Although the hotel would be wholly owned by Tanzania, nearly
half the cost was to be provided by loan finance from Israel. The
managing agent was a firm called Mlonot, the architect Zevet and
the builder Solel Boneh. All these are Israeli firms who took the
opportunity to establish themselves in the newly independent
country.

The design was lavish and the quality of the construction work
was not distinguished. Within a few months of the opening of the
hotel, cracks appeared in many of the interior walls, and two
pumps working full time in the basement are required to pump out
the water which seeps in from the harbour. Requisites for the
hotel which were not obtained locally were ordered through
Israel, even if the goods were actually being obtained from third
countries. Many items came from Great Universal Stores in Lon-
don, but were routed through Israel. This practice allowed the
agents to put a mark-up on the price, and to collect it in Israel.
The exploitation of Tanzania started before the hotel was even
opened.

The hotel opened 9 December 1965. President Nyerere's com-
ment at the time is of interest in view of later events: “We have to
remember that this hotel is not intended to be a luxury for Tan-
zanians to enjoy. It is intended to make money.’ '

An amendment to the agreement to provide for running the
hotel was signed in October 1965. The arrangment was that
M nonot should pay Government two thirds of the net operating
profits of the hotel, or 6 per cent on the Government in-
vestment, whichever was greater. The balance could be kept by
MIonot. The net operating profit was carefully defined to exclude
payments of rent and provision for depreciation. To cover the ex-
penses of running the hotel, Government would pay Mlonot a
‘group management fee’ equal to 3 per cent of the turnover.

Milonot operated to maximise their gain from the agreement.

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 succeding 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

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