1992.Google Scholar
  167. 167.
    Personal communication with senior staff at the Tanzania Fertilizer Company, Dar es Salaam, 26 November, 1992.Google Scholar
  168. 168.
    It paid for less than 20 per cent of its Dutch import support during the 1980s. (van den Andel, 1992, pp. 6971 and 79–80.) As shown in Table A.15 in the appendix, it paid nothing for the last two allocations of Swedish import support - the only allocations for which payment data are available. Similarly, it did not pay for the 1988 and 1989 funds that it received from NORAD (n.d.a) and (n.d.b). According to unreconciled Treasury data, it paid for none of all the import support that it received during the period 1987/88–1992/93. (Doriye et al., 1993, Table 4.3, p. 79.)Google Scholar
  169. 169.
    Personal communication with senior staff at the Tanzania Portland Cement Company, Dar es Salaam, 11 November, 1992. This applied at least during the period 1984–1991.Google Scholar
  170. 170.
    Personal communication with senior staff at the Department of External Finance of the Ministry of Finance and Economic Affairs, Dar es Salaam, 13 November, 1992, and at the Planning Secretariat of SIDA, Dar es Salaam, 26 October, 1992.Google Scholar
  171. 171.
    Ministry of Finance (1993), p. 12.Google Scholar
  172. 172.
    For examples of recipients of Swedish import support who negotiated payments of cash cover by instalment, see Tanna Somaiya & Co. (1992), Appendix XII.Google Scholar
  173. 173.
    Havnevik et al. (1990), pp. 9–10 and 40–41.Google Scholar
  174. 174.
    Bhaduri et at (1993), p. 14; comment added.Google Scholar
  175. 175.
    Ministry of Finance (1993), pp. 7–26, passim, in particular pp. 24–26.Google Scholar
  176. 176.
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  177. 177.
    Doriye et al. (1993), pp. 57 (quotation) and 62.Google Scholar
  178. 178.
    Cf. the discussion on how the aid-supported investment boom sharpened resource constraint in Chapter III.Google Scholar
  179. 179.
    Table 4.7 above.Google Scholar
  180. 180.
    Mtango (1981), pp. 77, 81 and 95.Google Scholar
  181. 181.
    Of nine agricultural marketing parastatals in the table (NAFCO excluded), five made losses in 1977, one in 1976 and one in 1975, whereas one made a profit in 1977 and another in 1976. (Marketing Development Bureau, 1979, p. 15.) According to projections in unaudited accounts, the NMC made losses every single year since 1973/1974. (Mtango, 1981, Table 1, p. 31, and pp. 48–49.)Google Scholar
  182. 182.
    See Table A.9 in the appendix.Google Scholar
  183. 183.
    See Eriksson (1993), pp. 16–18, and Table 2.6, p. 68, for more details.Google Scholar
  184. 184.
    The Tanzania Audit Corporation figures for the losses and profits of the crop authorities are not wholly compatible with those in Table 4.5.Google Scholar
  185. 185.
    This is revealed by the background data on which the table is based and by Table A.9 in the appendix.Google Scholar
  186. 186.
    Cf. Tables 4.4 and 4.6 above.Google Scholar
  187. 187.
    According to the data on which Table 4.20 is based.Google Scholar
  188. 188.
    World Bank (1988a), p. 36. Cf. Table A.20 in the appendix.1Google Scholar
  189. 189.
    Marketing Development Bureau (1979), pp. 60–61 and 97.Google Scholar
  190. 190.
    de Valk (1992), note 4, p. 208.Google Scholar
  191. 191.
    Ibid., p. 197 (quotation) and note 4, p. 208.Google Scholar
  192. 192.
    World Bank (1988a), Table 1.6, p. 15, and Appendix B, Table B5, p. 108.Google Scholar
  193. 193.
    Cf. Ndulu (1988), p. 24.Google Scholar
  194. 194.
    Havnevik (1993), p. 58.Google Scholar
  195. 195.
    See, for instance, Hanak (1985), p. 53, Kiondo (1989), p. 14, and not least Shivji (1976), which is a classical reference.Google Scholar
  196. 196.
    See Table 4.8 above.Google Scholar
  197. 197.
    Kiondo (1989), p. 266.Google Scholar
  198. 198.
    World Bank (1988a), Table B1, p. 95.Google Scholar
  199. 199.
    Ibid., Appendix B, p. 106.Google Scholar
  200. 200.
    Ibid., p. 14, and Appendix B, pp. 106–107.Google Scholar
  201. 201.
    Marketing Development Bureau (1979), p. 93.Google Scholar
  202. 202.
    Kiondo (1989), p. 24.Google Scholar
  203. 203.
    World Bank (1988a), Appendix B, p. 108.Google Scholar
  204. 204.
    Maliyamkono and Bagachwa (1990), p. 46.Google Scholar
  205. 205.
    Cf. Maliyamkono and Bagachwa (ibid.) and Mihyo (1994), p. 114.Google Scholar
  206. 206.
    Kiondo (1989), p. 90.Google Scholar
  207. 207.
    Ibid., p. 91.Google Scholar
  208. 208.
    Ibid., pp. 92–93. For a full presentation of the GAPEX and AICC cases, with more examples, see pp. 90–95.Google Scholar
  209. 209.
    Bavu (1986), p. 17, referred to by Kiondo (1989), Table 2. 6, p. 83.Google Scholar
  210. 210.
    Marketing Development Bureau (1979), pp. 60, 95 and 97.Google Scholar
  211. 211.
    Mihyo (1994), p. 94; comment added.Google Scholar
  212. 212.
    Kiondo (1989), pp. 90–93, who refers to a piano, but given its weight, it must have been an organ.Google Scholar
  213. 213.
    Ibid., pp. 82–89 (quotation from p. 82).Google Scholar
  214. 214.
    Maliyamkono and Bagachwa (1990), p. 92, referring to Bevan et al. (1987a). Additional examples of this type of rent seeking are provided by de Valk (1992), pp. 370–371, and by Kiondo (1989), p. 231.Google Scholar
  215. 215.
    Bevan et al. (1987a), p. 40, and (19886), pp. 31–33.Google Scholar
  216. 216.
    de Valk (1992), p. 370.Google Scholar
  217. 217.
    Maliyamkono and Bagachwa (1990), p. 92; comment added.Google Scholar
  218. 218.
    Mihyo (1994), pp. 115–116.Google Scholar
  219. 219.
    Mihyo (1994), p. 96, referring to Parastatal Organizations Committee (1979–1982).Google Scholar
  220. 220.
    Kiondo (1989), pp. 229–231.Google Scholar
  221. 221.
    Ibid., p. 145.Google Scholar
  222. 222.
    Mihyo (1994), p. 91.Google Scholar
  223. 223.
    Cf. Maliyamkono and Bagachwa (1990), pp. 47 and 93.Google Scholar
  224. 224.
    Mihyo (1994), p. 114.Google Scholar
  225. 225.
    Ibid., pp. 87–91.Google Scholar
  226. 226.
    Kiondo (1989), p. 231.Google Scholar
  227. 227.
    Adam et al. (1994), p. 141, and World Bank (1988a), Appendix B, pp. 103 and 109.Google Scholar
  228. 228.
    Maliyamkono and Bagachwa (1990), p. 44, and World Bank (1988a), Appendix B, pp. 103 and 109.Google Scholar
  229. 229.
    Kiondo (1989), p. 240.Google Scholar
  230. 230.
    Sarris and van den Brink (1993), Table 68, p. 182.Google Scholar
  231. 231.
    Ibid., Tables 66 and 69–79, pp. 180 and 183–184.Google Scholar
  232. 232.
    de Valk (1992), p. 370.Google Scholar
  233. 233.
    Marketing Development Bureau (1979), p. 52.Google Scholar
  234. 234.
    Ibid., pp. 40 and 75–83, passim.Google Scholar
  235. 235.
    Ibid., p. 98.Google Scholar
  236. 236.
    Marketing Development Bureau (1979), p. 12.Google Scholar
  237. 237.
    See de Valk (1992), pp. 211–213 and 216, and Skarstein and Wangwe (1986), pp. 206–207.Google Scholar
  238. 238.
    Total gross fixed capital formation was around 25 per cent of official GDP annually, in real terms, during the same period. (Calculations based on the Bureau of Statistics, 1990, Tables 4 and 14–15, pp. 8 and 20–21.)Google Scholar
  239. 239.
    Rutayisire (1991) employed the so-called stochastic frontier production-and cost-functions method.Google Scholar
  240. 240.
    Technical inefficiency is defined by Rutayisire (ibid.), p. 15, as ‘failure of the enterprise to derive the maximum possible output from the inputs employed as a result of factors internal to the firm’.Google Scholar
  241. 241.
    Ibid., p. 24. Rutayisire’s sample did not allow for separate estimations for the second sub-period. (Ibid., p. 14.)Google Scholar
  242. 242.
    Ibid., pp. 24–27.Google Scholar
  243. 243.
    Ibid., pp. 28.Google Scholar
  244. 244.
    Rutayisire (ibid.), p. 16, defines allocative inefficiency as the employment of ‘inputs in proportions which violate the least cost input combination condition’.Google Scholar
  245. 245.
    Ibid., p. 28. There is an inconsistency in the source, which might imply that the inefficiency should be 18.3 instead of 183 per cent. Such a result is unlikely, however, to judge from Rutayisire’s other comments and findings reported here.Google Scholar
  246. 246.
    Ibid., p. 29.Google Scholar
  247. 247.
    Sah and Weitzman (1991).Google Scholar
  248. 248.
    We will retum to this interaction below.Google Scholar
  249. 249.
    The World Bank (1987), Vol. 1, p. 33, defines the domestic resource cost as ‘the cost of domestic resources (factors) that are necessary to save or eam one unit of foreign exchange by producing a (border-priced) unit of value added’.Google Scholar
  250. 250.
    Ibid., p. 40. The costs for the firms of producing goods that would have saved a unit of foreign exchange were higher than the net benefit of saving such a unit.Google Scholar
  251. 251.
    Ibid., p. 43. In particular, highly import dependent activities were extremely inefficient. (Ibid., p. 44.)Google Scholar
  252. 252.
    World Bank (1988a), pp. 18–19.Google Scholar
  253. 253.
    These mechanisms partly correspond to those suggested by North (1990), pp. 94–95, discussed in Chapter II.Google Scholar
  254. 254.
    As defined in Chapter 11.Google Scholar
  255. 255.
    This term is borrowed from North (ibid.).Google Scholar
  256. 256.
    Hansen et al. (1987), p. 40. A study by the Ministry of Finance (1993), p. 13, confirms that one criterion on which its allocations was based was precisely such ’[d]onor preferences and conditionalities’.Google Scholar
  257. 257.
    Personal communication with senior staff at NORAD, Dar es Salaam, 5 November, 1992. Donors used import support to assist domestic industries that lobbied for such assistance. See Eriksson (1995), pp. 37–39, for a discussion and references.Google Scholar
  258. 258.
    Elgström (1992), pp. 128–129 and 134–135.Google Scholar
  259. 259.
    Ibid., pp. 138–139. See also p. 128.Google Scholar
  260. 260.
    Bagachwa et at. (1992a), p. 11.Google Scholar
  261. 261.
    Tanzania Association of Parastatal Organisations (1989), pp. 29–30.Google Scholar
  262. 262.
    Kiondo (1989), p. 210, offers an example of the intertwined formal and informal networks. He notes, for instance, that ‘networks created by confinement policies can therefore extend all the way from the industry manager down to the distribution committees and the road blocks’.Google Scholar
  263. 263.
    Schumpeter (1942), who coined the term creative destruction, saw it as ‘a dynamic kind of competition arising from innovation and change’. (Langlois, 1986c, p. 11.)Google Scholar
  264. 264.
    Cf. Pelikan (1987), who distinguishes between two types of flexibility: of and within organisational structures.Google Scholar
  265. 265.
    See Table 4.1 and the text in the first section on selected macro-economic indicators for domestic balance, external balance and real growth.Google Scholar
  266. 266.
    See Tables 4.11 and 4.13 above.Google Scholar
  267. 267.
    See Table 4.15 above.Google Scholar
  268. 268.
    Hyuha and Ndulu (1990), p. 26. See also (1989), pp. 33–36.Google Scholar
  269. 269.
    For further examples of scarce resources that parastatals had privileged access to, see the World Bank (1988a), pp. 24–25.Google Scholar
  270. 270.
    Real producer prices for the major export crops coffee and cotton were more or less halved during the crisis. (Tanzanian Economic Trends, 1988, Table 10b, p. 56.)Google Scholar
  271. 271.
    The volume of officially purchased export crops as well as the volume and USD value of agricultural exports from the Tanzanian mainland dropped quite substantially during the crisis. See, for instance, Marketing Development Bureau (1990), Appendices l.a and 1.c, and Tanzanian Economic Trends (1988), Table 13, p. 60.Google Scholar
  272. 272.
    This is when food aid to Tanzania also was at its highest level. (Marketing Development Bureau, 1987, p. 18.)Google Scholar
  273. 273.
    Bevan et al. (1988b), pp. 46–64, established a positive relationship between the availability of consumer goods and the officially marketed supply of cash crops during the crisis.Google Scholar
  274. 274.
    Some of the negative macro-economic consequences of the soft budget constraint were to become even more clearly displayed during the reform period that followed, as will be shown in Chapter V.Google Scholar

Copyright information

© Springer Science+Business Media New York 2000

Authors and Affiliations

  • Gun Eriksson Skoog
    • 1
  1. 1.Stockholm School of Economics — EFI The Economic Research InstituteSweden

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