Tanzania (British Investors)

Part of the debate – in Westminster Hall at 11:20 am on 27th February 2008.

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Photo of Meg Munn Meg Munn Parliamentary Under-Secretary (Foreign and Commonwealth Office) 11:20 am, 27th 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.