Tanzania – What Would Magufuli Do?

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He bulldozed a reputation as a no-nonsense president who wasn’t afraid to go hard on corruption, but crackdowns on independent media have raised fears of an authoritarian streak.

There was a time in late 2015 and early 2016 – when Tanzania’s President John Magufuli had only just been elected – that the man they call ‘The Bulldozer’ could do no wrong.

He staged surprise visits to government departments to make sure everyone was working. He put a cap on official travel, and vowed to eliminate corruption. All over Africa, long-suffering citizens looked at their own moribund governments and wondered to themselves, and then on social media: #WhatWouldMagufuliDo?

‘However, in the shadows of these laudable activities the president has demonstrated a worrying authoritarian inclination to repress dissent,’ writes Nic Cheeseman, professor of democracy and international development at the University of Birmingham, on his blog.

Even Magufuli’s much-lauded anti-corruption drive was not all it seemed to be.

‘Stopping corruption by sacking officials in an ad hoc manner […] may look dynamic and effective, but in reality it exacerbates the problem,’ says Cheeseman.

‘At root, corruption occurs because institutional checks and balances are not sufficient to prevent individuals from abusing their positions. Dealing with this by further undermining official processes ignores the heart of the problem and actually leaves institutions more, not less, vulnerable to manipulation.’

Where Magufuli is concerned, this should serve as a cautionary tale.

This year the president has been in the continental headlines again. He is now earning plaudits for taking on the big mining companies who, he says, have been plundering Tanzania’s wealth for decades.

His administration has slapped a massive fine on UK-based Acacia Mining, the biggest gold miner in the country, for allegedly misreporting their gold exports. At US$190bn, the fine is one of the largest in corporate history.

At the same time, Magufuli has pushed through new legislation to drastically reform Tanzania’s mining laws, including a ban on exporting unprocessed mineral ores in an attempt to force companies to refine locally.

These are groundbreaking policies designed to ensure that Tanzania benefits more from its vast mineral wealth. But before lauding Magufuli for his visionary leadership, it is worth considering what impact this is likely to have on the Tanzanian economy.

Southern Africa Resource Watch director Claude Kabemba told ISS Today there is no doubt that Tanzania’s mining industry needs a major overhaul. But he is concerned that Magufuli’s proposals are neither consistent nor comprehensive, and may ultimately fail to deliver the systematic reform necessary.

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Newly inaugurated President Magufuli greets President of Zimbabwe Robert Mugabe in November 2015. (Photo: GCIS)

As his domestic popularity has declined over the past year – from an extraordinary 96% in June 2016 to a still-respectable 71% in June 2017 – Magufuli has been looking for ways to reconnect with his base and to win over an increasingly sceptical opposition.

‘By espousing the language of sovereignty and economic war, Magufuli is tapping into political memories of liberation struggle and revolution,’ says Tanzania analyst Dan Paget on African Arguments.

‘This is not to cast aspersions about the sincerity of Magufuli’s intentions to reform the mining sector, but to illustrate that those reforms serve several purposes at once,’ says Paget.

Meanwhile, human rights organisations accuse Tanzania’s government of using repressive legislation to muzzle the media, civil society and opposition politicians critical of the institution.

Mwanahalisi in September became the second newspaper to be banned in Tanzania in one year, VOA reported. The government said the paper had violated previous warnings about articles criticising President Magufuli.

“We report facts that are liked by many readers and we point out where the government is going wrong,” said news editor Saed Kubenea. “That’s our policy since the start of this newspaper.”

The news outlet was also banned in 2012 for publishing stories that allegedly threatened national security. After a three-year court battle, the ban was lifted. Kubenea says they are hopeful they will get a similar ruling.

Earlier this year, Mawio newspaper was banned for two years after linking two retired presidents to dubious mining contracts. Rights groups criticised the ban as an attack on freedom of expression, which has been restricted since Magufuli came to power in 2015.

In the 2015 election, President Magufuli received 58% of the vote, compared to previous elections in which 80% of Tanzanians voted for the ruling CCM party.

DR Congo – Missing Mining Revenue

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More than double the amount spent on health and education disappears into corrupt financial networks. 

Between 2013 and 2015 more that US$750m in mining revenues went missing from the Treasury, moving instead into a dysfunctional state mining firm and other national level tax agencies, according to a report by Global Witness released on July 21st.

Although there is no solid evidence of where the cash has ended up, there is evidence that some of it has made its way into corrupt networks linked to the Congolese President Joseph Kabila.

Around $129.9m made its way to provincial tax agencies, around $95m to state-owned companies, around $52m to national tax agencies, and around $70m to other government agencies.

These funds, amounting to around a fifth of mining revenues, are stifling finance from already embattled health, infrastructure and essential public services, which across much of the country, are underfunded.

Since 2012, Global Witness also claims that the government has siphoned off $1.4bn in deals with offshore mining companies, twice that spent on health and education, this is alongside the funds lost amidst an inefficient and opaque tax system, headed by powerful individuals close to the Kabila regime.

State mining company Gécamines has been engaged in numerous suspicious transaction while also failing to contribute to the national treasury, with billions of dollars of debt. The company’s collapse in the 1990s has been attributed to many years of “looting” by former President, Mobutu Sese Seko.

The DR Congo is the largest producer of copper and supplier of cobalt in the world with cobalt resources though to be worth as much as $10bn, but regions such as Katanga, where huge multinational mining firms are at work, are also some of the poorest.

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Artisanal miners in Kailo – CC 2007. 

In a separate report, the Congo Research Group (CRG) found that president Joseph Kabila’s family “either partially or wholly owns” more than 80 businesses operational inside and outside the country.

Alongside over 100 mining permits for diamond and gold, President Kabila owns 70,000 hectares of farmland. The President’s sister Jaynet Kabila owns a stake in the country’s largest mobile network Vodacom Congo, while the President’s brother Zoe Kabila has business interests with several mining firms, reported Quartz Africa. 

United Nations (UN) experts have voiced concern that Congolese military officer, Major-General Gabriel Amisi Kumba, appears to own gold mining operations in the northeast of the country, on the Awimi River in Tshopo province.

In November 2012, Amisi was suspended as commander of Congo’s land forces after a report accused him of distributing weapons to armed groups and poachers operating in the east. Amisi was cleared by the military authorities in July 2014 and appointed to his current position the following September.

The UN also said that “almost all artisanally sourced gold in the DR Congo was exported illegally and underestimated in both value and volume.” It is estimated that during 2013, 98% of artisanally produced gold, valued at around $409m, was smuggled out of the country, reported Bloomberg

On August 17th the government announced it was suspending VAT payments on mining imports, intended to assist the government in a $700m backlog of payments owed to mining companies. Following mineral price falls in 2016 the Congolese currency lost around 21% of its value.

Find out more in the Africa Research Bulletin:

RWANDA – DR CONGO: Cross Border Market
Economic, Financial & Technical Series
Vol. 54, Issue. 4, Pp. 21669A–21670C

GENERAL: Mining Indaba
Economic, Financial & Technical Series
Vol. 54, Issue. 2, Pp. 21621C–21622A

Gold: DR Congo – Mine Collapse
Economic, Financial & Technical Series
Vol. 53, Issue. 12, Pp. 21549A

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Uganda – Corrupt Payments

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Parliament orders the repayment of fees paid to 42 officials following a victory in landmark tax arbitration case. 

The Ugandan Parliament has ordered all 42 government officials who had received a payout to refund the Ugandan Shillings (UShs) 6 billion that they had shared as a reward by President Yoweri Museveni for winning a landmark arbitration tax dispute.

The tax dispute related to British-based oil firms Heritage Oil and Gas and Tullow Oil. In July 2010 Heritage Oil and Gas sold its assets in Uganda to Tullow Oil for US$1.5bn, with the Ugandan Revenue Authority (URA) issuing a tax bill of $434m.

In May 2011, Heritage Oil and Gas initiated arbitration proceedings against the Ugandan Government for the release of $405m held by the URA following the scale of interests in oil blocks 1 and 3A in July 2010.

The case against Heritage Oil and Gas was decided in Uganda’s favour and therefore upheld URA’s assessment of $434m as Capital Gains Tax, reported Uganda-based, the Independent.

The payment to the 42 officials was a reward for their purported role in the arbitration case.

Most of the beneficiaries who received between UShs50m and UShs200m had also profited from a UShs56bn money pot which was passed by Parliament across seven financial years to facilitate Uganda’s legal team to prosecute the tax case against the two British oil firms.

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President Yoweri Museveni – CC 2012.

However, some senior officials who took a share snubbed the Parliament’s directive for a refund. They stated that they cannot refund the money since President Museveni supported the payment.

Solicitor General Francis Atoke, who pocketed UShs234m, said, “why should I (refund the money)? The money was paid to us, we did not ask for it even when we handled the case. It was the principal (Museveni) who gave us (the money) and we used it, so refund what? There is nothing to refund.”

While the parliament committee’s report does not explicitly name the officials, it accuses URA Commissioner General Doris Akol of violating the URA Act and Public Finance Management Act when she authorised withdrawal of UShs6b from URA account, reported the Monitor.

The notable beneficiaries of the so-called presidential handshake also include Uganda National Roads Authority (UNRA) Executive Director Allen Kagina and Kampala Capital City Authority (KCCA) Executive Director Jennifer Musisi among others, reported the Observer

Uganda continues to suffer from widespread corruption, which hinders business and investment in the country. There have been numerous reports of bribes and under the table payments within high level government circles.

Find out more in the Africa Research Bulletin:

ROADS AND RAILWAYS: Uganda
Economic, Financial & Technical Series.
Vol. 54, Issue. 2, Pp. 21618B–21619B 

UGANDA: Drought Hits Hard
Economic, Financial & Technical Series.
Vol. 53, Issue. 12, Pp. 21533A–21534A

UGANDA: Kasese Inaction Criticised
Political, Social & Cultural Series.
Vol. 54, Issue. 5, Pp. 21445A–21446C

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South Africa – Economy in Recession

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As most economic sectors contract many point finger of blame at corruption within the ruling party. 

According to data from Statistics South Africa, the country as slipped into recession for the first time in eight years, largely due to weak manufacturing and trade sectors. In the first three months of 2017 the economy contracted by 0.7%.

The trade, accommodation and catering sectors were the worst performing, contracting by around 5.9%, while manufacturing contracted by 3.7%. The value of the South African Rand (R) also dropped by around 1%.

Standard Chartered Bank’s Chief Africa Economist Razia Khan said the data showed weakness where it was not expected; the country had been predicted to have relatively high growth rates. Nonetheless, Joe de Beer, Deputy Director General of Statistics South Africa, said, “We can now pronounce that the economy is in recession.”

South Africa’s economy showed marginal positive growth for 2016, although it then contracted in the fourth quarter. The only sectors to have made a positive contribution to output growth in the country have been mining and agriculture, reported the Conversation Africa.

“The slowdown in first quarter was due to much worse results from usually stable consumer-facing sectors that had been the key drivers of growth in recent years,” Capital Economics Africa economist John Ashbourne said.

Political instability, high unemployment and credit ratings downgrades have hit business and consumer confidence, while government bonds have also weakened.

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President Jacob Zuma – CC 2011.

Pressure on President Jacob Zuma, including from within his African National Congress (ANC) party, has risen since a controversial cabinet reshuffle in March that led to downgrades of South Africa to ‘junk’ status by ratings agencies S&P Global Ratings and Fitch.

“Our economy is now in tatters as a direct result of an ANC government which is corrupt to the core and has no plan for our economy,” Mmusi Maimane, the leader of the opposition Democratic Alliance (DA) said, reported the Premium Times.

The concern is that South Africa needs strong economic growth to help reduce unemployment levels, which currently stand at more than 27%.

In a statement, the Government of South Africa said that the current growth rate, if sustained, will lead to a further decline in GDP per capita, risking the sustainability of our fiscal framework and undermining the delivery of social services.

The government added that the Minister of Finance Malusi Gigaba would be seeking a meeting with business leaders to discuss ways of working together to achieve inclusive economic growth.

Find out more in the Africa Research Bulletin:

SOUTH AFRICA: Credit Downgrades Deepen Turmoil
Economic, Financial & Technical Series
Vol. 54, Issue. 3, Pp. 21637B–21639B

SOUTH AFRICA: Anti-Immigrant Protests
Economic, Financial & Technical Series
Vol. 54, Issue. 2, Pp. 21596A–21598C

SOUTH AFRICA: Growth Falls
Economic, Financial & Technical Series
Vol. 54, Issue. 2, Pp. 21605B–21606A

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Equatorial Guinea – Persistent Poverty

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Despite high per captia income and oil wealth the country is performing poorly in wider social development.

Comparatively, across the African continent, Equatorial Guinea boasts some of the highest levels of per capita income, and with a largely oil dependent economy, it has often escaped mention in discussions of poverty. However, Foreign Minister Agapito Mba Mokuy said despite wealth the country was performing poorly at social development.

According to reports from 2015 still around half of the country’s population lacks access to clean water, and life expectancy and infant mortality are below the average for sub-Saharan Africa. Similarly, half of the children who start primary school never end up finishing.

The problems in part stem from the fact that much of the wealth has been accumulated by senior government officials and a lack of investment in the country, as many officials have turned to overseas investments, drawing allegations of money laundering.

There seems to be, following investigations, systemic corruption at the highest levels of government. Through infrastructure projects the government pours huge amounts of oil money into construction projects, with contracts awarded to companies often owned or closely associated with high-level government officials.

International Monetary Fund (IMF) reports and high-level interviews show that the conflicts of interest allegedly lead to inflated contract prices and dubious investments in “white elephant” projects. The government does not make public its budgets, or track health and education spending, so the only data available is that collected by the IMF and World Bank.

Between 2009 and 2013, Equatorial Guinea took in an average of US$4 billion annually in oil revenue, and spent $4.2bn on infrastructure such as roads, buildings, and airports. However in 2011 the country only spent $140m on education and $92m on health, while the only other year for which data is available, 2008, $60m was spent on education and $90m on health, reported All Africa.

In comparison Uganda and Tanzania spend around a third of their budgets on education each year, while Ghana spends around a quarter, according to the World Bank.

Despite efforts to eradicate poverty and promote inclusive growth, these principles of the African Union (AU) Agenda 2063, are fruitless without efforts to tackle corruption.

The oil reserves in Equatorial Guinea, which have supplied billions of dollars in revenue over the last three decades are expected to run out by 2035, which will only deepen the crisis in the country.

In a recent case the eldest son of President Teodoro Obiang Nguema is facing an ongoing trial after accusations of plundering money from government funds to buy a mansion in Paris, France, allegedly embezzling around Euro 100m, according to Deutschewelle.

Teodorin Obiang is also a vice-president of the small oil-rich state on the African west coast. However his trial was recently postponed giving Obiang an additional six month to prepare his defence. According to Transparency International, this was a delay tactic.

Human rights groups have long bemoaned Equatorial Guinea for its record on civil liberties, unlawful killings and torture, alongside allegations of bribery and corruption.

Find out more in the Africa Research Bulletin:

EQUATORIAL GUINEA – FRANCE: President’s Son on Trial
Economic, Financial & Technical Series
Vol. 53, Issue. 12, Pp. 21521C–21522B

EQUATORIAL GUINEA: Weak Performance
Economic, Financial & Technical Series
Vol. 52, Issue. 7, Pp. 20926A–20926C

EQUATORIAL GUINEA: Co-Investment Fund
Economic, Financial & Technical Series
Vol. 51, Issue. 1, Pp. 20278B–20278C

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Angola – Sonangol Reshuffle

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President Dos Santos makes his daughter the head of the state oil company as a group of lawyers seek to block the move.

According to National State Radio (RNA) President Jose Eduardo Dos Santos has appointed a new board of directors for state oil firm Sonangol, placing his daughter, Isabel dos Santos, as the head of the firm.

Already Isabel dos Santos has wealth estimated at US$3.3 billion, making her the richest woman in Africa. Her own company, GALP, is Portugal‘s largest in the oil and gas sector, reported AllAfrica.

However according to a report by Maka Angola, an investigation has “unmasked Isabel dos Santos and proves that – contrary to her assertions – her Galp shares were obtained via Sonangol in a business deal paid for by state money and public funds”.

Maka claimed that Angola is already one of Africa’s worst “kleptocracies”, and the revelations reveal that Isabel dos Santos was only able to amass her fortune by diverting funds from Sonangol. Maka ask, “Should Angola now expect Isabel to repay Sonangol the seed money funnelled through front companies Exem Africa and Esperaza Holdings?

The Angolan regime has seen many billions in revenue disappear during the Presidency of dos Santos, with much of the benefits going to the Presidential family and a small circle of elites.

For around four decades President Santos has ruled the oil-dependent nation, and senior members of the ruling People’s Movement for the Liberation of Angola (MPLA) have talked of Isobel’s eventual succession. The recent appointment sees her placed at the “apex of the money tree that has for so long funded the Dos Santos endeavours,” reported Maka Angola.

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President Jose Eduardo Dos Santos – CC

However, the Daily Nation, on June 5th reported that twelve Angolan lawyers had decided to attempt to block the appointment of Isabel as head of Sonangol. The lawyers are to submit a complaint against the ruling regime for breaking public probity laws.

Spokesperson for the group, David Mendes, said, “the law says a public agent must not nominate or allow nominations and agreements when there is an intervention of his wife or his first degree relatives…the appointment is illegal and the law is in on our side to halt the nomination”.

The main opposition party, the Union for the Total Independence of Angola (Unita), said that the appointment is a clear demonstration of favouritism and corruption inside the ruling party.

The Presidential family has large stakes in most of Angola’s strategic industries, including diamonds, the banking sector, media and telecommunications, and Isobel has much of her business empire located in Portugal.

Given Angola’s dependence of oil, being the head of the state oil company is “next to the presidency… the most powerful position in the country,” Angola analyst Aslak Orre told the BBC, reported the Daily Nation.

President Dos Santos is the second longest serving African leader after Teodoro Obiang Nguema Mbasogo of Equatorial Guinea. In March this year he said that he would step down in 2018, although similar promises made in the past have not been fulfilled.

New board of Sonangol:

– Isabel dos Santos – non-Executive Administrator and President the Board of Directors.
– Paulino Fernando de Carvalho Gerónimo – Director and chairman of the Executive Committee.
– Caesar Paxi Manuel João Pedro – Executive Director.
– Eunice Paula Figueiredo Carvalho – Executive Administrator.
– Manuel Luís Carvalho de Lemos – Executive Director.
– John Pedro de Freitas Saraiva dos Santos – Executive Director.
– Jorge de Abreu – non – Executive Director.
– Jose Gime – non – Executive Director.
– André Lelo -. non – Executive Director
– Sarju Raikundalia – non – Executive Director

Find out more in the Africa Research Bulletin:

POWER: Angola
Economic, Financial & Technical Series
Vol.53, Issue.4, Pp.21263B–21264C

OIL AND GAS: Angola
Economic, Financial & Technical Series
Vol.53, Issue.4, Pp.21260A–21261C

ANGOLA: Economy in Crisis
Economic, Financial & Technical Series
Vol.53, Issue.1, Pp.21134B–21135A

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Mozambique – Secret Debts

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International financial support for the national budget is suspended after revelations that the government failed to disclose substantial debts.

Recent findings have revealed that the government of Armando Guebuza, who was President from 2005-2015, managed to take on more than US$2 billion in secret debts, prompting an economic crisis in the country. The Group of 14 (G14) support donors suspended their contributions on May 4th and the International Monetary Fund (IMF) has also stated that it will not release any more funds aside from standby credit.

Following these decisions the Economic and Finance Minister Adriano Maleiane on May 4th announced the first cuts including a hiring freeze, although Maleiane guaranteed that health and education would not be affected. Total donor support amounts to $467m annually, around 12% of the state budget.

The debts were caused by at least three parastatal loans to companies in 2013, including the Mozambique Tuna Company (EMATUM) for $850m, Proindicus for maritime security at $622m and the Mozambique Asset Management (MAM) for $535m. In total an estimated $321m in debt repayments will be due in 2017, adding to other government debt; it is widely feared that there are further unrevealed debts.

The government has also admitted to secret loans to the Ministry of the Interior, including $221m between 2009-2014 for armoured vehicles and riot police equipment used in fighting against the Renamo rebel group, reported Mozambique News Reports.

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Ex-President Armando Guebuza

The Mozambican Debt Group (GMD) has claimed that the debt levels in the country are unsustainable, despite government claims to the contrary. In 2015 debt had reached 39.9% of Gross Domestic Product (GDP), just 0.1% away from unsustainable levels above 40%, although the figures were calculated before these recent revelations. According to reports from state-owned AIM the debt now stood at 69% of GDP, although rating agency Fitch put the amount higher at 83% of GDP with the possibility of rising to over 100% by 2017.

The GMD warned that this level of debt would have adverse impacts of the poorest strata of the population, leading to a substantial reduction in public funds.

Prime Minister Carlos Agostinho do Rosario had flown to Washington, United States, to meet the IMF Managing Director Christine Lagarde to confess the secret loans. An IMF statement read, “following a meeting held earlier this week…a technical team led by the Vice-Minister of Finance, Ms. Isaltina Lucas, worked intensively with the IMF Mozambique staff team.”

“Looking ahead, the Fund and Mozambique will continue to work together constructively to evaluate the macroeconomic implications of this disclosure of information and identify steps to consolidate financial stability, debt sustainability and enhance governance and oversight of public enterprises,” reported AllAfrica.

Workers have stated that they do not want to be forced to pay for the commercial debts, said General Secretary of the Organisation of Mozambican Workers Union (OTM) Alexandre Munguambe, speaking during May Day celebrations, reported AIM.

Already counted as one of the ten poorest countries in the world, Mozambique has been hit hard by falling commodity prices, ongoing drought and a recent flare up in violence between the ruling Frelimo party and the Renamo rebel group; these further debt burdens on the economy are likely to place increasing strain on the poorest and most vulnerable segments of the population.

Find out more in the Africa Research Bulletin:

MOZAMBIQUE – EU: Budgetary Support
Economic, Financial & Technical Series
Vol.53, Issue.1, Pp.21129A.

MOZAMBIQUE: Budget 2016
Economic, Financial & Technical Series
Vol.52, Issue.12, Pp.21102c-21103A.

Mozambique – Interest Rates Raised (Free to Read)
Economic, Financial & Technical Series
Vol.52, Issue.11, Pp.21070C.

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