Port smuggling in Tanzania

The Corruption-Efficiency Nexus in Dar es Salaam’s port - Rice and Sugar

Summary:

Despite several recent studies assessing inefficiencies and corruption issues in Dar es Salaam’s main port, the evidence on corruption dynamics remains scattered. These studies mainly looked at inefficiencies in the port, in particular the loss determined by long delays affecting ships that arrive in Tanzania’s central port.

While new investments and a reform of the port’s governance would be critical to address these inefficiencies and losses, investments would be insufficient if corruption is not reduced. The World Bank report points to the fact that corruption is “both a source of inefficiency and a direct result of inefficiency.”

ACE will adopt a two-pronged mixed-method approach to investigating this corruption-efficiency nexus, conducting in-depth rents mapping analysis for specific commodities (rice and sugar) to understand smuggling and underreported imports. We we will then refine existing quantitative methodologies to estimate evasion of custom duties for different categories of products. By computing the mismatch between revenues and reported trade flows for a number of selected commodities we aim at developing a tool for tracking improvements in the functioning of the port authority. We believe this evidence will help to develop coalitions among producers in the rice and sugar industries for collective action-based anti-corruption strategies.

The Corruption issue:

The port of Dar es Salaam is the main gateway of Tanzania and has been at the centre of multiple corruption and rent capture activities. The latter are intertwined with corruption problems in tax and import duties collection, and have impacted the development of a number of productive sectors in Tanzania.

Smuggling of products, including raw materials, imports of counterfeit drugs, as well as dumping, have undermined the development of a number of sectors with comparative advantage potential, including rice and sugar. Finally, smuggling and rent capture activities affecting Dar es Salaam and other minor ports in Tanzania are also at the centre of the political tensions between the mainland and Zanzibar.

Theory of Change:

  • IF targeted reforms of import licensing and import exemption duties are aligned with the demands of local emerging producers
  • And IF collective action is organised to include affected parties and beneficiaries with the participation of the port and tax revenue authorities, and monitoring tools are introduced to track improvements in both port efficiency and smuggling reduction
  • THEN corruption-related inefficiencies and unproductive resource capture in the port will reduce, local production in the targeted sectors and tax collection will increase
  • BECAUSE import licencing and duties will be better aligned to the interests of local producers, who will invest their own time and resources to protect their interests in reducing smuggling and import duties evasion

Research Methods:

  • Surveys of shops in Dar es Salaam to determine extent of imported sugar and rice in 2018
  • Analyses of customs data on imports of rice and sugar from TRA and ZRB
  • Analyses of import permits for rice and sugar and the processes involved in obtaining them
  • Data on shortfalls in production used in granting import permits and tariff reductions
  • Import and export statistics
  • Time series mismatch analysis of tax revenues data with data on the value of import and export
  • Interviews with key stakeholders

Synergic data collection: We will also rely on household survey for rice under the fertilizer project

Partners: Antonio Andreoni & Luca Tasciotti (SOAS), Ole Therkildsen (DIIS), Deograsias Paul Mushi (EcomResearch Group)

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