The Kilimanjaro Hotel, which was managed by an Israeli firm,
Milonot, is another such example. The management agreement
provided that Mlonot would pay the Government two-thirds of
the net operating profits of the Hotel, or 6); per cent on the
Government investment, whichever was greater. The balance
would be kept by Mlonot. ‘The net operating profit was carefully
defined to exclude payments of rent and provision for
depreciation. To cover the expenses of running the hotel Govern-
ment would pay Mlonot a ‘group management fee’ equal to 3 per
cent of the turnover’.*® Mlonot manipulated its accounts, etc., to
ensure maximum return for itself.

At first the accounting period was every three months. During a given
period of three months as few bills as possible were paid. The hotel
made a profit, and a third of this went to Mlonot, During the succeeding
period of three months the bills outstanding were paid off, so that the
hotel made a loss. Overall the hotel was making a profit, but by this
means a disproportionate amount of that profit finished up in Israel.
Later they operated an accounting system which did not separate
depreciation from various replacement purchases. The Government-
appointed auditor complained that he could not satisfy himself that the
net profit calculation had been paid to Government. In fact it seemed
that substantial sums were due to the Government.

Another example which has come to light is that of the Tan-
zanian Fertilizer Factory.?” This is a joint venture in which N.D.C.
owns 60 per cent and Kloeckner, the third largest Germany, owns
40 per cent. In addition, Kloeckner also advanced to the company
a loan of 93 million shillings at an interest rate of 3 per cent above
the discount rate of the West German Bank. By 1970 the discount
rate had risen to 7 % per cent, which meant Tanzania was paying
10 %4 per cent on the 93 million shillings. Again, Tanzania lost 14
million shillings when the Deutchmark was revalued because the
contract was fixed for a sum measured in Deutchmarks. In ad-
dition, Kloeckner had contracted to supply the machinery, the
profit on which was over 10 million shillings, which amply
covered their equity. And since the loan was guaranteed by the
German government, Kloeckner was taking no risk in the project.
On the other hand, if the project succeeded, they would own 40
per cent of the equity.

All three of these case studies show the enormous loss in sur-
plus incurred by a host country through countless ways by which

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