AFRICAN JOURNEY A white elephant -- symbol of Tanzania's troubled economy

AT the edge of the rain forest, the Mufindi escarpment drops 2,000 feet to a spectacular vista of undulating hills and distant mountains. On a clear day, when there are not too many bushfires, you can see nearly 100 miles to the Livingstone Range by Lake Malawi. Only a short distance from the escarpment base in the Mgololo Valley, however, lies the smoking profile of one of Tanzania's largest and most prestigious development projects: the Southern Paper Mills (SPM) pulp and paper mill. Not since the completion of the Chinese-built Tazara Railway in 1977 linking Dar es Salaam with Zambia has this east African nation embraced a project of such scale and expense.

A gleaming complex of multicolored concrete and steel, the plant uses some of the latest technology from West Germany, Finland, Japan, India, and the United States. It has been hailed by the government as a labor-intensive industry conceived ``for the achievement of self-reliance.'' Employing more than 2,000 workers, it is designed to furnish 80 percent of the country's paper needs.

But according to international aid sources involved in the project, the SPM plant may prove to be Tanzania's most expensive white elephant since independence.

By the time former President Julius Nyerere inaugurated the mill in October, it had already cost nearly $600 million, more than twice the initial $261 million estimate. Contrary to positive feasibility studies by a Finnish firm, the sources believe the state-owned plant has little hope of becoming a viable commercial enterprise. Nor do they see it as capable of repaying its debts.

Observers doubt the plant will ever achieve more than a fraction, perhaps a third, of its annual 60,000-ton production capacity. It is totally reliant on spare parts, fuel, and chemicals from abroad, all of which must be purchased in hard currency. It must also pay for the foreign advisers needed in the years ahead, using funds which can only come from outside goodwill.

``No one's been doing Tanzania any favors by setting up an operation like this,'' said one Norwegian specialist.

Its paper costs three to four times as much as foreign imports, which are now banned by government protectionist measures to ensure local sales. When this correspondent visited the plant, it had obtained one export order to Kenya for foreign exchange, but only at a heavily subsidized rate. Acid rain in Africa?

Poor site planning is another problem. Brooke Bond (BB), the British tea firm and one of Tanzania's largest single hard currency earners, fears that acid rain, or sulfur dioxide emissions, carried up the escarpment could seriously affect their estates at nearby Mufindi. SPM officials say this is unlikely, but Malcolm Keeley, BB Chairman, argues that even slight gaseous odors ``could ruin the flavor of the tea and render the crop useless, and worsen Tanzania's already poor balance of payments.''

The Mgololo pulp and paper mill is indicative of so much that has gone wrong with Tanzania's development policies. For a nation with 90 percent of its population living off the land and whose export potential lies overwhelmingly in agriculture, all too many aid projects have shown themselves inappropriate to the country's real needs -- expanding crop production, encouraging small, competitive enterprises, and raising the standard of living.

According to Western observers, an average $600 million worth of foreign aid has been poured into this country annually over the past 20 years. This represents one of the largest per capita aid programs in the world.

``But when you get down to the nitty gritty, Tanzania has very little to show in the way of effective projects,'' commented one longtime resident.

Foreign aid officials admit that literally hundreds of millions of taxpayer dollars from the United States, Canada, Western Europe, and other donor countries have been wasted, and continue to be wasted.

President Nyerere's version of African socialism has only served to stifle initiative. Paradoxically, it has also encouraged a debilitating degree of dependence on outside assistance.

``The Tanzanians no longer look to themselves to solve their problems,'' said a senior Western diplomat. ``They expect the donor countries to do it all for them. It's a very unhealthy situation.''

At the same time, the donors bear heavy responsibility. Anxious to see Nyerere's experiment succeed as a model for other African countries, they acquiesced to his demands of ``aid without strings.'' They also backed large-scale development and industrialization programs, many of which were based on political rather than economic considerations, and were a far cry from self-reliance.

One example is the high-tech, Norwegian-run fisheries station at Bagamayo near Dar es Salaam, which, according to one advisor, ``would collapse within weeks or months if we left.'' Another project which cannot be run without foreign assistance is the enormous Canadian wheat estate near Arusha. Managing nationalized land once efficiently cultivated by private farmers, Canadian technicians run a highly mechanized operation better suited to the plains of Alberta than to developing Africa.

Not all projects are based on donor altruism. ``A lot are pretty mercantile about their aid,'' noted one Western diplomat.

With tight economies back home, development contracts in Tanzania and elsewhere can be lucrative.

``Look at the Swedes, that flagship of humanitarianism, they're out there selling everything from Volvos to Scanias,'' noted another diplomat.

A major factor in the collapse of donor projects is the donors' failure to ensure basic maintenance once they have pulled out. Multimillion dollar schemes ranging from roads to factories have simply rotted, rusted, or crumbled because Tanzanians lack the means, or interest, to continue. More recently, the donors have been putting greater emphasis on the need to maintain existing projects rather than embark on new ones. Aid programs slashed

They have also been getting tougher. Certain countries have slashed, or are threatening to slash, their aid programs unless Dar es Salaam changes its approach in line with International Monetary Fund (IMF) recommendations. Even Tanizania's faithful allies, the Chinese, have expressed ``disgust'' with the way the government has let things slide.

American aid to Tanzania, for example -- over $336 million since 1962 -- has been written out of the US budget for the past two years. Ten million dollars remain in the pipeline, but this will run out in 1987. Similarly, Britain will cut its roughly $30 million aid program by 75 percent in 1986.

One IMF stipulation is the eventual devaluation of the Tanzanian shilling by as much as 200 to 300 percent, a measure the government is reluctant to embrace. Black market economy

At present, the official rate stands at an artificially low 16 shillings to the dollar, with the black market rate five to seven times as high.

``The entire economy is based on the black market,'' noted one West European diplomat. ``Everyone -- government ministers, businessmen, expatriates, the lot -- all deal in it. It's a reality this regime has got to face.''

Most donor nations have recognized the need to reevaluate, and possibly reduce, their aid programs. Excessive aid, observers point out, has only undermined Tanzania's goal of self-reliance.

The stress, they say, should be on quality rather than quantity, with Tanzanians encouraged to live within their means and to concentrate on less ambitious, more practical programs.

``But we Africans must learn to be more discriminating, to say no to aid doesn't fit our needs,'' said a Tanzanian manager.

Perhaps most important is the need for a coordinated development policy among donors. At present, there are literally thousands of foreign advisers in this country, many of them frustrated and useless because they lack the powers of decision. Tanzanians, too, need to be given more individual powers of decision rather than having always to consult with party committees.

Given greater clout, the donors could probably reduce their advisory ranks by 90 percent and still prove more effective. Observers point to the success of the diminutive British colonial service which, comparatively, achieved far more 30 years ago with only a fraction of the development resources.

This is beginning to happen. In a number of cases, the government has quietly handed over to expatriate advisors the right to hire and fire, control purse strings, and skirt redtape. But for a country still trying to shake off its colonial past, it is a difficult political decision.