Previous Quarterly Editions
Expropriation Risk: 76 77 80 80 Political Violence Risk: 46 44 45 42 Terrorism Risk: 40 40 40 38 Exchange Transfer and Trade Sanction Risk: 51 53 54 54 Sovereign Default Risk: 66 68 68 66
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Discontent within the ruling CCM is accelerating ahead of next year’s elections. One of the main fault lines is between those currently in President John Magufuli’s administration and former CCM leaders who are not. In July, two former CCM Secretaries General, Yusuf Makamba and Abdulrahman Kinana, were publicly accused of seeking to prevent Magufuli from being nominated as the party’s candidate in 2020, when he will seek a second term. Both denied the charges, suggesting that Magufuli himself was behind the claims. Despite this escalating war of words, Magufuli retains his strong grip on the CCM and should be able to forestall any serious challenge to his candidacy. However, despite this strength, the crackdown on critics of the president continues. In June, a former aide to leading opposition figure Zitto Kabwe was abducted by an unknown gang and only released after a week; in May, another critic of Magufuli was taken from his office in southern Tanzania and found, heavily beaten, five days later. In July, a prominent investigative journalist was detained by police and questioned about his citizenship status in what was widely seen as a warning to the media. Moreover, new legislation rushed through parliament in June means that NGOs and civil society organisations wishing to continue operations in Tanzania will come under greater pressure to modify their operations to conform to government sensibilities. The changes are in line with other recent amendments to laws on statistics, political parties, media and cybercrimes, all of which reduce the ability of civil society organisations to exercise freedom of expression and association through implied threats to their operations. For example, an MP who criticised the government’s handling of the economy has been arrested under the Statistics Act for citing false figures. The stand-off between the Tanzanian government and Acacia Mining continues, with the government pushing Acacia to accept an offer from Barrick Gold, its majority shareholder and former owner, to buy the company back. It has indicated that this would result in a quick settlement to Acacia’s long-running dispute with the government over the claim that it owes an extraordinary 190 billion dollars in back taxes. Meanwhile the pressure on the company continues. In March, it was ordered to clear up a leak of toxic waste from its North Mara gold mine or risk closure, while in July it was ordered to stop using a waste storage facility at North Mara in a move that would seriously damage Acacia’s ability to continue operations. Despite the government’s approach to the mining sector, however, several major infrastructure development projects have moved closer to starting in recent months. Uganda and Tanzania signed the final agreement for the East African Crude Oil Pipeline (EACOP), which will transport oil from Hoima in Uganda to the port of Tanga, while construction started on the Stiegler’s Gorge hydroelectric dam project in July. Tanzania’s official statistics agency put first quarter growth at 6.6%, although the IMF figure was 4%. In July, the World Bank contradicted the official figure of 7% growth last year, suggesting it was 5.2%, and there is a similar difference between the current estimates for 2019.
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As the example of Acacia Mining shows, the government is willing to use its authority to persuade shareholders to make decisions that best reflect its own interests, while attempting to coerce companies into revisiting agreements or making unscheduled payments. Aware of the impact on its reputation, it has made no secret that it is looking to Chinese and Turkish companies for new investment on the grounds that they are less likely to impose conditions. In July, the government awarded licences to two Chinese-owned companies for the construction of gold refineries, despite warnings that gold refining in-country would not make economic sense. Meanwhile, in another move that emphasised the government’s lack of transparency, the former managing director of the state-owned Tanzania Petroleum Development Corporation was reappointed in July despite having been suspended in 2016 over allegations of corruption. No new information was released about the case and no reason given for his reinstatement.
Around 20 critics of the government have now been kidnapped for periods of several days since 2016, with the government doing little to dispel accusations of complicity. Even though the Magufuli administration is making clear that the price of criticism is increasing, there is a risk that political tensions could rise if the few expressions of dissent that do take place are met with a violent response. In the past, incidents of political unrest have tended to reflect local rather than national tensions but with President Magufuli’s re-election bid in 2020 likely to be contentious, this could change in the coming months.
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There are few indications of an international terrorist presence in Tanzania, and the country is not on Washington’s list of countries in which US nationals may be at risk from terrorist activity. However, the capacity of security services to track and monitor suspected groups or individuals remains weak and Tanzanian citizens have been implicated in terrorist incidents elsewhere in the region, including attacks by al-Shabaab in Kenya.
Inflation has risen slightly in recent months to around 3.5%, reflecting an increase in food inflation. However, this is still below the target of 5% and well under the East African Community’s inflation ceiling of 8%. The balance of payments deficit grew to 1.29 billion dollars for the year ending in May, and the current account deficit widened to 2.15 billion dollars. Both figures reflect the significant increase in imports of capital goods for infrastructure development projects. The central bank is ramping up its efforts to tackle the problem of non-performing loans, firing the head of a state-run bank in July.
Two auctions of Treasury bills in May were both oversubscribed. However, the clear preference for 20-year bonds over 5-year bonds indicates a lack of confidence in medium-term prospects. Foreign exchange reserves have fallen slightly in recent months to around 4.3 billion dollars, covering four months of imports. Central government external debt is relatively high at around 35% of GDP but is mostly concessional.
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