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 Times,��Bloomberg��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����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��sugar,��palm 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����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.