Tanzania and Angola Crisis

07 August 2020

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The economy of African countries is largely based on primary products and the extraction of natural resources, exported as unprocessed. As a result, economic growth is much slower than might be, because revenues, received from added value in the processing, accrue outside the continent. In this regard, the economy of African states in the large degree dependent on the price of fluctuations and trade regulations. This fact is proved by severe economic crisis which confronted African states in the late 1970s and early 1980s.

In 1970’s, the Tanzanian economy has developed relatively rapidly, which was associated with high world prices for Tanzanian exports. The policy of the forced creation of the “socialist villages” led to the alienation of farmers from the land, and the rate of growth was slowed. In the late 1970′s, Tanzania has entered into an economic crisis. The fall of the world prices for products of Tanzanian exports, world oil crisis and burdensome war with Uganda have led to a breach of the balance of payments.

Internal factors revealed by https://bestessaysservices.com have also played an important role. The state systematically underpaid farmers for exports and accumulated a significant portion of revenues from exports. Therefore, farmers faced a dilemma: either to produce fewer products or to realize a substantial part of it on the black market. Socialist type of economy also required the existence of political restrictions of economic activity. Arusha Declaration of 1967 banned the party functionaries and government officials to be engaged in business and to use hired labor.

Despite Tanzanian leadership efforts to prevent the personal enrichment of the party elite and government officials, the economic crisis of 1980 has generated an extensive shadow economy. Employees of the party apparatus and government officials, faced with the inability to survive on their salaries, have engaged in entrepreneurial activities. Experts note that it is difficult objectively assess the economic state of Tanzania, because it is virtually impossible to determine the extent of the shadow economy.

In the early 1980′s, the Government of Tanzania has made several attempts to adjust economic policies but it did not help the sick socialist economy. In 1986, Tanzania held talks with the IMF to obtain loans for the restructuring of the economy. The reached agreement meant a radical shift of economic course of the country, since the conditions required the rejection of the socialist methods of management. Like most countries, embarked on the path of reforms, Tanzania was implementing the privatization of public sector of agriculture and industry. The IMF also demanded trade liberalization and devalue of the Tanzanian shilling.

Another example is Democratic Republic of Congo, whose subsoil is rich in minerals, has the most powerful economic potential of tropical Africa. In mid-1970′s, the country entered again into an economic crisis, which was continuing into the 1990′s. As export revenues only partially offset the significant costs of imports, the government has made large foreign loans. Growth of exports constrained by low world prices for major export products: copper, cobalt, coffee, and diamonds. It was required a financial assistance from foreign banks and international organizations to service foreign debt. By 1997, it amounted to 13.8 billion dollars. Since agricultural production did not meet the needs of the population, the government was forced to spend foreign reserves to import food. Economic difficulties were aggravated as well by poor infrastructure, especially transportation. Annual budgets were made with a significant deficit, which coupled with other economic problems, led to high inflation.

Since mid-1970′s, production of many products of the manufacturing industry each year has decreased or not increased. Moreover, in the early 1980′s, production capacity of many enterprises operated only at 30%. This situation was due to restrictions on currency transactions, which hindered the procurement of imported spare parts for worn-out equipment, insufficient supplies of industrial commodities and the reluctance of investors to boot industry at full power against the backdrop of an uncertain economic situation.

The crisis also affected Angola. After the proclamation of independence of Angola, almost all the Portuguese settlers left the country and the economy fell into decay. Former Portuguese companies have moved under the management of new public companies, which had no experience of organizing production. Only the oil industry was booming, as from 1968, when Angola has started production of oil, the oil industry was controlled by large international companies. By mid-1980′s, the sale of crude oil brought more than 90% of export earnings and over 50% of government revenue. Most of the other sectors of the economy, with the exception of diamond, indirectly were supported by revenues from oil exports. Agriculture faced a severe crisis. In mid-1980′s, there were more than 20 oil companies in Angola from the USA, France, Italy, Japan, and Brazil.

In the searching out of the deep economic crisis in the early 80′s, most African countries, many of them by following the instructions of the IMF, went on the road to economic restructuring, the main slogans which were weakening the regulatory role of the state, complete freedom of market relations, and accelerated privatization. “Shock therapy” in Africa has led to even greater growth in social tension among the nearly three hundred million people and an increase in financial and economic dependence on the leading Western donor countries.