Previous Quarterly Editions
Expropriation Risk: 78 76 77 80 Political Violence Risk: 44 46 44 45 Terrorism Risk: 42 40 40 40 Exchange Transfer and Trade Sanction Risk: 54 51 53 54 Sovereign Default Risk: 66 66 68 68
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Concerns are increasing about Tanzania’s apparent slide towards autocracy. The government of President John Magufuli continues to take actions that undermine the opposition and shut down criticism as next year’s presidential and parliamentary elections draw closer. Earlier this year, it amended the Political Parties Act to give the government-appointed Registrar of Political Parties significant powers over the way in which political parties are run and the ability to deregister parties that are deemed to be non-compliant. The amended act also introduces stiff penalties for those convicted of unauthorised civil education activities, a category which could include opposition-sponsored voter registration drives. Although the government claims this is part of the efforts to ensure all parties hold regular internal elections and do not misuse public funds, it has been widely seen as a deliberate move to reduce the role of Tanzania’s opposition parties. There has already been evidence of what can happen from Zanzibar, where the Registrar appeared to intervene in an internal leadership dispute in the opposition Civic United Front (CUF) to favour the party chair over its secretary general, Seif Sharif Hamad. The result was that Hamad left the party. In April, four opposition parties launched a challenge to the amendments in the East African Court of Justice (EACJ) but it is not clear whether a favourable ruling could come in time to have any impact on the elections next year. However, in a blow to its efforts to control the media, the EACJ ruled in March that significant parts of the government’s Media Services Act were unlawful and must be rescinded, including some of the most egregious elements used in limiting media freedom. Edward Lowassa, who quit the ruling CCM to contest the 2015 presidential election as the CHADEMA presidential candidate, rejoined his former party amongst much CCM celebration in March. Lowassa’s faction looked as though it might split CCM before his departure but now that he has played his trump card by leaving, his return will be less significant. His return to the CCM may be more about protecting his personal business interests from government scrutiny rather than a desire for political influence. More significant for longer-term politics is Hamad’s decision to leave the CUP and join the new opposition Alliance for Change and Transparency (ACT) party, which thus far has just one MP, former CHADEMA leader Zitto Kabwe. The alliance is seen as important for Kabwe, potentially bringing him a large amount of CUF support on Zanzibar and on the mainland as Hamad remains popular amongst many CUF supporters. This may allow ACT to present a serious challenge to the current main opposition CUF and CHADEMA in the 2020 elections. Concerns over the impact of a weak institutional environment and unpredictable changes to policy and regulations continue to impact foreign investment. In an example of the trends that worry investors, although the IMF has downgraded its growth forecast for 2019 to around 4%, compared with 6.6% in 2018, the government insists that growth this year will be 7.3% and has refused to authorise the publication of the IMF’s report.
Having begun with the mining sector, the government has proved willing to broaden its efforts to coerce companies into new deals, settlements and unscheduled financial payments. In April, the CEO of Vodacom Tanzania and eight other company employees were arrested and charged with leading a criminal network and economic crimes. Following negotiations with the Director of Public Prosecutions, the company agreed to pay a fine and ‘compensation’ of around 2.3 million dollars for their release. Opposition MPs have accused the government of manufacturing charges in order to demand a financial settlement, warning that this will fuel foreign investor concerns over government actions. In response, the government says that it will look to countries such as China or Turkey, which it sees as less likely to impose conditions or focus on human rights as part of their approach to investment.
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The government’s continued clampdown on political protests and demonstrations risks generating pressures that, with no official outlet, may result in political violence. Small incidents could quickly escalate if police respond to unauthorised rallies with significant force, as they have done previously. In the past, protests have tended to reflect local tensions rather than national trends. Although there are concerns over the CCM’s autocratic direction, neither the government nor its opponents expect any protests on a scale that could jeopardise its hold on power. However, if Magufuli chose to extend his term of office by amending the constitution, an idea that his supporters have already raised, that could produce extensive protests.
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There are few indications of a significant international terrorist presence in Tanzania, and the country has not appeared on Washington’s list of countries where US nationals may be at risk from terrorist activity. However, the country has had experience of terrorist attacks on US interests, and the capacity of the security services to track and monitor suspected groups or individuals remains relatively weak.
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Inflation remains at around 3%, reflecting a continued slowdown in food price inflation, although rising energy costs are an increasing concern. The current account deficit continues to grow, rising by 20% since the start of 2018. This reflected rising imports as well as a decline in exports, and in particular a fall in earnings from the gold sector as a result of a decline in the volume of exports. However, exports have been strengthening in recent months as gold exports increase in quantity and value. Like other currencies in the region, the shilling has come under pressure as the dollar strengthens.
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The limited trickle down of economic growth is contributing to a weakening of the economy. With recent treasury bond sales undersubscribed, there is limited money available for the infrastructure upgrades that would provide some stimulus. External debt remains relatively high at around 35% of GDP but is mostly concessional. Foreign reserves stand at around five billion dollars, proving five months of import cover.
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