xl. At independence in 1961, Tanzania was barely urban with some 95 per cent of the population residing in rural areas. Julius Nyerere, the founding President of Tanganyika, immediately declared disease, poverty and ignorance enemies of the newly independent state. The TANU Government put special emphasis on rural development and sought development strategies that could improve the well-being of the people. A World Bank Mission commissioned by the British colonial state recommended an approach to modernisation based on a market-led economy. This was adopted, although, by the end of the sixties, this approach had not yielded the expected results. The economy experienced what President Nyerere described as ‘Growth without Development’. This is the context within which an alternative economic model was introduced through the Arusha Declaration. xli. In February 1967, government issued the Arusha Declaration, a major policy statement calling for egalitarianism, socialism, and self-reliance. The Declaration promised a decentralised government and a rural development programme known as Ujamaa (‘familyhood’ in Swahili) through which cooperative village farms were created. Factories and plantations were nationalised and major investments made in primary schools and health care. Economic development was to be promoted through agricultural transformation and industrialisation. This development strategy was more in line with the prevailing ‘basic needs’ development approach. Private sector entrepreneurs were seen as exploiters and enemies of the state. xlii. The Ujamaa socialist experiment was short-lived. The Tanzanian economy went into deep crisis from the midseventies into the eighties, expressed in high inflation rates, budget deficits, balance of payment problems, shortages of basic goods, and capacity under-utilisation in public enterprises. This, in turn, affected state capacity to manage and sustain social services, particularly health and education. xliii. The crisis depicted a disintegration of the post-independence developmental and welfare-oriented state. Government ultimately yielded to pressure to adopt structural adjustment policies as the risk of economic collapse had grown considerably. Initially, the authorities reacted with unsuccessful home-grown adjustment efforts. In 1986, the Tanzanian authorities finally agreed to the first stabilisation and structural adjustment programme (SAP), guided by the World Bank and the International Monetary Fund (IMF). Since then, Tanzania has taken aggressive steps toward macroeconomic stabilisation and structural reforms. xliv. Economic reforms have paid off. Annual GDP growth averaged 6.4 per cent over the past five years, exceeding 7.0 per cent in 2002 and 2003. Tanzania’s growth rate of 6.3 per cent in 2004 is well above the rate achieved in Kenya (3.1 per cent) and in South Africa (3.7 per cent). It is also higher than the regression benchmark for countries with Tanzania’s characteristics (5.2 per cent). This strong growth performance reflects the fruits of responsible monetary and fiscal policy, concerted reforms, rapid export growth, and significant debt relief. The Absence of Inclusive Growth and Structural Transformation xlv. Ironically, in Tanzania, as in other African countries in recent years, economic growth has not brought significant improvement in people’s lives. This is the paradox of growth to which former President Nyerere referred in the sixties. Despite impressive growth, little was achieved in terms of substantial and sustained poverty reduction. The incidence of income poverty declined only marginally from 35.8 per cent in 2000/01 to 33.6 per cent in 2010. Income poverty (basic needs and food poverty) varies across geographical areas, with rural areas worse off. Tanzania’s economy also remains donor-dependent while the major sectors of the economy - agriculture and industry - have remained largely untransformed. 2.2 Tanzania’s Strong Pan-Africanism and its Role in the Liberation of Southern Africa xlvi. On achieving independence, Tanzanian leadership focused on supporting other African nations’ efforts to gain independence. Tanzania’s participation and leadership in the African liberation struggle is of significant value. As a key member of the Frontline States - which included Zambia and Botswana - it contributed significantly to the independence of Southern African States by committing its scarce resources, diplomatic strength and military support. Nyerere carried liberation ideals forward into the rest of the continent and, with the leaders of the other few African countries that were independent in 1963, established the Organisation of African Unity (OAU), the predecessor of the African Union (AU) 6