The experience of African states during the 20th Century has been marred by economic struggle. External forces explaining these struggles abound; the colonial-era misappropriation of economic production, post-independence political instability, and a disadvantaged insertion into the global economy are but a few. The need for reform was made clear by widespread high inflation rates, large budget deficits, and correspondingly high levels of debt. The political institutions that were required to carry out these reforms were shaped by the colonial experience of 20th century African states. As a result, powerful and often autocratic regimes came to dominate (see Cheeseman & Fisher, 2019). The IMF devised a structural adjustment programme (SAP) intended to resolve the economic crises being experienced by African states. This comparative case study analyses the effect that the power held by State leaders had on the state’s capacity to achieve meaningful reform through IMF sponsored SAP. Meaningful reform will be defined as reform that improves prosperity across the entire population. Uganda and Tanzania have been chosen for comparison.The institutional structure of both of these states afforded State leaders significant power. The principal difference between the leaders was that Tanzania’s Julius Nyerere held strong socialist ideological views while Uganda’s Yoweri Museveni allowed pragmatism to guide his economic policy-making. This would prove to be pivotal in dictating how each regime negotiated with the IMF on its proposed neo-liberal reform programme. Nyerere’s ideological views empowered him to reject the IMF’s conditions, while Museveni’s pragmatism made him a willing adopter. However, the power of State leaders would ultimately prove to be of secondary significance compared to the structural forces that led both states to adopt similar reforms; reforms that served the interests of the international community and the State leaders at the expense of the wider domestic population.

Basis of power: Uganda and Tanzania

In terms of institutional structure and executive prerogative, the power allocated to State leaders in Tanzania and Uganda was similar. During the period which saw the introduction of SAP (the 1970s and 1980s), both Nyerere and Museveni operated without formal political opposition. Nyerere headed the Tanganyika African National Union (TANU) in an authoritarian one-party state while
Museveni was the president of the National Resistance Movement (NRA) in an authoritarian military oligarchy (Bratton and Van de Wall, 1994, p. 473). Both rulers centralised responsibility for structural adjustment to the presidency, granting them full control over the domestic implementation of policy and negotiations with the IMF (Van de Walle, 2001). In both Tanzania and Uganda, State leaders had near-absolute power vis-à-vis their constituents and political opponents from an institutional perspective. However, when ideological factors are considered it becomes evident that the actual extent of the power elites were able to exercise differed crucially between Nyerere and Museveni.

Nyerere held strong socialist ideological principles which imposed constraints on the political avenues available to him, while Museveni allowed economic pragmatism to guide his decision-making process. Both Nyerere and Museveni rose to power on the back of socialist-nationalist economic programmes (Mwenda & Tangri, 2005, p. 452). In spite of this, Museveni made an agreement with
the IMF and World Bank just a year after taking power to implement structural adjustment, a neo- liberal economic reform programme (ibid.). Nyerere, on the other hand, remained vehemently opposed to structural adjustment which he viewed as a form of neo-imperialism that directly undermined his socialist principles (Hyden & Karlstrom, 1993, p. 1399). These contrasting levels of ideological commitment served to empower and constrain Nyerere and Museveni in opposing fashion. Nyerere’s principled approach emboldened him in the face of the IMF as he sought to avoid adopting measures that would undermine the public good, but also bound him to a narrow range of domestic economic policy tools. Museveni’s pragmatism allowed him a wide range of policy tools
but meant that the policy-making process was largely transferred to the IMF which did not always have the welfare of the Ugandan public at heart. These contrasting forms of power and constraint had a direct impact on the ability of each leader to achieve meaningful reform in their respective countries.

Tanzania under Nyerere (1974-1985)

Nyerere’s socialist ambitions led him to stave off accepting conditional aid from the IMF for a long time, but when economic conditions continued to worsen his ideological convictions restricted him from implementing the necessary policy measures. The impact that the conditions of Nyerere’s power had on his inability to achieve meaningful reform will be analysed under Hyden & Karlstrom’s (1993) model of policy-making. Between 1975-79, Tanzania avoided accepting any conditional funding from the IMF because unconditional funds were sourced through the Oil Recovery Fund and national coffee export revenue increased sharply following the destruction of Brazil’s coffee crop in 1976 (Biermann & Wagao, 1986, p. 92). During this period, Hyden & Karlstrom (1993) described the policy-making process as being ‘technical’, meaning it was low in conflict and ambiguity.

This began to change when the short-term factors that had been driving economic prosperity came to an end in 1980. At this point, the structural weaknesses caused by Tanzania’s inability to produce sufficient economic surplus to sustain its extensive public spending programmes became evident. This was compounded by a series of external shocks, including a simultaneous drop in coffee prices and oil shock which drove Tanzania’s terms of trade down by 40% between 1978-82 (Hyden & Karlstrom, 1993, p. 1398). Despite the rapid decline in Tanzania’s output revenue, government spending continued to rise. This led to a widening fiscal deficit that was being financed by the central bank. In the absence of increased output, the increasing money supply led to rapid inflation (ibid.). It became evident that monetary policy adjustments, such as adjusting the nominal exchange rate and interest rates, was needed to offset the short-term effects of inflation. However, to Nyerere and his colleagues, using price as a mechanism to allocate resources was seen as a sign of profiteering. Their commitment to a fixed nominal exchange and nominal interest rate had become a matter of national sovereignty (ibid., p. 1398-9). The battle lines between the Tanzanian government and the IMF were drawn up and the policy-making process had become ‘political’, high in conflict low in ambiguity. Nyerere’s government could not make the necessary adjustments, believing they would equate to political suicide.

The flip side to Nyerere’s ideological resolve was that, when combined with his skill as a diplomat, he was able to garner sympathy and financial support through various bilateral agreements. The most noteworthy funding came from Scandinavia, where Nyerere’s platform of state intervention to achieve egalitarian ends resonated strongly. While this helped Nyerere remain in power, it was
not enough to offset the deeper economic issues that pervaded the Tanzanian system. There was a 50% decrease in real income per household over the 15 years preceding 1984 and a 65% decrease in living standards among the urban population (Bevans et al., 1988). By 1985, when Nyerere resigned as president, minimal reform had been implemented but the state’s control over policy-making remained intact.

Uganda under Museveni (1986-1996)

Museveni had none of the ideological reservations of Nyerere and was quick to agree to conditions of structural adjustment in return for IMF funding. Museveni inherited a state that was in economic disarray after the Amin dictatorship, and within a year of taking power his regime faced the threat of a growing rebellion in northern Uganda. The fragility of his political control and lack of alternatives forced Museveni to approach the IMF for financial assistance. With minimal bargaining power, Museveni agreed to adopt far reaching neoliberal adjustment measures in return for funding that would average $500 million per annum (Mwenda & Tangri, 2005, p. 452). Between 1986 and 1996, Uganda’s GDP increased by approximately 40% (albeit from a very low baseline following the Idi Amin dictatorship) (CEPR, 1999). This would suggest that Nyerere’s power to refuse IMF funding and conditions while enduring an extreme economic downturn stood in the way of Tanzania achieving as much economic growth as Uganda did. However, Uganda’s GDP growth paints only part of the picture.

The downside to Museveni’s eager adoption of SAP was the transfer of policy control to the IMF and the creation of an economic system reliant on foreign resources that disproportionately benefited a small economic elite. The IMF believed Uganda’s budget deficits required a demand management solution, while the problem of insufficient supply required the establishment of more competitive export markets. For these measures to be successful, the propertied ‘entrepreneurial’ class needed to be empowered by transferring resources from the public to the private sphere and markets needed to be liberalized (Mamdani, 1990, p. 430). However, the IMF failed to recognise that, due to how the Ugandan state was structured, the proposed reforms were likely to achieve economic development at the expense of further entrenching economic inequality and its economic dependency on foreign states.

The state Museveni inherited was shaped by the ‘economic war’ of 1973 under the Amin regime which was responsible for transforming the Ugandan state from one of the most efficient political apparatus in Africa into a corrupt and overextended organisation. Of particular importance to the trajectory of the Ugandan economy was the “state-created, state-protected” group of powerful proprietors known as the mafutamingi (Mamdani, 1990, p. 434). The state’s absorption of these wealthy land/business holders both economically empowered them and excused them from tax collection. State revenue streams declined sharply after this, as they became limited to income tax from the working class, export taxes on coffee (the peasant crop), and sales taxes on mass consumption goods (ibid.). Income tax dropped from 16.5% of GDP in 1969/70 to 4.8% by 1982/3 and excise tax dropped from 14.61% to 5.4% over the same period (ibid.). Mamdani (1990) argues that the fiscal deficit inherited by the Museveni regime was being generated by the state’s economic system that enabled the mafutamingi to represent the largest share of import demand while avoiding taxation. This structural configuration stood in the way of meaningful economic reform in Uganda and the IMF adjustment programme Museveni agreed to would serve to exacerbate these conditions.

The trade-off generated by SAP, which favoured short-term economic growth at the expense of long-term economic development, is evidenced by the key policy area of inflation management. To reduce inflation, the IMF proposed a demand-side solution known as a credit squeeze. This measure reduced the amount of credit available to the public and forced interest rates up. In turn, this reduced the demand for domestic goods and drove prices down. While this was effective at quickly reducing inflation, it caused domestic markets to contract which created problems for industries that were reliant on domestic consumption. The scale of the impact is reflected by the Background to Budget survey of 1987 which found that the number of employees in selected manufacturing firms fell by more than 50% compared to the level in 1982 (Government of Uganda, 1988). This could have been avoided if inflation had been reduced by increasing the domestic supply. While supply-side policies are admittedly more difficult to implement and less effective in the short-run, the economic interests of the IMF must be recognised as a key determinant of the policy choices that were made. In 1998, the United States, Germany, Japan, the U.K. and France collectively controlled approximately 40% of the votes in the IMF (IMF Members’ Quotas and Voting Power, 1999). By weakening domestic markets, Uganda grew increasingly reliant on foreign capital. This served to further entrench Uganda’s position in the global economy as a supplier of commodities and buyer of manufactured goods from developed nations. The shape of economic reform in Uganda is thus a reflection of the weak bargaining position Museveni held when negotiating IMF aid funding. With that said, Museveni’s power within the Ugandan state allowed him to manipulate the implementation of the SAP and further consolidate his regime.

The IMF sought to improve the overall efficiency of the state by reducing its capacity to engage in neo-patrimonial practices but the political instability this would have brought about was so great that State leaders were forced to circumvent it. The conditions of IMF funding required the Ugandan state to reduce the number of state enterprises and the overall size of the state as a measure of employees. The rationale behind these conditions was that, by reducing the size and scope of the state, there would be fewer opportunities for neo-patrimonial practices and efficient economic practices would be able to replace them. However, if these conditions were to have been comprehensively implemented they would have severely undermined Museveni’s capacity to maintain favour with his political power base, the mafutamingi. For this reason, when privatization began in 1992 it was carried out slowly at first and with great hesitancy (Mwenda & Tangri, 2005, p. 453). It only began to pick up pace during the mid-1990s once political elites had figured out how the process could be coordinated so as to replace the neo-patrimonial function that the distribution of state resources previously served. The privatisation of state-owned enterprises was directed so that buyers were political allies, semi-autonomous agencies were established to distribute jobs to supporters while avoiding bans on civil service hiring, and the largely classified military budget became the subject of misappropriation (Mwenda & Tangri, 2005). In this case, the domestic power structure enabled the maintenance of inefficient economic practices. However, the alternative option was for Museveni to voluntarily dismantle the basis of his political support which would have led to political instability and jeopardized the entire reform programme.

Tanzania under Mwinyi (1985 – 1999)

In 1985, Nyerere stepped down as President and his successor, Ali Hassan Mwinyi, adopted the IMF conditioned structural reform programme. Mwinyi followed a similar policy programme to the one implemented in Uganda, only he faced greater internal political resistance than Museveni. After resigning as president, Nyerere assumed the role of party chairman and continued to oppose structural adjustment policies. This turned the policy process into what Hyden & Karlstrom (1993) refer to as ‘ideological’, meaning the issue was high in conflict and ambiguity. This, along with the weakened state capacity caused by years of economic crisis, served to slow down the implementation of the SAP. Nevertheless, Mwinyi pushed forward with adjustment measures and during 1986, the
Tanzanian Shilling was devalued in three stages from 16 shillings per dollar to 40 shillings per dollar (Biermann & Wagao, 1986, p. 99). The absence of political uproar as Nyerere had anticipated acted as a strong indication that the public was prepared for policy reform (ibid., p. 100). This shift continued through to the end of the 1980s, at which point Nyerere resigned from his position as chairman and any remaining interest in socialist policy withered away. At this point the policy-making process entered the ‘institutional’ phase. It had become widely accepted that economic reform was necessary and as political views aligned the focus shifted to improving the institutional capacity needed to carry out said needed reforms.

What does this case study tell us about meaningful reform in Africa?

Both Uganda and Tanzania ended up acquiescing to the conditions of the IMF in order to access valuable aid assistance. The IMF reform packages were designed to rapidly improve economic indicators and restructure African economies so that they could play a productive role in the global economy. By accepting these measures, both states forewent the possibility of achieving reforms that were designed with the long-run development of their nations at heart. However, Nyerere’s reign demonstrated that even when the well-being of the population is made the priority, many African states lacked the necessary resources and capacity to achieve meaningful reform without aid assistance. Had Nyerere lacked this power and accepted the IMF’s conditional aid, the policy route
Mwinyi went down would have simply been expedited.

Museveni’s lack of power during his initial negotiations with the IMF led him to agree to structural adjustment outright. The power that he did possess, vis-à-vis the Ugandan public, enabled him to manipulate the implementation of SAP so that it replaced the neo-patrimonial function formerly provided by state resources. This maintained the neo-patrimonial character of Ugandan politics which produced economic inefficiencies. However, the maintenance of the neo-patrimonial order was a necessity because a sudden dismantling of it risked the complete collapse of political stability. Had Museveni lacked the power to use structural adjustment for neo-patrimonial ends, it is unlikely the policy measures would have been adopted at all because they would have directly undermined his ability to remain in power. This would have limited Uganda’s capacity to carry out reform at all and an outcome similar to Nyerere’s experience of severe economic depression could have been expected.

Ultimately Uganda and Tanzania arrived at similar economic outcomes, despite having rulers with contrasting power profiles, demonstrating that structural factors dominate variations of State leader power. African leaders faced a catch-22 situation. They lacked the financial power and state capacity to implement meaningful reform independently, as evidenced by Nyerere’s failures. Yet the only way to access the necessary financial support was by agreeing to a reform package that reinforced the corrupt and unequal nature of economic power in their country.

Conclusion

The power held by State leaders had minimal impact on the outcome of reform in Uganda and Kenya, and didn’t serve to change how meaningful the reform that occurred was. Nyerere’s ideological reservation had the greatest impact on the way reform was implemented, serving to prevent IMF prescribed reform from being adopted in Tanzania during his rule. However, this power became insignificant when Mwinyi adopted the programme shortly afterwards. Museveni’s weakness vis-à-vis the IMF led him to adopt SAP but the existing conditions in Uganda meant that the programme primarily benefited a narrow group and furthered the state’s dependency on foreign actors. His power within Uganda allowed him to implement SAP while retaining the ability to continue neo-patrimonial practices. In both cases, very similar reform packages were implemented and in neither case can the reform be considered meaningful given that the economic system primarily served the domestic elite and the IMF’s powerful actors.

Bibliography

Bevan, D. L., P. Collier, J. W. Gunning, and A. Bigsten. “Incomes in the United Republic of Tanzania during the ‘Nyerere Experiment’: Evidence from household surveys.” in W. van Ginneken (Ed.), Trends in Employment and Labour Incomes. Case Studies of Developing Countries (Geneva: ILO. 1988), pp. 66-83.

Biermann, W. and Wagao, J., 1986. The Quest for Adjustment: Tanzania and the IMF, 1980-1986. African Studies Review, 29(4), p.89.

Bratton, M. and van de Walle, N., 1994. Neopatrimonial Regimes and Political Transitions in Africa. World Politics, 46(4), pp.453-489.

Cheeseman, N. and Fisher, J., 2019. Authoritarian Africa. Oxford University Press.

Government of Uganda (1988) Background to the Budget, 1988-89. Kampala.

Hyden, G. and Karlstrom, B., 1993. Structural adjustment as a policy process: The case of Tanzania. World Development, 21(9), pp.1395-1404. International Monetary Fund. 1999. IMF Members’ Quotas and Voting Power. [online] Available
at: https://www.imf.org/en/About/executive-board/members-quotas [Accessed 14 January 2022].

Mamdani, M., 1990. Uganda: Contradictions of the IMF Programme and Perspective. Development and Change, 21(3), pp.427-467.

Mwenda, A. and Tangri, R., 2005. Patronage politics, donor reforms, and regime consolidation in Uganda. African Affairs, 104(416), pp.449-467.

Naiman, R. and Watkins, N., 1999. A Survey of the Impacts of IMF Structural Adjustment in Africa: Growth, Social Spending, and Debt Relief. Centre for Economic and Policy research.

Van de Walle, N., 2001. African economies and the politics of permanent crisis. Cambridge: Cambridge Univ. Press.