Judegment Day At The High Court London

Judegment Day At The High Court London
Mengi v Hermitage: Libel Claim Successfully Defended

Friday, 16 December 2011

Should the UK continue to spend tax payers’ money on Tanzania?


Should the UK continue to spend tax payers’ money on Tanzania?

As British tax payers struggle to make ends meet during a devastating recession, many are wondering whether their government should continue to offer aid to corrupt countries that end up stashing aid funds into secret Swiss banks. Sarah Hermitage looks at the East African country of Tanzania and wonders whether continuing to pour British tax payers’ money into a country whose leaders continue to flout British laws and have done nothing in the past 20 years to show what the huge aid package they receive from Britain has achieved, is the right way ahead for Britain.

“This is a good moment for taking a step back and ask ourselves whether we would call today’s overseas development aid policy and practice successful – successful, that is, in providing sufficient impetus to overcome the strong forces worldwide that keep people poor.” – Phil Vernon, International Alert.

In March 2011 British Secretary of State for International Development Andrew Mitchell announced major changes to UK’s international aid program based on a nine-month review of the agency’s policies. “This government is taking a radically different approach to aid. We want to be judged on our results, not on how much money we are spending,” Mitchell said of the changes to the aid program.

The 2010 Budget restated the British Government’s commitment to reach 0.7 per cent of national income as aid by 2013, following a November 2009 Queen’s Speech commitment. Provisional 2009 data suggests that the UK’s total aid expenditure reached £7.4 billion, or 0.52 per cent of national income, up around £1 million from £6.4 billion in 2008 (0.43 per cent of national income). This represents a doubling of the aid/national income ratio since 1997 (when it was 0.26 per cent), and is the highest level of the ratio since 1964. Andrew Mitchell states such amounts are morally right and represent the values of the UK and its government but in times of austerity at home, how can these amounts of overseas aid be justified particularly in countries that show little commitment to good governance and thus slow development.

Most commentators agree that the purpose of development aid is to create conditions where assistance is no longer required. The Paris Declaration lays down a practical, action-orientated roadmap to improve the quality of aid and its impact on development’ and recognizes that aid is more effective when partner countries exercise strong and effective leadership over their development policies and strategies. Whilst we need to recognize that we are on very controversial and politically sensitive terrain when we talk about aid, there can be limited value to the British tax payer to continue to support countries where aid is not producing sustainable development due to a lack of effective leadership from receiving governments.

Tanzania is the third largest gold producer in Africa and is rich in mineral resources. Despite its mineral wealth, it is the largest recipient of development aid from Britain and has received in excess of US$2.89 billion in aid (from all donors) in its 50 years of independence. It is Africa’s top and, the world’s third leading recipient of aid after war-torn Iraq. It depends annually on foreign aid by 45 per cent, receiving US$453 million for its 2011/12 aid budget under the umbrella of General Budget Support (GBS). Despite these massive amounts of foreign aid, there has been no significant decrease in poverty over the last 20 years and the country is lagging behind on key development goals for safe water, income and health despite considerable economic growth. The 2007 Tanzania Household Budget Survey showed very little change in income poverty since 1991. Overall, in the 16 year period between 1991 and 2007, poverty fell by about five per cent. But most of this change can be explained by progress in Dar es Salaam. In rural areas, and other urban areas, the decline in poverty is too small to give confidence that poverty has actually fallen (Policy Forum-Tanzania). High economic growth in Tanzania has not been pro-poor.

Such dependency on aid can be understood in war-torn Iraq, but Tanzania’s dependence on foreign aid is surely difficult for DfID to justify. UK’s influential cross-party Public Accounts Committee (PAC) recently criticised DfID’s poor understanding of the scale and possibility of aid being lost to fraud and corruption. In the 2010-2011 fiscal years, DfID reported losses of £1,156,000 (0.016 per cent of total spending) which PAC stated to be unbelievably low. Even if the mechanisms for the effective administration of aid are present, it is inevitable that large amounts of DfID’s money will go astray (and certainly much more than the 0.016 per cent). In Tanzania alone, senior official’s estimate 20 per cent of the government’s budget in each fiscal year was lost to corruption, theft and fraud (U.S. Department of State 2009 Human Rights Report). Assuming this figure is accurate, £130 million of tax payers’ money will be lost to corruption over the next four years from DfID’s £643 million aid budget to Tanzania alone.

Corruption is endemic in Tanzania and a failure to effectively address it belies the Tanzanian government’s commitment to upholding the rule of law, the quintessence of any successful aid policy. Former British High Commissioner to Kenya Sir Edward Clay states that in Kenya, Secretary of State Mitchell and his predecessors have ‘missed the warnings about the folly of investing in a government whose most distinctive characteristic was its endemic corruption’ and that DfID policies have done little to address the systematic problem of corruption: providing an alibi for bad governance and doing little to ‘address a culture of impunity’. There is little to suggest the situation is any different in Tanzania (whilst it is acknowledged that Tanzania is aid dependent and Kenya isn’t).

The director of the International Centre for Tax and Development Research, Professor Odd-Helge Fjeldstad, observes that Tanzania is good at chasing donor money and argues that if efforts chasing donor funds were reduced by one per cent and redirected to increase local revenue collections, the treasury coffers could have increased. He highlights the negative relationship between aid funds and revenue collection. A recent study argues that if corporate tax had been paid on the 2010 revenue of Barrick Gold at the US Federal rate of 35 per cent, the monies raised would have been in the region of (Tanzania Shillings) TZS225 billion (approx. US$141,432,935.64).

In evidence submitted to the House of Lords Economic Development Committee in August, Sir Edward Clay highlights poor governance as a common cause of the failure of development assistance to achieve its objectives. He states that chronic poverty and, above all, deepening inequality, cannot be overcome without confronting corruption in its many forms and recognising the debilitating effects it has on the institutions of a state. This view is shared by Saumu Jumanne, a lecturer at Dar es Salaam University who states that Tanzania is poor because of poor leadership and management of the aid and that only a trickle of aid reaches the targeted groups and sometimes even aid for orphans is misappropriated.

Tanzanian writer Sebastian Sanga suggests Tanzania’s political stability misleads external partners as regards the realities of democracy and the degree of correct resource governance. He highlights the difficulties of propagating good governance in Tanzania stating powerful and self-interested economic actors gain control over the executive department, to their own advantage, meaning that there are then enormous losses for the entire society.

In light of such damning evidence of poor governance in Tanzania, it is hard to understand or indeed justify the contradistinctionary view held by the British government. DFID ranks Tanzania in the top 10 per cent of countries supported by British aid which has the potential to be most well used. Henry Bellingham, the British Minister for Africa recently assured Tanzania’s Minister for Foreign Affairs Bernard Membe that Tanzania would remain one of the top receivers of UK aid as it was one of the few countries in Africa with an outstanding human rights record and good governance. A policy that denies the true state of governance in aid receiving countries provides a vacuum for the misuse of aid, fuels corruption and does little to promote sustainable development and relieve the lives of the poor.

UK aid flows to Tanzania have increased from £111.776 million in 2006/7 to £146.045 in 2009 (SID 2011 Tables Index DfID) and are viewed by the Tanzanian government as a fait accompli. British lawyer Dirk Crols makes this point that African governments consider foreign aid as a permanent, reliable and consistent source of income providing no reason to adopt an alternative policy to foster and finance the economic development of their countries. He poses the question, if the only thing you have to do is to cash your cheques, why should you elaborate an economic-financial policy or planning in the long term?

The late economist Péter Bauer drew an unusual (but increasingly accepted) correlation between corruption and foreign aid, a phenomenon he referred to as the vicious cycle of aid. Bauer wrote that in countries where governments, public institutions and courts of law are corrupt, both domestic and foreign investment is unattractive. Fewer investments lead to a reduction in economic growth and thus an increase in poverty levels. As a response, donors give even more aid which further feeds corruption.

Zambian economist Dambisa Moyo claims 50 per cent of UK aid will end up in the bank accounts of corrupt bureaucrats, in banks that are not even in the country where aid is supposed to go due to a lack of administrative infrastructure to allocate the money and efficient accountability mechanisms to oversee that the money is going to the right places. Tanzania has vast mineral resources and the means to develop itself; yet fifty years after independence it remains Africa’s largest recipient of aid with the British tax payer being the largest unilateral donor.

Andrew Mitchell states UK aid is about value for money and ensuring that every pound taken off hard-pressed taxpayers delivers 100 pence of value which is accountable to the British tax payer. Mitchell states the Coalition government takes a zero-tolerance approach to corruption and clamps down ruthlessly on any misuse of funds allowing British aid to deliver value for money and achieve the best results in fighting poverty and building a safer world.

However, Mark Lowcock, Permanent Secretary at DfID has confessed to the PAC that he does not know how much of DfID’s aid money was lost to fraud and corruption. ‘Poor people in developing countries expect the aid and debt relief received by their government to be spent in ways which actually improve their lives. Similarly, taxpayers in rich countries expect finance to poorer countries to be spent on fighting poverty.’ It is not suggested that UK cuts aid to Tanzania but, it is suggested that whilst issues of poor governance are ignored, corruption flourishes with impunity. As a result, the lives of the Tanzanian poor will not be sustainably relieved and the British tax payer will not get value for money in respect of its aid programme.

If we take a step back therefore and ask if today’s overseas development aid policy and practice is successful in Tanzania – successful, that is, in providing sufficient impetus to overcome the strong forces worldwide that keep its people poor, the answer is, it is not.

Sarah Hermitage is a solicitor of the Supreme Court of the United Kingdom. She read law at the University of Kent at Canterbury after spending six years serving in the police force in Kent. She has had a passion for Africa since the age of six and has lived in Monaco, Sudan, Kazakhstan, Malawi and most recently, spent six years in central China and eight years in Tanzania. She is a strong anti-corruption activist with interests in the operation of and access to the rule of law in Tanzania. She is married to Stewart, an agronomist and expert in small holder farming in sub-Saharan Africa who was born and raised in Zambia. We are proud to have her join our small team of contributors.

No comments: