DOES AID WORK IN TANZANIA?

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Anti-Corruption Resource Centre
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Does aid work?

Reflections on a natural resources programme in Tanzania


Eirik G. Jansen

Does aid work?
Reflections on a natural resources programme in Tanzania
By Eirik G. Jansen

U4 Issue 2009:2

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1. Introduction
Does aid work? The question is posed by the Director of Norad in the introduction to Norad’s final report of 2007 (Norad 2007). The conclusion is clear: Yes, aid does work, but not well enough. The Director invites the readers of the report to participate in a public debate about Norwegian development aid, and invitation also extended by the Minister of International Development and Environment. In this article, I take on their challenge by sharing my experience as a programme officer for the Management of Natural Resources Programme (MNRP) in Tanzania.
Very briefly about my own background for presenting the following reflections: Since 1970 I have worked full time with development aid and development issues. For nearly half of the time since 1970 I have worked in various countries in Africa and Asia where the results of our development efforts can be observed. Many of the reflections I present are related to work I have carried out as a researcher and participant in development projects in the rural areas of various countries in Asia and Africa.Other reflections are based on the experiences I gained by working for many years at the Norwegian embassies in Bangladesh and Tanzania. However, in this article my focus will be on one particular development programme which Norway funded for many years in Tanzania. This programme confirms many of my experiences and reflections from work in other countries.
The question of whether development aid works can be addressed at several levels. Economists who assess the aggregated effects of aid will often discuss the effects of aid on economic growth
(Ridell 2007). Although this article will focus on one particular development programme, there will nevertheless be many general lessons to be learned about important factors influencing the
effectiveness and impact of aid.The information presented in this article is directly related to the MNRP, which Norway financed from 1994 to 2006 with about US$ 60 million, about US$ 5 million per year. I was programme officer for MNRP at the Norwegian Embassy in Dar es Salaam from 2003 to 2007. During this time, I had regular meetings with the Government of Tanzania regarding MNRP and travelled widely throughout Tanzania to assess the progress of the programme. MNRP was for many years regarded as a successful environment and natural resources programme. Information that has emerged during the last few years has shed new light on the programme. A final evaluation of the programme in 2006 has raised serious doubts about the programme, concerning its results as well as its financial management (Cooksey 2006). Two subsequent reports from a Danish audit firm in 2007 exposed extensive mismanagement of money and corruption2 in the programme (Andresen & Bhattbhatt 2007a, 2007b). According to the Danish auditor, as much as half of the money allocated for MNRP, US$ 30 million, may have been misused or lost through corrupt practices. It was the Norwegian Embassy in Dar es
Salaam that became suspicious and initiated an investigation into the financial management of the
programme. This article will focus on why and how so many millions of dollars were mismanaged. It will not address the results and achievements of the programme in any detail. In order to discuss this issue, it will be necessary to assess the wider economic and political context in which the programme has been implemented. Many of these issues also constitute the framework within which other development programmes take place in Tanzania and other African countries. A main conclusion of this article is that we were not sufficiently aware of this context when planning and implementing MNRP.
A main comment from those who evaluated MNRP in 2006 was that the governments in both
Tanzania and Norway dealt with MNRP as if it operated in a vacuum. MNRP was not assessed in the light of how the Government of Tanzania in general managed its natural resources nor in the light of key features of the administration of the Government of Tanzania. The following sections of this
[2 The World Bank’s definition of corruption will be used in this article: “Abuse of public office for private gain”.U4 ISSUE 2009:2 Does aid work? WWW.U4.NO ]
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article will address these issues and argue that the implementation of MNRP was clearly influenced by this context.
This article will describe MNRP and present the results from the Danish audit reports. There are few Norwegian development programmes where the flow of financial resources has been documented in so much detail and where the financial management system has been assessed so closely. Based on my four years of experience as a programme officer for MNRP, I will subsequently present my own observations which I believe will help explain the mismanagement of money in MNRP.
The Government of Tanzania was not the only actor in MNRP. The Government of Norway has also played a major role in the development of the programme. Why did Norway not discover the extensive mismanagement of resources at an earlier stage? This article will discuss certain aspects of the Norwegian Government’s policies concerning management of development aid in general and how this has affected the programme.
The article will also show what Norway has done in connection with the mismanagement of MNRP resources and how Norway will address these issues in relation to the new natural resources programme that is currently in the planning stage in Tanzania. In the last section of this article I will discuss to what extent the experiences from MNRP are relevant for other development programmes.


2. The importance of natural resources in Tanzania
Renewable natural resources in Tanzania play an important role both for the population in rural areas of the country and for the economy as a whole. Of Tanzania’s total population of 40 million people, 75 percent live in rural areas. Most of the rural population has access to forestry, fish and/or wildlife resources. It is estimated that on average 40 percent of the income in rural households comes from one of these three natural resources. Agriculture is the main economic sector in the rural areas, but most people who live off the land use simple technology and the productivity of land is very low. Efforts to improve the agricultural sector are slow, and income and food from the forests, fisheries, and wildlife will for many years continue to play an important role for the rural population.
Natural resources are important at the national level too. Timber from the forests is important for economic activities in the country and it is also a major source of foreign exchange. Tanzania also receives substantial foreign exchange from the export of Nile perch from Lake Victoria and shellfish from the coastal areas. The wildlife of Tanzania brings income from tourism and hunting licences. Traditionally, local people have used their own rules of management for the various natural resources that have been of interest to the local people. During the last decades this has changed. A new set of actors, very often foreign investors, have discovered the value of Tanzania’s natural resources. The competition for scarce natural resources has changed the constellation among the actors. “The lake is no longer ours”, lament tens of thousands of fishermen and fisherwomen around Lake Victoria after foreign investors, the national elite and the Government have gained control over the fish resources
(Jansen et al 200).

3. Corruption in the management of natural resources
Those who have control over the natural resources are in a powerful position and usually have easy access to money. There are major conflicts about natural resources, and such conflicts take place on several levels. Each natural resource leads to its own type of conflict. Many researchers talk about the natural resources curse, which is a highly relevant concept for Africa, including Tanzania
(Collier 2007). Tanzania has not been successful in managing its natural resources in a sustainable and equitable manner, nor has the country been able to achieve significant economic growth in its utilisation of these resources. It is Tanzania’s Ministry of Natural Resources and Tourism – hereafter referred to as the Ministry – which is in charge of managing the forestry, fisheries, and wildlife

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resources. The Ministry had three separate divisions, each dealing with one of these resources. MNRP had projects in the forestry, fisheries, and wildlife sectors that were closely connected to these three divisions of the Ministry. The Ministry issues licences for harvesting the resources and is responsible for managing the resources in a sustainable manner. Each of the three divisions in the Ministry employs hundreds of people at central, regional, and district levels.
In all of the three sectors there has been pervasive corruption during the last decades. Management and staff in the Ministry, together with politicians and people from the local population, have plundered the resources and exploited the resources in a way that is not sustainable. Often this has been in collaboration with foreign investors. With assistance from the Kuwait Fund for Arab Economic Development,3 the OPEC Fund for International Development,4 and the Saudi Fund for Development,5 one of the largest bridges in Africa was built over the Rufiji River in southern Tanzania in 2003. The bridge led straight into a natural forest of about 20,000 square kilometres that had remained fairly unexploited until then. A comprehensive study conducted after the completion of the bridge showed xtensive illegal exploitation of the forest. Logs worth tens of million of US$ were exported illegally to China and other countries in Asia. Taxes and royalties were paid for only four percent of the forests that were harvested. The study estimated that Tanzania annually lost US$ 52 million of its potential revenue, due to illegal logging (Milledge 2007).6 Reports from the fisheries and wildlife sectors also show that politicians and representatives of the Government allow these resources to be plundered by national and international companies, provided they themselves obtain a share of the profit made by the companies. Both in the fisheries and wildlife sectors, licenses are allocated to investors at a price that is only a fraction of the market price. Corrupt representatives of the Government earn huge amounts of money that should have gone into the Treasury. The development partners in Dar es Salaam recently notified the Government that the fees which the Government received from the wildlife sector were minimal. The Government only charged US$ 8,000 for hunting blocks that had a much higher market value. The Government accepted the complaint by the development partners and increased the fees to US$ 40,000 for each block. However,
many of the politicians and ministers who controlled these hunting blocks complained that the increased fees would lower their profit and therefore demanded that fees should remain at the old levels (British High Commission, Dar es Salaam 2007). The trawlers (about 150 coming from the EU countries and the Far East) that operate within the Exclusive Economic Zone in the Indian Ocean only pay US$ 18,000 annually to obtain a licence. On a good day of fishing, the trawlers are able to catch fish of the same value as the annual fee. It has been estimated that if the Government had charged market value for these licences, the Treasury could have collected US$ 20 million annually for the trawlers’ licences (Development Partner Group, Dar es Salaam 2005). It is also well known that the export of Nile perch from Lake Victoria has been underreported for many years in order to avoid taxation.7 There is much money to be earned by government officials and politicians who contribute to increased export of natural resources without it being taxed.
The Ministry is in a special position in the Government administration of Tanzania because of its opportunity to generate its own resources from taxes, fees, and royalties. It also receives allocations from the Ministry of Finance. It is difficult to estimate how much money the Ministry transfers to the Treasury and how much disappears due to corruption. With all the potential income from natural resources

6 The Norwegian Embassy in Dar es Salaam took the initiative for this study in 2004. It was supported by 15 bilateral and multilateral organisations in Tanzania and the Ministry of Natural Resources and Tourism. The Norwegian Embassy administrated and funded the study during the period 2005 - 2007. The study was discussed in the Parliament, among the development partners, and NGOs. Many NGOs have jointly made a plan to assess the follow-up of the report recommendations.

7 The African, October 7, 2004.
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resources, the Government of Tanzania should have been able to manage its own natural resources without depending on funds from development partners.
A report from the World Bank summarises these issues:
Because of policy failures, Tanzania’s natural resource endowments are not harnessed in
an optimal way to achieve both economic growth and poverty reduction. On the contrary,
owing to weak governance regimes in revenue-generating sectors, resources are offered
below market price to the benefit of a few powerful winners and the loss of the majority
of the rural population. Yet these natural resources provide substantive potential for
income to communities in the rural areas. The weakness in governance regimes in
forestry, wildlife and fisheries include primarily (a) the lack of transparency and
accountability in issuing rights to extract resources and accrue revenues from them, (b)
inequitable sharing of benefits with communities, and (c) monitoring and surveillance of
stocks. In all four principal sectors providing natural capital in the growth equation –
forestry, wildlife, fisheries, and mining – royalties are set arbitrarily and do not reflect
scarcity. Royalties are hence not used as a policy instrument of intertemporal resource
pricing and sustained yield management (Pfliegner 2008).
The Government of Tanzania has a complicated relationship to its task of managing the natural resources. On the one hand the government has, with the support of its development partners, spent much time and resources in developing legal acts, policies, strategies, national plans, and sector strategies for its forestry, fisheries, and wildlife resources which are compatible with those of the international community. No doubt many government officials in Tanzania do their utmost to comply with and follow up these adopted plans and strategies. On the other hand, there are also many government officials and politicians who undermine the policies they themselves have been central in having Parliament adopt. Many of these politicians and government officials have held high positions in the Ministry. These leaders can force honest government officials to adopt corrupt practices. It is therefore not a lack of legal acts and instruments, policies, strategies, and plans that explains the mismanagement and corruption in the field of natural resources, but the political will to follow up on the adopted instruments.

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