Country FilesEast & HornCountry Profile 2014: TANZANIA


Posted on Friday, 07 February 2014 10:23

Country Profile 2014: TANZANIA

alt The CCM’s crisis of confidence

As the ruling Chama Cha Mapinduzi (CCM) approaches what will be Tanzania’s most competitive general elections to date in 2015, several divisive issues are looming. At the top of the list is the future relationship between the mainland and Zanzibar, followed closely by concerns over the government’s ability to manage the imminent boom in natural gas projects at a time of widespread economic hard ship and rising unemployment. The authorities’ apparent disdain for press freedoms and other rights has contributed to a growing crisis of trust.







theafricareport-tanzania-72dpiThe CCM’s crisis of confidence

Pre-election priorities include managing resources and fixing the power sector

Expulsions of immigrants have damaged relations with most neighbouring states

As the ruling Chama Cha Mapinduzi (CCM) approaches what will be Tanzania’s most competitive general elections to date in 2015, several divisive issues are looming. At the top of the list is the future relationship between the mainland and Zanzibar, followed closely by concerns over the government’s ability to manage the imminent boom in natural gas projects at a time of widespread economic hard ship and rising unemployment. The authorities’ apparent disdain for press freedoms and other rights has contributed to a growing crisis of trust.

The government’s latest plan to push through a new constitution and to present it for a national referendum in February 2014 met with a wholesale walk-out from parliament by the opposition parties in September. The new constitution now seems unlikely to be in place before the 2015 elections,but it will dominate political discussions in 2014 as the opposition shifts its focus to pressuring the government to set up an independent electoral commission and amend the process of voter registration.


The aspect of the constitutional draft that will cause the most political wrangles is the creation of a federal union. This would be made up of a union government alongside separate governments for both Zanzibar and the mainland.

Because the CCM is nervous of losing its influence in Zanzibar and of seeing the archipelago potentially secede from the union, President Jakaya Kikwete has signalled his willingness to discuss the matter with the opposition, but he risks criticism from his own party if he makes too many concessions in the coming year. With a broad section of civil society feeling that the CCM has taken over the constitutional rewriting process, fears are rising that its high-handedness will disturb the peace at a time of rising anti-union sentiments in Zanzibar.

The rows over the constitution, coupled with secession debates, have led to Muslims accusing the government of marginalisation. They have called for reform of the education system that they say favours Christians. Increased attacks on religious leaders in Zanzibar and tensions between Muslims and Christians will dominate political and social discussions in the coming year. The situation could hurt tourism in Zanzibar, where police have onfirmed the arrest of suspected Al-Shabaab allies. The unrest in the isles is seen as a sign of growing radicalisation on the archipelago, and the government is facing pressure from the international community to deal with it.

The closure of two main newspapers in 2013 and a series of physical assaults on journalists seem to indicate that the government is no longer tolerant of media freedoms at a time when the media have had little choice other than to report on its declining popularity.


The failure of a supposedly expanding economy to bring obvious benefits to ordinary citizens, coupled with rising unemployment, will also strongly influence the political and economic atmosphere ahead of elections. Inflation fell slightly after a good harvest, and the country attracted substantial investment, but the trade balance was hit by falling gold prices. A growing economic issue is the government’s efficiency in management. A dispute over natural gas in the southern town of Mtwara led exploration companies to express concerns about the security of their operations.

Tanzania can expect to meet its medium-term growth target of around 7% a year. In the coming year this will be driven by investment in the oil and gas sectors as well as by significant investments in energy infrastructure. Increased investment in offshore oil and gas exploration can be expected following Tanzania’s fourth offshore licensing round (see box), while onshore activity will be dominated by the continued construction of a $1.2bn China-financed gas pipeline from Mtwara to Dar es Salaam and Tanga – a project with social and environmental implications.

A decision in September by the UK’s BG to move on land acquisition for a multi-train liquefied natural gas (LNG) processing plant in the Lindi region will attract further investment, even though the long-term status of BG and its partner Statoil (and the scope of a likely government stake in the project) is not yet clear.

The upcoming elections are already affecting public spending decisions. As part of a ‘big results now’ initiative, the energy ministry is target in gan increase in power delivery of 25% by mid-2015, from a 2012 base. This will need to be achieved while a proposed re-structuring of the electricity utility, Tanesco, is being undertaken. This has been on the agenda before. Whether minister Sospeter Muhon go can push through reforms that his predecessors never dared to implement will be a critical indicator.

Big visions are matched by large financing plans. Finance minister William Mgimwa has indicated that a $1bn eurobond offer planned for the end of 2013 is for the power and transport sectors. The critical indicator will be the finance ministry’s ability to put the deal together and get it to market in time to finance pre-election expenditure.

theafricareport-tanzania-72dpi-2WAITING FOR A RATING

Tanzania still needs to get a credit rating and will ideally need the IMF’s blessing to raise its commercial debt ceiling. This may be possible, as the IMF has no funding relationship with Tanzania, and markets are likely to respond favourably. A private debt placement organised by Stanbic in February 2013 raised $600m, at terms that at the time were believed to be unfriendly.

Although inflation came down to single figures in 2013 it remains to be seen if that can be sustained in a pre-election year marked by high private investment flows from overseas and increased public expenditure.

High levels of public expenditure and the gas-related investments should achieve the projected growth rates. Whether they can be maintained may depend on whether Tanzania can address its isolation within the East African Community (EAC). The EA C has increasingly become a two-track federation as Uganda, Rwanda and Kenya have become frustrated with Tanzania’s reluctance to integrate. Recent agreements between Uganda, Rwanda and Kenya on rail links and pipeline infrastructure have excluded Tanzania. An ongoing Tanzanian campaign to identify and expel illegal immigrants, mostly from EAC countries, has further undermined relations. Early in 2013 tensions with Rwanda exploded when Kikwete called on the Rwandan president,Paul Kagame, to negotiate with the Forces Démocratiques de Libération du Rwanda, the exiled Hutu rebel group now operating in the eastern Democratic Republic of Congo.

Rebuilding some trust with neighbours would help improve Tanzania’s access to markets and Dar es Salaam’s ability to remain competitive with Mombasa as a key port for the region. Other vital sectors face similar challenges. Manufacturing exports to the region have been increasing at over 10% per year since 2000 but, unless the tensions in the EAC are resolved, this might not be sustainable.

The relationship with Malawi has turned very sour: not only do both countries have very different notions of the location of the common border, but hundreds of Malawians in Dar es Salaam have been singled out for summary rounding up and deportation. Xenophobia is usually a sign of insecurity. By stirring antagonistic relations with its neighbours, the government perhaps hopes to fire up a spirit of patriotism ahead of the 2015 polls.


TANZANIA’S STATUSas a the lead investment destination in East Africa for gas, and possibly oil, will hinge on energy and minerals minister Sospeter Muhongo’s ability to manage the long postponed

fourth licensing round and legislative changes. Originally scheduled for September 2012, the round – covering one onshore and seven offshore blocks – was postponed until the last quarter of 2013 to allow a natural gas policy to be ratified by parliament. The legislation remains outdated, particularly for gas. Amendments to the existing 1980s legislation may be possible, but there has been no sign of a legislative review. Lack of clarity around government intentions helped spark street disturbances in January and May 2013. The May riots were timed to coincide with the minister’s budget speech. Investor response to the lack of clarity has been less dramatic, but also keenly felt. The level and nature of state participation, particularly in onshore liquefied natural gas processing initiatives, remains unclear.

Permanent secretary Eliakim Maswi promised the legislation would be in place by September 2014 in time for the start of exploration activites. In practice this may not be possible, as an act must be read in four consecutive parliamentary sittings before being passed.



Rank 2012Rank 2011CompanySectorCountryTurnover (Thds $)Turnover changeNet profits


Rank 2012Rank 2011Bank nameCountryTotal assetsNet interest incomeLoansDeposits
110101CRDB BANK*TANZANIA1,529,1430741,3731,332,271
121107NATIONAL MICROFINANCE BANKTANZANIA1,336,596167,679696,5811,105,379
144-NATIONAL BANK OF COMMERCE*TANZANIA969,12264,615469,464804,789
191185EXIM BANK TANZANIATANZANIA529,98813,064264,119384,623

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