Transcript policy forum a summary of kikwete`s first two years: tanzania

KIKWETE’S FIRST TWO YEARS
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POLICY FORUM
A SUMMARY OF PRESIDENT
KIKWETE’S FIRST TWO YEARS:
TANZANIA GOVERNANCE REVIEW
2006-07
BRIAN COOKSEY
30 OCTOBER 2009
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WHY A TANZANIA GOVERNANCE REVIEW (TGR)?
TGR examines:
• the sources and uses of public finance
• the processes involved in allocating and controlling
public expenditure, and
• the outcomes of these processes in terms of generating
public goods and welfare
• governance in the private sector and civil society, and
• the role of donors in supporting governance initiatives
in the country
•Future TGRs will attempt to monitor trends in public
expenditure and governance.
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Mainland revenue performance 2003
to 2007, billion Shs
2003/04 2004/05 2005/06 2006/07 2007/08
TRA Collection
1,405
1,695
2,041
Annual revenue growth 23
21
20
(%)
GDP at market price 13,039 14,968 16,857
Revenue/GDP (%)
10.8
11.3
12.1
2,577
3,333
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18,915
22,350
13.6
14.9
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But…
• the tax base is very narrow: in 2006,
286 large taxpayers accounted for over
70 percent of domestic taxes
• Value Added Tax (VAT) has become
the most important source of revenue
(39%).
• While duty exemptions on traded
goods fell between 2000 and 2005,
VAT exemptions rose, reaching 20% of
gross collections in 2005
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And…
‘… TRA officers … have discretion over important
decisions … related to the determination of tax
liabilities (assessments), selection of audits,
litigation, … Many administrative procedures,
including … reporting tax revenues, could be more
transparent. Firms report that over-assessment of
tax liabilities is common, followed by ‘negotiations’
between the tax officer(s). This is compounded by
a general lack of specific sector expertise within
the TRA. … With the exception of the larger
enterprises, taxpayers continue to experience …
claims for bribes…’ (FIAS 2006: 101-2).
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Donor support (1)
• In 2007, 20 donors provided 42% of the
total budget in the form of General Budget
Support and basket funding
• Budget support is preferred by some
donors because it puts resources into
locally identified priority areas and presents
a single entity to be monitored and
evaluated (MKUKUTA)
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Donor support (2)
• Does more budget support and fewer
projects mean a reduction or an
increase in donor influence on the
course of events?
• Does budget support increase or reduce
aid effectiveness?
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Revenue shortfalls (1)
• Revenue is lost through undervaluation of
privatised state companies and assets
• Non-privatised parastatals incur huge
revenue losses EG subsidies to TANESCO
totalled nearly TShs 200 billion between
2002 and 2006.
• Sale of government houses to senior
government officials and politicians before
the 2005 elections (Shs 260+ billion?)
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Revenue shortfalls (2)
Huge revenue losses and misallocation of
benefits from natural resource
exploitation
• The timber trade
• Fisheries
• Hunting tourism
• Minerals and gemstone smuggling
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Public expenditure and
financial management (1)
• The Public Financial Management
Reform Programme (PFMRP) has
improved certain aspects of PFM:
• Integrated Financial Management
System (IFMS), external audit,
procurement and revenue reforms.
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Public expenditure and
financial management (2)
• Areas where progress appears to have
largely stagnated include:
• The quality of budget formulation and
planning.
• Strategic budgeting, budget classification,
payroll, internal audit and the involvement
of the legislature in the budget process.
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Public expenditure and
financial management (3)
• PFMRP difficulties are considered a reflection
of resistance to change as the reforms
involve radical shifts in both power and
resources. PFM reforms have involved heavy
investment in technology and IT systems, but
such investment has not been
accompanied by an awareness of the
underlying political economy and the
associated constraints.
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Recurrent expenditure 2001-2006
Fiscal Year
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
Tshs billion
1,253.1
1,527.8
1,834.1
2,252.3
2,875.6
3,142.3
LGA share %
18.7
19.0
17.7
17.0
18.6
24.3
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PUBLIC EXPENDITURE (1)
• There have been no major budget
deficits in recent years, but significant
deviations of actual from budgeted
expenditure are common
• Between 2002/03 and 2006/07
deviations in the recurrent budget at the
vote level exceeded 20 percent.
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PUBLIC EXPENDITURE (2)
• Donors believe that these high recurrent
budget deviations relate mainly to the
power and influence of individual MDAs
within the political/bureaucratic power
structure. This explains the ‘significant
weaknesses in Government financial
management. …[The] GOT has not made
substantial progress in improving its Public
Financial Management Systems over the
last two years’ (DFID Tanzania 2007).
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PUBLIC PROCUREMENT (1)
• Public Procurement Act of 2004
• Procurement Management Units to be
set up in each MDA and LGA
• Public Procurement Regulatory
Authority (PPRA) established
• This ‘mammoth exercise … will take
years to embed and mature.’
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PUBLIC PROCUREMENT (2)
• Public procurement has been the
major source of corruption and
waste in Tanzania
• All large building and engineering
projects are prone to corruption,
resulting in losses of up to 30 percent or
more of project costs.
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CAG’s reports on MDAs for
2005/06-2006/07
CAG’s
opinion:
Clean
Qualified
Adverse
No opinion
N/A
Total
2005/06
N %
19 33
15 26
4
7
9 17
10 18
57 101
2006/07
N %
28 49
11 19
0
0
8 14
10 18
57 100
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LOCAL GOVERNMENT
TRANSFERS
• Apart from recurrent and capital budgets from central
government, programme- or project-related grants to
LGAs include:
• HBF (Health Basket Fund),
• PEDP (Primary Education Development Plan),
• LGCDG (Local Government Capital Development Grant),
• PADEP (Participatory Agricultural Development and
Empowerment Project),
• RWSSP (Rural Water Supply and Sanitation Project),
• TASAF (Tanzania Social Action Fund), and
• Numerous ad hoc projects in individual regions/districts.
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Summary of CAG reports
for LGAs
Results
Clean
Qualified
Adverse
Total
2000
3
16
75
114
2006
53
67
4
124
2007
100
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0
124
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2006 PEFAR
• The Local Government Fiduciary
Assessment Joint Evaluation questions
the ‘quality and integrity’ of the
‘external scrutiny and audit’ functions of
the CAG in five of the seven councils
studied, and criticises ‘duplicative
external audits and inspections’ that
‘seriously strain the limited capacity of
local councils.’
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Local Authorities Accounts
Committee Report
Visits in early 2007 to Irambo, Igunga,
Tanga, Masasi, Kigoma and Kibondo
districts revealed huge disparities
between ‘audit information … and what
the MPs found out during their on-thespot inspection.’
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SERVICE USER SATISFACTION
• In 2006-07, road conditions, the availability of
drinking water, and the cost of medical treatment
constituted ‘major problems’ for about three out of
five adult Tanzanians.
• Poor roads were more of a problem in rural than in urban areas.
• Shortage of drinking water was a major problem in rural areas and Dar es
Salaam, less so in other urban areas.
• Poor sanitation was a serious problem for two-fifths of Dar respondents.
• Water for crops and livestock constituted a major problem for 44 percent of
rural respondents.
• The poor were more likely to find services problematic than the less poor,
but the cost of schooling and availability of electricity were more of a
problem for the less poor than the poor. (VOP 2007).
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FARMERS’ SERVICE SATISFACTION
When asked what benefits they receive from the
government, 82% of the poorest farmers replied
‘nothing’, as did 76% of the middle group and 66% of
the least poor. Seventy-six percent of livestock keepers
gave this answer, as did 80% of fishers.
– 86% of farmers had never used chemical fertiliser,
– 72% had never used agro-chemicals,
– 77% had never used improved seed varieties.
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CSO SERVICE MONITORING
• CSOs are involved in tracking the budgetary
process and public expenditure at different
levels:
•
•
•
•
PER, PEFAR
Public expenditure tracking (PETS)
Tanzania Governance Noticeboard
Etcetera
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CHALLENGES TO PETS
• Service providers are difficult to approach, are
reluctant to cooperate and are sparse with
information.
• Surveys effect little change in service providers
• Change occurs when information generated by
tracking is used by others, notably elected
councillors
• Most of the corruption, waste and inefficiency is at
the national level, most of the monitoring at local
level
• Need for service providers to greatly simplify
reporting formats
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CORRUPTION CONTROL
• International comparisons suggest that
Tanzania’s anti-corruption efforts have been
comparatively successful
• Detailed analysis of the data sources
suggests that the improvement is less
significant
• The most serious revelation of the 2006-07
period is the rise of political corruption.
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POLITICAL CORRUPTION
• Numerous major projects have been undertaken with the
objective of financing the continued dominance of the ruling
party. This would not matter so much if the projects were
economically viable, national priorities based on least-cost
considerations. Yet not one of the recent examples of largescale contracting and procurement reviewed in TGR seems
to meet these criteria. On the contrary, they have had
serious negative consequences for the economy, the
efficiency of public spending, and the legitimacy of the state
in the eyes of the public.
• It follows that CSOs should focus their monitoring
activities on political and grand corruption.
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OTHER THEMES in the TGR
Other themes covered in the TGR include:
• Aid impact and effectiveness
• Private sector regulation
• Civil society governance
• Tanzania in comparative perspective
• Monitoring governance
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