Donor Agencies and Anti-Corruption Efforts in Tanzania

Written in March 2010 as part of an online course, “anti-corruption essentials,” run by the U4 anti-corruption resource centre. I had to identify an international organisation involved in anti-corruption work in Tanzania and provide an analysis of its effectiveness in helping Tanzania counter corruption.

Donor Agencies and Anti-Corruption Efforts in Tanzania

Corruption is increasingly acknowledged as a widespread and wide-ranging problem in Tanzania. This includes petty corruption affecting day-to-day interactions between citizens and the state as well as grand corruption affecting multi-million dollar projects and procurements reportedly used to finance election campaigns. Efforts to combat this problem come from several directions – political leaders creating their own anti-corruption platforms as a means of gaining popularity (see a typical example), donors concerned about good governance and accountability for funds, and civil society concerned about justice and pro-poor development.

Here I will be looking recent and high profile examples of development partner / donor involvement in Tanzania’s fight against corruption. In particular, I will look at the role of the International Monetary Fund (IMF) in uncovering the External Payment Arrears scandal (popularly known as EPA). I will also consider the UK government’s multiple roles in the corrupt purchase of high specification radar equipment, for the additional perspective that this case can shed on the anti-corruption work of the IMF.


The External Payment Arrears scandal involved an account at the Bank of Tanzania (BoT), from which $116 million was paid to several companies that had no legal claim to the money. It is widely thought that these funds were used to finance the governing party’s campaign in the 2005 elections. In December 2006, the Minister of Finance unexpectedly announced that “the government had been informed of alleged impropriety in the management of external commercial debt accounts at the BoT,” and would be conducting a special audit. Though it has not been publicly stated as such, it is generally acknowledged that the Minister of Finance was acting on information provided by the IMF, and that the IMF had put the Minister under pressure to take this action.

With the IMF (and other donors) watching closely, the audit was duly conducted and the theft was confirmed. The companies to which money was paid have been named, and the Governor of the BoT was sacked. He died a few months later.

The priority of the government has been to reclaim the stolen money from the benefiting companies rather than to initiate legal cases. This has been a controversial move, with civil society challenging this apparent impunity and the government defending itself by saying that country could “explode” if the investigations were not handled sensitively.

The role of the IMF in this case appears largely to be positive. Without the IMF’s intervention, it seems unlikely that the case would have ever come to public attention. There are no activists or journalists in Tanzania with the same level of expertise and access to information as the IMF, and the government’s later actions and statements suggest that they would have preferred the whole case to remain secret. However, the IMF’s role appears to have been limited to insisting that the case is made public and investigated fully, without commenting on the actions taken as a result. This has led to suggestions within Tanzania that the IMF is not taking corruption seriously enough.

UK Government and the Radar Scandal

This scandal involved the sale in 2001 of high specification radar equipment to Tanzania by the British company, BAE Systems. UK Ministers at the time noted that the deal “stank of corruption”, since there were plenty of cheaper and more appropriate options available, but the UK Prime Minister insisted that the government should not stand in the way of the deal. It later emerged that almost a third of the £28m cost of the radar was paid by BAE in “commissions” through a middleman into a Swiss Bank Account.

The UK has ratified the OECD Convention on Combating Bribery of Foreign Public Officials, and has enacted this into law making it illegal for British companies to bribe foreign officials. The OECD Convention and this law are designed for exactly such a case as the BAE radar to Tanzania, and investigations were launched by the Serious Fraud Office (SFO). A similar case against BAE for bribery in Saudi Arabia was dropped by the SFO under political pressure from Prime Minister Blair citing “national security interests”. But since Tanzania does not carry the same political weight as Saudi Arabia, the radar case was allowed to continue.

The SFO case was closely followed by in Tanzania, with many activists hopeful that for once an anti-corruption case would be pursued seriously since it was being dealt with by the British authorities. Tanzania’s Prevention and Combating of Corruption Bureau (PCCB) provided assistance to the SFO but effectively stopped its own investigations in expectation that the SFO investigation would be sufficient.

However, in February 2010, the SFO reached a deal with BAE under which BAE pleaded guilty to false accounting charges and agreed to pay a fine of £30m in return for which, several cases including the Tanzanian radar, were dropped.

This has left Tanzania in a state of uncertainty. Tanzanian authorities were depending on the SFO case against BAE to provide evidence against the Tanzanian officials and middlemen involved in the deal. With the SFO case having ended without a clear conclusion, the chance of such evidence reaching Tanzania for successful prosecution is thought to be minimal.

Lessons and Conclusions

These two cases both provide evidence of the potential of international cooperation to fight corruption, but also of the pitfalls. On the positive side, the capacity of the IMF and SFO to uncover and investigate corruption cases played a key role in these cases. Arguably the relative integrity and accountability of these institutions was also important – certainly the trust placed in them by the Tanzanian media and public was far greater than the trust placed in Tanzania’s PCCB, central bank and National Audit Office. Furthermore, the IMF, backed by other key donors to Tanzania, was able to use its influence as a financier to insist on thorough investigations into the EPA case.

However, the limitations of international cooperation are also evident here. First, donor agencies have a strong incentive to keep funds flowing. If a corruption scandal makes it difficult for donors to keep disbursing funds, they may decide to either hide evidence of corruption that they come across or to share it only as a quiet warning rather than going public. This could explain the IMF’s reluctance to continue pressing the Tanzanian government for action following the EPA audit.

Second, political factors can undermine the pursuit of justice through international cooperation. The IMF has long been cautious of becoming too intricately involved in national politics. In this case, bringing the case to public attention and insisting that it is properly investigated seems to be as far as the IMF is willing to go, publicly at least. Insisting on cases being followed up through legal channels rather than simply aiming to reclaim the stolen funds (the Tanzanian government’s preferred course of action) appears to be more than the IMF is comfortable with.

Political factors are clearer in the BAE case. The SFO’s decision to settle with BAE rather than pursuing a court case was less political than their earlier decision to drop their case against BAE in Saudi Arabia, but both cases demonstrate that even western legal systems are politicised and far from perfect. And the British government’s initial decision to allow an obviously corrupt deal to go ahead in the first place is also a sign that politicians rarely act against their political and national business interests. These factors clearly undermine the effectiveness of the OECD Convention.

The IMF has clearly played a key role in uncovering this case of corruption in Tanzania. However, political difficulties and perhaps misaligned donor incentives have prevented this from reaching a full and satisfactory conclusion. The BAE-Radar case shows even more clearly how political challenges can undermine justice when international cooperation is used to pursue anti-corruption activities.