How Accurate is the Economist's Article on Magufuli Versus Acacia Mining?

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Executive Summary

The Economist provides coverage on Africa; however, something is very off about their coverage of the Tanzanian President Joseph Magufuli.
We cover The Economist’s accuracy in this article.

Introduction

On May 26, 2016, The Economist wrote an article on John Magufuli entitled Government by Gesture.

In this article, we will check the accuracy of The Economist.

See our references for this article and related articles at this link.

The Economist’s Article

The Economist’s article begins with an illustration of Magufuli driving a bulldozer over what appears to be everything. This is a very negative vision of what Magufuli is doing, but how accurate is this depiction of Magufuli?

Magufuli’s Cartoon Characterization

This cartoon seems to show one accurate thing (bulldozing corruption) combined with two inaccurate things. We can’t find any media coverage of Magufuli doing anything harmful or damaging to structures or the local flora and fauna of Tanzania. Therefore, this cartoon overall seems entirely inaccurate.

Secondly, this also brings up the topic of the article’s title. “Government by Gesture” sounds impulsive and irresponsible. But are these two traits that describe Magufuli? We will find out as we review The Economist’s article.

Article Quotations

“WHEN opening parliament after his election last year, Tanzania’s president, John Magufuli, repeated a campaign promise: parents would no longer have to pay for secondary education. “And when I say free education, I indeed mean free,” he assured MPs. This year the government started expelling foreign workers without proper permits, including thousands of Kenyan teachers. Schools that were already straining to cope with a huge influx of new pupils are now at breaking point.”

Tanzania has had a long term problem with educational capacity. This issue is worsening because Tanzania’s population has overgrown over the past 15 years. Of course, this issue precedes Magufuli’s tenure, but the issue The Economist is bringing up is that Magufuli is foolishly expelling foreign workers. The logic being that expelling these foreign workers reduce Tanzania’s educational capacity. And that would seem to be a natural consequence of reducing the number of teachers.

However, if people are living in a country and working in a profession without permits, should that be permitted? For instance, if Tanzania needed more dentists, should Magufuli then allow dentists who are already in practice in Tanzania to stay because there is a dentist shortage?

Perhaps, there are pros and cons.

However, what Magufuli is doing here is upholding the rule of law. This is something that many previous Tanzanian leaders have not done. If The Economist is intent on placing a negative spin on things that Magufuli does, one way of doing it is only to emphasize one side of any particular issue. This is a consistent pattern throughout The Economist’s article.

“The president, nicknamed “the Bulldozer”, has delighted Tanzanians with an anti-corruption drive and public displays of austerity. Within weeks of taking office last November he had banned all but the most urgent foreign travel for government officials. He spent Tanzania’s Independence Day picking up litter by hand. He has fired officials suspected of incompetence or dishonesty and purged 10,000 “ghost workers” from the public payroll. However, he has a worrying tendency not to think things through.”

Let us break down this paragraph.

Magufuli…

Has instituted an anti-corruption drive.
Is in favor or public displays of austerity.
They have banned all but the most urgent foreign travel for government officials. (which, by the way, is not merely a public display of austerity, it is a true type of austerity. Tanzania has a per capita income of just over $3000 per year, which translates to $6000 per year based on purchasing power parity (what the people inside the country can buy with that money). However, for travel, the per capita income applies as one must purchase travel in other currencies. Most likely, much of this travel is to developed countries. It is a simple matter to spend $4500 internationally to a developed country for a week’s stay. That is 1.5 times the income of an average Tanzanian for a year. Should government officials be doing that very often? All those travel monies have to come out of Tanzanian taxes. Also, companies and entities that would corrupt Tanzanian government officials want them traveling to London and attending World Bank and other conferences on “development,” as it allows them to develop relationships with them that can be used to get Tanzanian officials to place the interests of multinational representatives ahead of their responsibilities to the Tanzania population.
Magufuli picks up litter by hand.
Magufuli fired officials suspected of incompetence or dishonesty.
Magufuli purged 10,000 ghost workers off the public payroll.

Magufuli is Not Thoughtful…Compared to George W Bush?

These all sound like great things. So why at the end of the paragraph is it finished off with stating he has a

“worrying tendency to not think things through?”

And compared to whom? For instance, would The Economist say this about George W Bush?

GW started two wars against countries that had nothing to do with 9-11, and the long-term bill for these wars has been estimated at $4 Trillion.
Bill Clinton had all kinds of sexual liaisons that created liability for his administration.
Donald Trump has the impulse control and attention span of an infant. Therefore, by the standard of recent previous US presidents, Magufuli would score quite well.

So I am looking forward to reading about Magufuli’s “worrying tendency not to think things through.”

The Taxation at the Port of Dar es Salaam

Let’s see what The Economist has in store for us.

“Take, for example, his efforts to extract more tax from people using the port at Dar es Salaam, a gateway for the region. He has enforced VAT on the costs of moving goods that arrive at the port overland to neighbouring countries such as Zambia and Malawi. Shipping firms have immediately switched routes and now unload in Kenya, Mozambique or South Africa, leaving a once bustling harbour almost empty.”

Extract more tax from people using the port of Dar es Salaam? Is that the right definition for what Magufuli did? And who are these people using the port?

Last I recall, “people” don’t “use” ports (sailboats are rented from the harbor, not the port).

The primary users of ports are companies, not people.

And what is going on with The Port of Dar es Salaam is a lot more involved than The Economist is letting on.

Is The Economist aware that many companies were using the port and paying extremely little in taxes to the government for the use of the port? Governments are entitled to obtain taxes, and those taxes should not only be based upon taking them primarily from wage earners. The government needs taxes from businesses. Businesses, like those that advertise in The Economist, want ordinary citizens to feel bad for the fact that they have to pay any taxes at all. But as an individual, where do I complain about the far higher taxes that I pay? As a percentage of my income, then say General Electric or Warren Buffett. Warren Buffet pays around 15% of his income in taxes. Far lower than a typical US taxpayer.
Is The Economist aware that The Port of Dar as Salaam is widely known for inefficiency? And that this is in part due to the low revenues obtained by the Port of Dar as Salaam? Is the Economist aware that ports require investment from the governments that control the port?
At any point, did The Economist feel it important to explain to the reader that The Port of Dar as Salaam is known for corruption? And that corruption of a public infrastructure item like a port typically means payoffs to the managers of the port in exchange for reduced port fees and taxes? And that the port’s inability to raise revenue due to corruption has been a key factor in the problems with the port’s inefficiency?
Did The Economist ever see fit to include the following quotation from the website All Africa?

“The sacking of Mr Mwinjaka and Mr Massawe as well as the disbandment of the TPA board follows an ongoing crackdown on tax evasion at the country’s largest port, a situation that is said to deny the government billions of shillings in revenue every year.

The axe on TPA and at the ministry headquarters was long coming since the discovery of nearly 3,000 cargo containers that had been cleared recently from the port before payment of taxes estimated at Sh80 billion. Eight suspects including senior TRA officials were charged in court on Friday with abetting this matter.

The PM has made two successive impromptu visits to the port, on November 27 and December 4 this year to uncover the rot that has seen top brass at TRA also affected.

“These are the top official without whose authority no movement of containers from the port to ICDs would take place. They would have easily known that containers had been cleared without due taxes being paid but they did not take any action,” said the PM.

The tax avoidance scandal in the port was exposed by PM Majaliwa when he made an impromptu tour at the port on November 27, and revealed that 329 containers were cleared out of the port without paying revenues. He made a second unannounced visit to the port last Thursday and made a more staggering revelation that 2,387 containers had been illegally cleared between March and September 2014. Four ICDs were involved in the scam and they are JEFAG, DICD, PMM and AZAM.”

Tanzania has major problems in corruption in both the Port of Dar en Salaam, the Tanzania Railway Limited organization, and in the Department of Mining. These are issues Magufuli has tackled very aggressively. This corruption is widely known.

However, according to The Economist, Magufuli is just too greedy. Who is too, greed? The Magufuli or the shipping companies and other port users that don’t seem to want to pay enough in taxes to sustain the port?

Secondly, is it, in fact, a common problem that African countries generally extract too much money from companies? No. The opposite is the problem. Therefore, The Economist is asking the reader to accept a ridiculous proposition. And it conveniently leaves out how little in the way of revenue that Tanzania was receiving from The Port of Dar es Salaam.

Magufuli’s Popularity

“Mr Magufuli remains popular with ordinary Tanzanians. Twitter users at #WhatWouldMagufuliDo celebrate his thriftiness by suggesting amusing things he might approve of, such as wearing a curtain instead of buying new clothes and heating showers with a candle. The president has mended fences with neighbours, too. In April Uganda decided that a $4 billion oil pipeline would go through Tanzania, scrapping a previous agreement with Kenya. A month later Rwanda decided to build a railway to Dar es Salaam instead of the Kenyan port of Mombasa.”

This sounds as if it is complimentary, but in fact, it is actually dismissive. It implies that his appeal is to the simple common folk. That is the brilliant people, the elites (you know those people that read The Economist and lack the intelligence to see through the writing to the funding) aren’t necessarily on board. And this transitions to a negative implication in the next paragraph.

Magufuli’s Disrespect for Due Process?

“However, some Tanzanians, especially businessfolk, are having doubts about Mr Magufuli’s flair for the dramatic. When he thinks a public official has misbehaved he fires him on the spot, rather than following due process.”

Well, this is inconsistent. In a previous criticism, The Economist criticized Magufuli for following the law when it came to Kenyan educators who were teaching without the proper permits. Now, when he fires someone, The Economist thinks that it does not follow due process. Secondly, what is due process for employment? There is no due process in the private sector, and The Economist thinks this is grand.

However, what is the actual rules of firing government employees in Tanzania? Does The Economist actually know, or are they making things up? It might be entirely within Magufuli’s rights to fire people “on the spot.” And there can be abuses to such a system, but it is unclear from The Economists’ explanation as to whether these firings are justified. Tanzania has a large number of civil servants who are known to be loafing around all day, who have jobs because they are related to someone who is not adding value. This is a common problem throughout Africa call featherbedding. The government is supposed to accomplish things. It needs to collect taxes. It needs to run efficiently. It cannot be primarily a jobs program from the laziest in society.

Also, The Economist seems to have inserted a legal term into the conversation that does not belong.

Due process is when a person is being tried in the judicial system. Is Magufuli interfering with due process in the legal system? Not that I have heard. This description relates to being fired from jobs. I don’t recall the term “due process” ever used in employment because people can be fired, and there is not, in most cases, a way to debate the topic. If that were the case, 100% of people would object to being fired. Due process would apply to a workplace firing if a discrimination lawsuit were filed by the person fired, but now we are back into the legal system.

Overall this use of the term due process appears deliberately deceptive.

Not Sufficiently Pleasing the World Bank?

“More important is that he shows little interest in wider reforms aimed at spurring economic growth. If anything he seems to be making it tougher to invest in a country that already scores dismally on the World Bank’s ease of doing business index, where it is ranked 139th out of 189.”

But if we look at the Economist’s reference to the World Bank, let us pause for a moment to ask who the World Bank is?

The most important thing to know about The World Bank is that 100% of the World Bank’s funding comes from the US Treasury. This means the World Bank is a political arm of the US government, and as such, they loan money to further US policy objectives. This is the same role played by the International Monetary Fund, but for the European countries.

The political objective of the World Bank is to endorse governments that are friendly to the US, and a big part of this is “being friendly” to the multinationals that hire the expensive lobbyists to go to Washington DC to get the World Bank to do their bidding. These multinationals like to make the highest possible profits, which means they prefer not to pay taxes, and they like regulations as business-friendly as possible. Therefore, the worse any government will allow a multinational to treat its people and its resources, the more approval they receive from the World Bank.

It should also strike people as curious that two of the previous leaders in the US Department of Defense. One was Robert McNamara, the Secretary of Defense and the primary architect of the disastrous Vietnam War, and Paul Wolfowitz, the Undersecretary of Defense under Donald Rumsfeld, and a principal architect of the devastating Iraq and Afghanistan wars. One might say that screwing other countries with weapons is excellent training for leading the World Bank, where one screws countries with loans.

Therefore, getting a “pat on the head” from The World Bank means little more than the officials in that country allowed their countries to be exploited by multinationals. Yet, this is not something The Economist has any interest in explaining. And why would one drop to 189th in ease of doing business through demanding taxes to be paid, demanding that value adds be performed in Tanzania by mining companies and that disputes involving Tanzania be settled in Tanzania? What does the World Bank mean by “ease of doing business?” Does the World Bank mean to support corruption? Because no non-corrupt company would have any complaint with the changes happening in Tanzania. But of course, corrupt ones would. Corrupt companies would threaten Tanzania by removing their investment.

Yet, all of this is not something The Economist has any interest in explaining.

The World Bank is not completely useless. Their economic advice is futile. However, their opinion on birth control, something desperately needed in African countries whose populations are growing at an unsustainable rate and will bring great suffering and fuel conflicts, are generally correct. But The Economist does not care about covering birth control and sustainability topics. They want to write articles that serve to help their funders get the possible money.

Is Magufuli Weakening Africa’s Institutions?

“What Africa needs is strong institutions, not strong men or women,” says Zitto Kabwe, an opposition leader.

Hmm…what a strange thing to say. Naturally, if you are in the opposition, you would prefer that your opponent is weak.

Would Zitto Kabwe accept this as a legitimate criticism if had Magufuli’s job? One thinks Kabwe’s view on this might change somewhat. Secondly, let us evaluate the logic for a moment.

I would ask Zitto Kabwe how Africa can have strong institutions if those institutions are corrupt. They can’t. Magufuli is rooting out corruption in Tanzania’s institutions. Removing corruption makes institutions stronger as they are more able to carry out their mandate. Yet Kabwe’s view seems to be that the institutions should become “stronger” without a strong man or woman, forcing them to change. How is that supposed to occur precisely?

In researching Zitto Kabwe, his comments regarding Magufuli’s anti-corruption campaign are misleading. Kabwe has criticized Magufuli for not going after major corruption. But after tackling corruption at the Tanzanian Revenue Authority, the Port of Dar es Salaam, The Department of Mines, Ghost Workers, Tanzanian Rail, is that a reasonable criticism on the part of Kabwe. Mining and the port of Dar es Salaam are two of Tanzania’s major revenue producers. That is “where the money is.”

No Interest in Wider Reform?

The Economist’s statement that Magufuli has “no interest in wider reform” is outrageous. What evidence has The Economist presented that this is true? Magufuli’s reforms are quite wide. He is addressing everything from hospital inefficiency to education to cleanliness in Tanzania to corruption, getting multinationals to pay their taxes. How much wider should Magufuli’s reforms be to please The Economist? And what would The Economist know about fighting corruption? Their business model is to take advertising to advance the interests of the advertisers. The first rule of calling out others for corruption is not to be corrupt yourself.

Is Tanzania Now a Tougher Place to Invest?

What seems to be the case is that Magufuli is making Tanzania a “tougher place to invest.” However, is Magufuli showing a propensity to punish honorable companies that want to do business fairly in Tanzania? If so, it is not apparent. It seems that Magufuli is making Tanzania more difficult for companies that intend to rip off Tanzania. And this is merely intolerable to The Economist. Why should an African country demand that multinational not bribe officials to evade taxes? Where does any African country get off claiming the right to be treated fairly by multinationals?

The next quotation is both endlessly amusing but also demonstrates the depth of The Economist’s bias.

Surprisingly Tanzania even makes it hard for honest companies to pay their taxes (there it ranks 150th). Little wonder many less scrupulous ones don’t bother: last year fewer than 500 companies contributed an astonishing 43% of government revenues. Many others paid nothing.

Really?

Tanzania makes it hard for honest companies to pay their taxes?

Do these companies not know the address of the Tanzanian Tax Authority.

When I pay my taxes, I have the IRS’s address, and I send them a check.
It’s challenging for a government to “make it hard” for you to pay your taxes. Because Tanzania has no address for you to send in your taxes (according to the logic presented by The Economist), “less scrupulous” companies don’t bother.

This has to be one of the most deceptive defenses of tax evasion even published. Here the responsibility for tax evasion is shifted to the government. Tanzania is the first government in history to have a distinct distaste for receiving tax revenues.

“Instead of addressing these deeper structural issues Mr Magufuli has continued to live up to his nickname of “Bulldozer”:”

Again, what are the deeper structural issues? What is The Economist talking about? Magufuli is addressing tax evasion and the corruption that goes hand in hand with it. That is the grave structural issue.

one foreign firm was given seven days to settle a $5m bill, says its boss. The country’s revenue authority then took the money directly from its bank account.

How far in the rears was that tax bill? Has The Economist ever dealt with the IRS? Because if you don’t pay your taxes to the IRS, they tend to not play around with you either. Secondly, multinationals have been shafting Tanzania on taxes for many decades. Is The Economist concerned with that side of the story? Also, $5m is not very much money for these multinationals. The amount of tax evasion is enormous every year. This $5 would amount to a rounding error on the total amount of unpaid taxes, that someone in the Tanzanian government is paid to look the other way not to collect. See details of the tax evasion of just one company, Acacia Mining below.

Acacia Mining: The Good Guys

“By contrast, the government is painfully slow to pay its own bills: it still owes the same company $30m. Acacia Mining, a gold producer, is owed $98m in VAT rebates—effectively an interest-free loan to the government.”

Here The Economist has made a curious selection for an aggrieved party. If one is looking for a sympathetic company to profile, Acacia Mining would not be my first choice.

Tanzania has accused acacia Mining of under-reporting the amount of gold and other precious metals on a single container shipment by 14 million dollars. They only paid taxes on $1 million, where $15 million in taxes were due.
Acacia Mining has most likely been cheating Tanzania out of tax revenues for decades. Magufuli has accused Acacia Mining of underpaying Tanzania tens of billions over 20 years. This is Magufuli’s accusation. We don’t know if it is true. But Acacia Mining is a company with a very checkered history.

Yet, The Economist’s “objective take” on all of this is that Acacia Mining is owed VAT rebates? And that this is an interest-free loan to the government?

Can we think of potentially a reason why Magufuli did not want to pay this “bill?”

Is Tanzania Now Uninvestable?

A desire to receive owed taxes has converted Tanzania into an “uninvestable” company according to The Economist’s ultra unbiased sources.

“The country has become totally uninvestable,” says a bigwig at a private-equity firm with holdings across Africa. “You pay your taxes for five years and have the returns to prove it and then some guy arrives with his own calculation and says you haven’t paid your tax.”

Is that what has been happening? Has Acacia Mining been paying its taxes for five years? Has Acacia Mining been accurately reporting the precious metals it as removed from Tanzania for all of the time it has operated in the country?

Most likely, Tanzania is quite investable. But you might have to be willing to pay a reasonable rate of taxes, and it won’t be as easy to buy off government officials, as the “bigwig” at the private equity firm with holdings across Africa prefers.

One question that comes to mind is whether this bigwig has any interest in the people of Tanzania, or is he is merely looking to maximize his profits? It is a reasonable question to ask.

Magufuli Hangs Out with CCN Thugs?

“Mr Magufuli’s zeal may be admired, but his party, which has ruled Tanzania since independence, is thuggish and undemocratic: it suppressed dissent during the elections last year and then cancelled a vote held in Zanzibar after the opposition probably won it. Frustrated, America suspended $472m of aid. The Bulldozer merely harrumphed that Tanzania would soon no longer need aid and told the revenue authority to squeeze even harder.”

Is America genuinely frustrated with Magufuli’s “thuggish and undemocratic nature?” Interesting. So when the US supports Saudi Arabia, where public beheadings of political dissidents are commonplace, and the 1500 member, Saudi Royal family, controls 70% of the nation’s wealth, and there is no second party. Saudi Arabia scores on the bottom of all human rights measurements, is the US frustrated? Or are we happy to book the order for a $100 billion weapons order that was just signed under Trump?

And with Magufuli willing to take an independent path from the $472 million in (strings attached aid), why is this called “squeezing harder?” If Magufuli allows tax evasion to a far higher amount of money than $472 million, will the US become less “frustrated” and release the $472 million? Put another way, is the $472 million an enticement for Tanzania once again to move back to a pre-Magufuli level of corruption?

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Conclusion

This author is not providing an endorsement for Joseph Magufuli. I don’t think many of Magufuli’s dictatorial approaches are appropriate and will most likely lead to abuses in some shape or form. However, this article is straight-up propaganda by The Economist. It is John Magufuli through the eyes of international multinationals who would like to continue the unequal deal they have had with Magufuli’s predecessors who sold out the interests of ordinary Tanzanians for their enrichment.

Generally, the international media, particularly concerning Africa, only knows how to cover African politics from the perspective of international multinationals. This is the one-sided and somewhat corrupt view that The Economist offers its readers.

This brings up the question of why one pays to buy The Economist. One should be paid to read corporate propaganda.