Research Brief
The Unintended Consequences of Foreign Aid in Tanzania

Tanzania has been a relative success story in terms of African political reform. In the early 1990s Tanzania shifted from a one-party to a multiparty system, allowed greater freedoms for the press and civil society, and in 1995 held its first multiparty elections since 1962. The country has also somewhat of a donor darling since the late 1980s due to the institution of wide ranging structural adjustment policies as prescribed by international institutions. It is the second largest aid recipient in Sub-Saharan Africa, after Ethiopia, and received about $26.85 billion in assistance between 1990 and 2010. In the WIDER working paper 'Donor Assistance and Political Reform in Tanzania' Aili Mari Tripp assesses the impact development aid has had on Tanzania's democratic transition and consolidation. She argues that foreign assistance has in many ways directly strengthened democracy through support to civil society, parties, the media, legislature and the judiciary but that it has also had some, unintended, negative consequences on the quality of the countries democracy.

Foreign assistance, political reform, and accountability in Tanzania

Tanzania has been on a fairly steady trajectory of democratic consolidation since it adopted multipartyism in 1992. Indicative of the consolidation of multipartyism is the fact that there are now six parties in parliament and 22 per cent of the seats are held by the opposition. Repression of civil society and government control of the media have diminished in the recent years and parliament is no longer regarded as a rubber stamp, and much of the national agenda is driven by opposition parties.

The role donor's have played in this change has been one of supporting political pressures for reform that have risen internally, the legislature, judiciary, civil society and the media have all been major players in driving forward political reform in Tanzania, and all of these institutions have received support in the form of foreign aid. Donors have had a particularly positive impact in their support of civil society, media reform and legal sector reform.

Civil society in Tanzania has expanded significantly since the early 1980s and this is partly due to donor's placing a new emphasis on the importance of NGOs during this period. Civil society now plays an important role in both advocacy and service delivery, and the government in Tanzania today brings them into virtually all consultative processes. Donors have also been supportive of a variety of programmes and actors which aim to enhance the independence of the media. Funding has been given to the Media Council of Tanzania as well as a variety of NGOs involved in media advocacy work. The impact of this can be seen both in the increase in media freedom and the proliferation of new newspapers and television stations in Tanzania.

Donor support, largely from the Nordic countries, for the judiciary has also been significant, and has targeted law reform and legal aid projects, as well as support for human rights NGOs. There have been improvements in judicial capacity since the 1990s and the judiciary has, through a series of landmark rulings has asserted its independence from the executive in recent years. However problems remain, in particular corruption is still rife in the lower courts and judicial independence continues to be undermined by executive control of appointments.

The unintended consequences of foreign assistance

While it is undoubtedly true that donors have had a positive role in strengthening some key institutions and actors in Tanzania there is still a long way to go. In fact, Tripp argues that one of the things holding Tanzania back from further democratic consolidation is the unintended consequences of some donor interventions.

General Budget Support

In light of the Paris Declaration, as well as the ongoing debate about aid efficiency, donors have tried to increase their coordination and harmonize aid delivery. In Tanzania this has led to increasing amounts of aid being given in the form of general budget support (GBS). By 2007-08 51 per cent of all foreign aid to Tanzania came in the form of GBS. However this aid modality has had the unintended consequence of shifting power to the president and the finance minister, who make most decisions regarding GBS. In addition to this the fact that GBS entails large amounts of funds sitting in unaudited accounts means it can be used to support corruption and as political finance. This form of aid has also detracted from funding that used to support civil society and other forces pressing for political reform. This places ownership of the development agenda squarely in the hands of the government, the funds involved are often used as a means of entrenching the status quo and buying political support.

Abolition of Development Levy

In 2003, Tanzania's finance minister announced the abolition of an unpopular tax known as the Development Levy. The Development Levy was unpopular and difficult to collect; it also failed to result in services commensurate with the size of the tax. Its abolition was popular and was largely supported by donors.

Donor support for the removal of the Levy has had consequences which contradict their emphasis on decentralization and local government reform and which have made local governments less accountable to their citizens. The abolition of the Levy reduced the revenue that district councils received and consequently increased their dependence on central government for their revenue base. Revenue from central government to district councils is distributed in the form of General Purpose Grants. These grants are highly politicized and were used by the CCM to punish regions that did not support them. Today 95 per cent of local government revenue in Tanzania comes from either the central government or directly from donors. This reliance on central government, and donors, impedes the ability of citizens to participate meaningfully in local government.

Support for privatization

Mismanagement of privatization in Tanzania has had a number of negative consequences for accountability. Donors helped to fund privatization projects in the hope that they would divest the state of money-losing enterprises. The privatization of commercial enterprises, such as the Tanzania Cigarette Company, was largely successful but larger infrastructure enterprises have failed to become financially stable and all but one, Tanzania International Container Terminal Services, have reverted back to public control.  Many of these companies are losing massive amounts of money and are deeply uncompetitive. They are kept afloat for political reasons and the government's ability to do this is underwritten by donor financial backing.

A good example of the government using such companies for political gains is their manipulation of the countries electricity infrastructure. Electricity in Tanzania has often been rationed to influence voters. Citizens and industry have a better chance in obtaining uninterrupted power in an election year, while after elections blackouts increase. More importantly subsidization of failing businesses has not led to an improvement in services for the citizenry but has instead provided rent seeking opportunities for the elite. These rent seeking opportunities are so lucrative that their benefit seems to outweigh any electoral benefit that could be gained by providing quality services. Donors have thus been sustaining a political system in which donors have greater incentive to support failing infrastructure than to focus on building a viable and well-managed enterprises based on sound fiscal practices.

Tripp concludes that by failing to consider the potential for their actions to have contradictory effects, donors in Tanzania have supported the status quo and corrupt practices at the same time as strengthening societal actors who are challenging the same thing. The judiciary, civil society, political parties, the media and the legislature have all directly benefited from donor support but donor actions have also strengthened the executive and thus made it harder for these groups to hold the government to account.

Tripp points out that the Tanzanian case offers useful insights regarding why the literature on aid and democracy is so mixed. Donors need to consider not only the direct effects of their actions but also the contingent and often unintended indirect consequences.