Index Trend Previous Quarterly Editions
Expropriation Risk: 78 Political Violence Risk: 42 Terrorism Risk: 38 40 Exchange Transfer and Trade Sanction Risk: 52 Sovereign Default Risk: 65
Risk Temperature 59 (Significant) -2
TREND ▼ ►
Tanzania voted for the lowest tiers of elected officials at the end of November. However, the main opposition parties, led by Chadema, boycotted the polls, arguing that government violence and intimidation against their supporters, and the fact that many of their prospective candidates were prevented from standing, prevented a free and fair election. As a result, the ruling CCM, which has been in power since the country became independent, won 99.9% of votes cast and almost all the 16,000 seats to be filled. Three of the country’s 26 regions and several wards in Dar es Salaam did not even hold the elections in the absence of any rival candidates. However, CCM would most likely have won a majority of seats even without the boycott, and it was not immediately clear why the leadership felt it worth risking its already dubious democratic credentials on a vote at this local level. During the second half of 2019, the leader of Chadema defected back to CCM, thereby destabilising the country’s main opposition party, while the CUF, whose stronghold is in Zanzibar, has been experiencing its own splits. As a result, CCM is again in a strong position. However, CCM strategists clearly saw the local contests as a precursor to the legislative and presidential elections due in 2020, and so did not want to risk any indication that the opposition parties were still capable of a strong showing. Good polling data is scarce in Tanzania now that the government has targeted organisations that previously conducted independent opinion surveys, but it is clear that there has been a substantial decline in President Magufuli’s popularity since he took office in 2015. Despite the difficulties within Chadema, the opposition party has spent the past five years building up its grass roots support across the country, and it could present a real challenge to CCM dominance at the national level in fair elections. Against this background, CCM officials clearly felt that they needed a big win in order to justify claims that the party remains popular across Tanzania. Being able to show overwhelming support in recent local elections could be presented as ‘proof’ that any suspiciously large majority in 2020 has recent precedent. Magufuli is expected to be the CCM candidate for the presidency, despite some internal party concerns over his falling popularity. CCM leaders appear to be targeting a win with 75% of the vote in 2020, and they will be helped by the return to CCM of Edward Lowassa, who lost to Magufuli in 2015 when standing for Chadema, as this leaves the opposition without an obvious candidate. In the meantime, the government is continuing to push through its ambitious public development programme. However, the tight fiscal environment could limit progress in constructing the infrastructure that will allow the country to benefit from its substantial oil and gas reserves. The government’s approach to foreign companies in the country will continue to cause concern and deter some investors. Moreover, a return to the rhetoric of economic nationalism is likely as the 2020 election campaign kicks off. Following a strong mid-year economic performance, the government will be able to point to growth above 5% for 2019 as the construction, mining and communications sectors continue to perform well. However, even though this figure is expected to rise to 6% for 2020, Tanzania’s economy is still performing below its potential.
Expropriation Risk 78 (High) TREND ▼ ►
The government continues to push for more favourable terms in contracts with foreign companies, especially in the extractive sector where it continues efforts to access more of the profits made by mining companies. As gold prices have risen, concerns over the government’s stance have subsided somewhat, but if a subsequent fall in commodity prices coincides with renewed demands on mining companies that are part of the CCM election campaign for 2020, then investor concerns about Tanzania will quickly increase again. The government continues to look to Chinese and Turkish investors who it feels are less likely to add conditions to their investments. In mid-2019, 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.
The government’s approach to foreign companies in the country will continue to cause concern and deter some investors.
Political Violence Risk 42 (Medium) TREND ► ▲
The local elections saw little evidence of violence, but this was largely the result of the opposition boycott. The national elections in 2020 do have the potential for serious political violence but clashes closer to polling may be forestalled by early government action against its opponents. However, the prospect of conflict within CCM, which seemed a possibility at one point, has now receded. Opposition parties continue to accuse the government of collusion in the use of kidnapping and violence against their supporters and officials, as well as against its other critics.
Terrorism Risk 40 (Medium) TREND ▲ ►
In November, an apparent cross-border attack by jihadists from Mozambique's Cabo Delgado Province into Tanzania's Mtwara Region left six people dead. This spillover from the situation in Mozambique was an unusual incident for Tanzania, as its relatively capable security forces have been paying increased attention to the southern border region since 2017. However, Tanzanian nationals have been implicated in regional terrorist incidents outside the country, and there are reports that some have crossed the border to join jihadist forces in Mozambique.
Exchange Transfer and Trade Sanctions Risk 52 (Significant) TREND ▼ ►
Inflation continues to remain low and stable at around 3.5% as the economy benefits from slower price rises for non-food goods and services. The central bank has kept its interest rate at 7% since cutting it from 9% in August. However, the banking sector continues to suffer from the challenges posed by non-performing loans, and it is not clear that the government has a clear policy for tackling the problem.
Sovereign Default Risk 65 (Medium-High) TREND ▼ ▲
Tax revenues increased by over 25% during 2019, and government revenues were up by roughly the same amount. Government debt has also been growing, however, and is now above 35% of GDP, while reserves have stayed around 5.5 billion dollars. Although the balance of payments deficit fell in 2019, the current account deficit grew as the result of an increase in imports. Gold continues to make a crucial contribution to export revenues, encouraging government efforts to diversify revenue streams to include income from hydrocarbons as soon as possible.
