Tanzania (British Investors)

– in Westminster Hall at 11:00 am on 27 February 2008.

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Photo of Roger Gale Roger Gale Conservative, North Thanet 11:00, 27 February 2008

Good morning, Mr. Bercow. It is a genuine pleasure to be permitted the opportunity to speak under your chairmanship.

In sharp contrast with that sentiment, I take no pleasure at all in having to discuss this morning a matter of considerable concern that arises from my failure to protect the interests of two of my constituents, Mrs. Sarah Hermitage and her husband, Mr. Stewart Middleton, who made the mistake of investing in Tanzania. I know and respect the Minister well enough to say that if she has prepared a speech extolling the virtues of Tanzania as an example of a developing African country that is making progress, and the importance of British investment in and overseas aid to that country, I would be grateful if she would do me the courtesy of tearing it up.

I have heard the arguments from Lord Triesman and Lord Malloch-Brown. I shall read their comments into the record and, in the limited time available, I shall explain why I believe that they and the Government of the United Kingdom are misguided in their naive faith. If the Minister does not have enough time or the briefing to respond in full to my observations, I shall completely understand, because I have a great deal to say. I do not seriously expect her to be able to reply to some of the things that I am afraid I need to say this morning, but I would welcome a written response in due course.

I record my appreciation of the assistance of two people: the Tanzanian high commissioner to the United Kingdom, Mrs. Mwanaidi Maajar, and the British high commissioner in Tanzania, Mr. Philip Parham. Mrs. Maajar received me with great courtesy at a time that, following bereavement, was difficult for her family. I believe that she has exhausted her powers as a diplomat, which, of course, are not the same as ministerial powers, in trying to bring about a fair resolution to the problem.

Mr. Philip Parham has proved an exemplary UK representative. He has gone far beyond anything that might reasonably have been expected in seeking to protect the interests of my constituents and of British overseas investors.

Sadly, all that help and my own meagre efforts have been to no avail. My constituents have lost their investment, lives have been placed in danger and, most important of all, innocent people have been imprisoned. I have a file on the matter that is about a foot thick. The case is complex and interwoven with legal contortions. It is inevitable, therefore, that in 20 minutes I shall skate over some facts in a way that will lay me open to charges of being selective and superficial, but I will do my best to state the case simply.

Between 2000 and 2004, the Silverdale farm in Moshi, Tanzania, was owned by Benjamin Mengi, whose brother—this is relevant—is the Tanzanian media magnate Reginald Mengi. Benjamin Mengi received from Vector US $150,000 and a Toyota Land Cruiser in exchange for the use of 10 acres of land leased for genetically modified organism trials for the production of zero-nicotine tobacco.

On 20 May 2004, the lease to the Silverdale and Mbono farms was assigned by Mengi's company—Fiona (Tanzania) Ltd.—to Silverdale Tanzania for a consideration of $112,000. The money was paid in agreed instalments and formally receipted. Mengi retained a 30 per cent. shareholding and my constituent Stewart Middleton acquired 70 per cent.

Mr. Middleton is a farmer with years of experience in Africa. He embarked on the production of vegetables for export and employed local labour. The African co-operatives that owned the freehold of the land passed a resolution accepting the transfer on 10 May 2004, and they also accepted the rental paid to them at the time.

In January 2005, Benjamin Mengi, having sold the lease once, sought to sell it for a second time to a neighbouring farmer, Konrad Legg. In April 2005, Mengi applied to the courts to have the investors, Stewart Middleton and Sarah Hermitage, evicted. Simultaneously, it would appear that a contract was to be taken out on Middleton's life. He was to be shot in the head, his body placed in the Kikafu river and his car abandoned at the airport.

In June 2005, Stewart Middleton opened police charges against Mengi for forgery and conspiracy to murder. The Deputy Minister of Home Affairs was informed but the allegations were never investigated. In August 2005, Stewart Middleton and his Tanzanian manager were arrested on the streets of Moshi by armed police and taken before magistrates on complaints made by Mengi. The charges, which do not exist under the penal code of Tanzania, were dropped, and Mr. Middleton was released. No apology was ever offered by the Tanzanian Government.

In November 2005, Mengi declared publicly in front of the Moshi regional crime officer that he would drive the investors out of Tanzania "by any means necessary". To cut a long story short, he succeeded.

Representations were made to President Jakaya Kikwete in January 2007 by the then Foreign Secretary, Margaret Beckett, and an intervention was made by Mrs. Cherie Booth, QC, the wife of the former Prime Minister. She raised the issue with Justice Minister Mary Nagu in February 2007. Those approaches were recorded in Africa Confidential on 25 May 2007 in an article that added:

"Praising the government's Private Growth Initiative earlier this year at the prestigious United States Yale University, East Africa Tycoon Reginald Mengi stressed the need to be 'careful' when choosing a partner."

How right.

"His younger brother, Benjamin Mengi, is trying to obtain the lease to the lucrative Silverdale and Mbono farms in the Kilimanjaro region which in May 2004 he assigned to Silverdale Tanzania owned by British Investors Sarah Hermitage and Stewart Middleton.

Official pledges of support notwithstanding the Moshe district police have twice arrested Middleton after Mengi claimed he had not been paid the full price agreed—despite Mengi signing a receipt to the contrary which Africa Confidential has seen."

It clearly helps to have a brother who owns newspapers and television stations that are relied upon by the President and the Government for support.

In spite of the Herculean efforts of the British high commissioner, Philip Parham, a three-year campaign of threats and harassment has been waged by a small-time crook. Backed by local police officials, Mengi has been allowed to drive lawful investors from Tanzania in fear for their lives and for the lives of the honest, decent and hard-working Tanzanians whose livelihoods they have fought to protect.

In November 2005, the then British high commissioner, Mr. Andrew Pocock, who is distinguished in his own right, wrote to the director of criminal investigation in Dar es Salaam:

"You will no doubt be concerned, as I am, by what appears to be continuing intimidation of a bona fide investor in Tanzania. Part of this intimidation seems to be coming from the local police force. Mr. Middleton is not a criminal. There is no evidence that he has broken Tanzanian law in any way. Yet he is arrested without charge and taken by armed guard before a magistrate...I am particularly mindful of the efforts of the Government of Tanzania to encourage legitimate investment and concerned that a British National who is the source of such investment—and of local employment and exports—should be subjected to harassment that does not reflect Tanzania's hospitality."

Those comments were copied to the Deputy Minister of Home Affairs, Captain John Chiligati, who took no action.

In June 2006, Stewart Middleton found it necessary to write to the Minister for Planning, Economics and Empowerment following the imprisonment, on trumped up charges, of one of his staff. He wrote:

"The entire judiciary here in Moshi is openly against me because of Mengi manipulating the situation by bribery and by telling key people in the judiciary that their jobs are in jeopardy as I have reported these matters to the Ministers concerned. The worst aspect of all of this is that people who are working with me are now suffering the consequences of doing so. Abel"— an employee—

"was arrested on the Tuesday and then Mzee Mtenga is attacked in the night of the Wednesday. There can be no doubt that this is a deliberate attempt to eliminate my support and also to have me suffer the guilt that I am responsible for the plight of these two outstanding Tanzanians."

More was to follow. On 9 October 2006, freelance writer Linda Garner recorded:

"The Republic of Tanzania threatened Stewart Middleton, a British investor living in Moshi in the Kilimanjaro region, with arrest for the third time in nine months. The hearing involved the case surrounding Mr. Middleton's arrest and committal to prison for fourteen days on 22nd July 2006."

The article states that three months after that imprisonment, the republic had still not produced prosecution statements and no charges had been laid.

In August 2006, following my representations to the Foreign and Commonwealth Office on these matters, in which I called for a suspension of aid to Tanzania, Lord Triesman of Tottenham, the relevant Minister, replied:

"Tanzania is an increasingly effective State. It has a stable Government committed to reducing poverty and promoting economic growth...To suspend aid would undermine the progress towards improving governance and cause unnecessary hardship for millions of Tanzanians living in extreme poverty".

I will return to the "extreme poverty" issue later. Lord Triesman had the grace to acknowledge:

"We agree that corruption does remain a problem in Tanzania as it does with many countries in the region."

He added that

"President Kikwete has emphasised the importance of tackling corruption and addressing its root causes."

I am not sure that Lord Triesman would have written the same letter after the hour-long meeting that Sarah Hermitage and I subsequently held with him and his officials or after receiving the personal letter, dated 20 March 2007, sent to him by Stewart Middleton's Tanzanian farm manager, technical manager and field operations manager, which stated:

"We have been imprisoned. We have had false accusations made against us which would have resulted in us being in jail again if it had not been for the efforts of the British High Commissioner, Philip Parham...The rule of law is not being applied in any matter concerning ourselves or our employer and we are very worried for our future."

On 1 November 2007, I wrote again to the Tanzanian high commissioner, Mwanaidi Maajar to inform her of my disappointment at the lack of progress towards a peaceful resolution of the case and of my intention, if necessary, to seek this debate. The letter was copied to our Foreign Secretary and on 2 December the Minister of State, Lord Malloch-Brown, replied on his behalf:

"We believe we should maintain our efforts to support economic growth and poverty reduction in Tanzania. Those efforts are making a real difference to the lives of poor people...Tanzanian budget procedures are better than in many other countries at similar stages of development. But public financial management including corruption certainly remains a challenge. President Kikwete has spoken strongly about the need to tackle it."

The "it" presumably relates to what another UK Minister had described in a parliamentary written answer on 25 July 2007 as

"potential irregularities with the Bank of Tanzania external payment arrears account for 2005-06."—[Hansard, 25 July 2007; Vol. 463, c. 1121W.]

At that time, the Department for International Development revealed that it had already given £345 million in "budget support", with a further £105 million disbursed in July 2007 in support for 2007-08.

On 15 January 2008, Sarah Hermitage wrote to me:

"All I know is that for now we have to escape the filth that surrounds us. I feel unclean with what they are doing to us and very, very upset that by omission my own Government is condoning it...I am not being melodramatic and I promise I am not in 'fishwife mode' but we are truly out of our depth now unless we get back up from Miliband".

On 26 January, she e-mailed:

"There is no doubt that we are in extreme danger. Our four key Tanzanian staff were arrested and imprisoned for six months yesterday and the remaining two key workers were told they were going to be beheaded...One of the key workers stated as he was being sent off to prison, 'We will die for this European'. However dangerous it is for us we feel that we cannot go until we have set the appeal for the men in place."

Following further threats of ambush and violence, Sarah wrote on 29 January:

"We are being sensible but I have to say I am scared now. It is not safe to walk on the farm. We will be out as soon as the appeal is filed—before if we need to be...There is nothing left of our operation. Everything has been stolen from the farm including the tin roofs from the field toilets...Incredibly, we were granted a right to see our men in prison. To see these fine Tanzanians walking in filth and mud and crouching before us like criminals was enough to break the strongest of spirits."

By that time, our high commissioner, Philip Parham, had persuaded the Chief Justice of Tanzania to meet Stewart Middleton personally. It was too late. On 7 February, I received a message from Stewart and Sarah via a friend saying that they were fleeing to avoid further arrest. And then:

"We have lost the farm. In the end the threats to our lives, the imprisonment of our staff, was placing everyone at risk...the farm is destroyed and now invaded by Mengi...the British Government was told two weeks ago that the Chief Justice had pulled all the civil cases, then he changed his mind...The British Government is taking the arrest and imprisonment of our management team as a direct threat on British investment...Our aim now is for the release of our men. We accept that we have lost everything".

They have now fled the country.

It would be convenient for those sitting in comfortable ministerial chairs in the Foreign and Commonwealth Office to be able to claim, in the interests of diplomacy and covering their own backsides, that this is an isolated case. It is not.

Biwater is a water and sanitation company that operates and manages successful projects worldwide. Anyone who knows anything about developing countries—you do, Mr. Bercow, and I believe that I have a right to claim that I do, too—knows how important water and sanitation are to the development of a nation and the promotion of good health, so it is reasonable to suggest that the Biwater projects are important.

In February 2003, a local joint venture company, City Water, was set up by a Biwater subsidiary in Tanzania. It was awarded a 10-year lease contract to manage the water and sewerage contract for the Dar es Salaam area, providing technical and commercial services for a $143.5 million donor-funded investment programme designed to transform water and sewerage services for the people of Dar es Salaam.

In the run-up to 1 June 2005, City Water's assets were seized and on 1 June three Biwater executives of City Water were summarily deported by the Government of Tanzania. At the time, Edward Lowassa was the Minister responsible as Minister for Water and Livestock Development. He subsequently became Prime Minister of Tanzania and was then forced into resignation following another corruption scandal relating to an energy deal.

The British Government are pouring millions of pounds of aid into Tanzania and they continue to maintain the pretence that the money is helping the poor. It would seem that the people described by Lord Triesman as "living in extreme poverty" are benefiting little from our aid programme while corrupt Ministers and business men are doing very nicely out of it.

Members do not need to take only my word. I leave the final say to "Joe" who, writing in January this year, adopted an alias to protect friends and associates still working in Tanzania. Joe, who has lost

"only a few thousand pounds" as a result of corruption in Tanzania, says:

"It's important to realise...that Tanzania is, in effect, a totalitarian regime. The idea that the system is democratic is a sham—the CCM have been in power since independence and it's very unlikely that any other party could win an election. This means that all power—including power over the courts and the legal system—is concentrated in the hands of a few, highly corrupt people. There is no doubt that corruption starts at the very top. Although current and past Presidents say the right words in public in an attempt to mollify donors, they are totally responsible for the industrial levels of corruption in Tanzania...I expect you've been following the Bank of Tanzania case. My friends in Dar Es Salaam say that the vast sums involved in the fraudulent payments to shell companies are just the tip of the iceberg: vast sums are disappearing from both the Bank of Tanzania and the Tanzania Revenue Authority.

The country is, effectively, being run by gangsters. It's worth remembering that some of the donors...have, at least until very recently, held Tanzania up as a shining example of what can be achieved in Africa. Our...own Department for International Development has been at the forefront of such organisations...In fact DFID pioneered a dreadful policy called 'budget support' in Tanzania".

That is the programme into which we appear to have pumped £450 million. Joe says:

"The only slight flaw in 'budget support' is that it takes no account...of corruption...The result is appalling. DFID have been throwing petrol on the fire of corruption and making a bad problem much, much worse. Things were bad enough under Mkapa but since President Kikwete came to power they have, I think, become a lot worse. Some experienced diplomats from the Foreign and Commonwealth Office have, incidentally, been saying for some time that DFID are very naive and have been causing rather than solving problems."

In an article in Mwananchi, the Swahili version of The Citizen newspaper, under the heading, "British MP calls for suspension of aid to Tanzania", the writer says:

"Many a time issues raised by MPs in the House of Commons lead to problems in African countries. That is what happened in Zimbabwe after several MPs in London pressed their Government to act against Robert Mugabe due to what they considered to be human right violations."

When the "ill treatment" of Robert Mugabe is prayed in aid of a cause I hope we might agree that we have hit rock bottom.

I do not think that the Minister can any longer defend either the promotion of private investment of funds in Tanzania or, under the present regime, the continuation of our aid programme to that country. I rest my case.

Photo of Meg Munn Meg Munn Parliamentary Under-Secretary (Foreign and Commonwealth Office) 11:20, 27 February 2008

I apologise to you, Mr. Bercow, and to Mr. Gale for the quality of my voice, but I hope that it will get me through my response.

I congratulate the hon. Gentleman on securing this debate. His constituents have suffered a grievous experience from investing in Tanzania. We are all aware that the topic is of particular importance to him, and he set out his case clearly. I shall talk first about the general situation in Tanzania, before coming to the specifics of his case.

Tanzania remains one of the poorest countries in Africa. More than 12 million people live below the national poverty line from a total population of about 38 million. Maternal mortality and chronic malnutrition remain stubbornly high, HIV/AIDS remains a major cause of premature death, and life expectancy is 48 years. With UK assistance, Tanzania is trying to tackle poverty, and over the past few years has made significant progress in some areas—for example, by increasing primary school enrolment from less than 60 per cent. to 97 per cent., and by reducing child mortality by a third, largely by making major progress in the fight against measles and malaria.

In many other respects, Tanzania is a good performer. The country remains politically, socially and macro-economically stable, and both domestic revenue and aid have increased significantly over the past five years. Donors recognise Tanzania's achievements in improving economic growth and infrastructure. The Tanzanian Government have made budget management more transparent, increased tax collection, and continued programmes to reform public service and public financial management.

The hon. Gentleman referred to the Department for International Development, which is closely involved in that work in the form of the business environment support in Tanzania programme and the Financial Sector Deepening Trust, which it has supported to the tune of £10 million over the past five years. That is in addition to support of more than £50 million for core public sector reforms in Tanzania over the past five years, which strengthen accountability and the state's capacity to deliver services to the poorest people. That is why the British Government are committed to continue to help the Tanzanian Government to reduce poverty. Aid flows are a significant part of the economy and equivalent to more than 40 per cent. of the Tanzanian Government's total spending.

As with all aid programmes, we regularly review our development partnership with Tanzania. The most important criteria must be whether our aid will help to reduce poverty, and to improve the lives of some of the poorest people in the world. However, when reviewing our aid programme, we take several factors into account, one of which is the quality of governance. Unfortunately, as the hon. Gentleman outlined, corruption remains a major issue in Tanzania, as in many other countries. Several cases of grand corruption are being investigated by the Tanzanian authorities, and the hon. Gentleman referred to the Bank of Tanzania. The recent special audit confirmed that more than $100 million was improperly paid from an account operated by the country's central bank. The initial steps taken by President Kikwete are highly commendable, and show that the Government are committed to fighting such cases when they are uncovered. The bank's former governor has been sacked, and a criminal investigation has been ordered to help to recover the money. The Tanzanian Government have made a commitment to produce an action plan, to take forward the recommendations of the special audit, and to strengthen wider public financial management measures.

Budget support donors, including the UK, have delayed confirmation of their aid for the 2008-09 financial year, pending more information from the Government about the way in which the Tanzanian authorities intend to respond to the recommendations of the special audit to strengthen measures to address corruption, and to improve public financial management.

Earlier this month the Tanzanian Prime Minister resigned because of another case of poor governance, as the hon. Gentleman outlined. That resignation led to a Cabinet reshuffle. That suggests that, although corruption remains, perpetrators of corruption or other malfeasance, even at the highest levels, are being held to account for their actions. Those steps towards improved governance should help to rebuild the confidence of budget support donors. Improved governance, and within that an improved judiciary service, is needed in Tanzania to help promote and protect the interests of foreign and local investment, which is desperately needed to help Tanzania lift itself out of poverty. Cases such as Silverdale farm are proof that Tanzania still has a long way to go.

Turning to the specific case of Silverdale farm, I share the hon. Gentleman's deep concern about the events that have unfolded there during the past three years or so. Stewart Middleton and Sarah Hermitage invested in the farm in good faith, and they have suffered from serious harassment in various ways. Since their initial investment in 2004, they and their staff, as the hon. Gentleman rightly emphasised, have been forced to defend themselves against many criminal and civil lawsuits. Mr. Middleton has been arrested, as have the couple's staff. Several lawsuits remain outstanding, and have been for long periods.

The British high commission and particularly successive high commissioners, Dr. Andrew Pocock and Philip Parham, have been and remain actively engaged with the case. They have provided a lot of support to Mr. Middleton and Miss Hermitage, and have intervened many times and lobbied the Tanzanian Government on the couple's behalf. That engagement has helped to bring the situation back from the brink on several occasions. British Ministers have also raised the case at the highest levels, most recently when Lord Malloch-Brown raised it with President Kikwete earlier this month during the African Union summit. As a result of those interventions, there are signs of potentially helpful movement from senior members of the Tanzanian Government. The Chief Justice is actively engaged, and has offered to mediate between the two parties in the hope of bringing the case to a just conclusion.

The Silverdale farm case is an example of why it is difficult to invest in Tanzania. It demonstrates the constraints on both the capacity and the integrity of the legal sector, which the Tanzanian authorities recognise and are trying to rectify. We will continue to be engaged on that case, with the aim of bringing it to a satisfactory conclusion. As I made clear, the British Government recognise that there are serious issues for foreign investors in Tanzania. We will continue to work with the Tanzanian Government to address those problems, with the ultimate aim of creating a positive business environment open to investment. The Government believe that that is the right way forward and will enable Tanzania to achieve its potential. We should continue to work towards realising that.

Sitting suspended until half-past Two o'clock.


We do not want the intervention of the Chief...

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