Security, trading and investment update for Tanzania

06 December 2019

Security trading and investment update for Tanzania Tanzania will face a number of security, investment and trading challenges in the coming months. In this article we provide a detailed forward-looking assessment of developments in the country.

Expropriation risks are likely to remain elevated ahead of the 2020 election, as President John Magufuli’s government seeks to increase ownership in the extractive sector.

Tanzania’s mining code limits recourse to international arbitration for mining companies, presenting significant operational risks for foreign investors.

Security Environment

The risk of anti-government protests in Tanzania is likely to increase in the run-up to the October 2020 presidential election, as the main opposition parties lead political rallies in support of their respective candidates.

Protests are particularly likely in opposition-dominated areas, such as Arusha, the coastal cities of Mtwara, Tanga, Dar es Salaam, and the Zanzibar archipelago.

During the 2015 election campaign, violent opposition protests occurred on the semi-autonomous island of Zanzibar.

Protests and improvised explosive devices (IEDs) targeted political officers of the ruling Chama Cha Mapinduzi (CCM) party.

Terrorism risks are moderate in Tanzania, with the potential for attacks increasing as an election year approaches.

Security trading and investment update for Tanzania Small jihadist groups are likely to form in the Mtwara, Masaguru, and Nanyumba regions along the south-eastern border with Mozambique.

Small-arms attacks targeting CCM party officials may be the modus operandi of these groups.

As a result, transit along the Tanzania-Mozambique border poses a high risk of collateral damage to foreign citizens and businesses in the next year.

Trading Environment

Tanzania’s economic growth is expected to slow to 5.2% in 2019 and 5.4% in 2020, driven by weaker foreign investment ahead of the October 2020 election.

While Tanzania continues to offer significant investment opportunity in its mining sector, changes in the industry’s regulatory framework over the past two years have reduced market appetite.

The mining industry’s value is forecast to decline by 5.46% in 2019, to US$0.73 billion.

However, Tanzania remains Africa’s fourth-largest gold producer and an expected increase in global gold prices in 2020 should encourage renewed foreign investment.

Gold production is forecast at 1.14 million ounces (moz) in 2019, and 1.12 moz in 2020.

The Tanzanian shilling is likely to face moderate depreciatory pressures, particularly if the regulatory environment continues to stifle foreign direct investment flows.

The Tanzanian shilling is forecast to gradually depreciate to TZS2315/USD in 2019 and TZS2380/USD in 2020.

However, the central bank has an adequate reserve base of foreign reserves, at four and a half months of import cover.

This should allow the central bank to continue intervening in the currency market to support the value of the Tanzanian shilling if necessary.

Investment Environment

Pricing Outlook TanzaniaExpropriation risks in Tanzania are likely to increase in the run-up to the general election in 2020, as the government pursues an expanded role in the natural resource and mining sectors.

Particularly vulnerable to expropriation are investments in previously government-owned assets, which are believed to have underperformed under private ownership.

The Ministry of Lands may expropriate these assets to redistribute the land to rural agricultural workers as part of a vote-winning strategy ahead of the December 2019 local polls.

The rural constituencies make up more than 67% of the total population and are crucial to the CCM’s hopes of re-election.

There is limited legal recourse to international arbitration for foreign mining companies.

Legal challenges must take place through domestic courts. As a result, foreign companies must rely on their domiciled countries’ bilateral investment treaties (BITs) with Tanzania.

However, the definitions of expropriation in BITs, as well as the Tanzanian government’s exercise of “public interest” clauses, make it difficult to prove instances of indirect expropriation.

As a result, the most viable option for foreign investors who have their assets seized by the Tanzanian government may be an out-of-court settlement.

5 Key Takeaways

  • Tanzania’s economic growth is expected to slow to 5.2% in 2019 and 5.4% in 2020, driven by weaker foreign investment ahead of the October 2020 election.
  • The Tanzanian shilling is forecast to gradually depreciate to TZS2315/US$ in 2019 and TZS2380/US$ in 2020. However, the central bank has an adequate reserve base of foreign reserves, at 4.5 month of import cover.
  • Expropriation risks in Tanzania are likely to increase in the run-up to the general election in 2020, as the government pursues an expanded role in the natural resource and mining sectors.
  • Investments in previously government-owned assets, which are deemed to have underperformed under private ownership, are particularly vulnerable to expropriation.
  • Tanzania remains Africa’s fourth-largest gold producer and an expected increase in global gold prices in 2020 should encourage renewed foreign investment.

The monthly Risk Outlook is supported by our proprietary country risk rating tool, World Risk Review (WRR) which provides risk ratings across nine insurable perils for 197 countries. The country risk ratings are generated by a proprietary, algorithm-based modelling system incorporating over 200 international sources of data.

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In this month's Risk Outlook, we also provide a detailed forward looking assessment of developments within the security, trading and investment environments for Argentina, Lebanon, Iraq and Mozambique and all of which have been the subject of recent enquiries from our client base.

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  • Eleanor SmithEleanor Smith

    Eleanor Smith is a Senior Political Risk Analyst within Marsh JLT Specialty’s Credit Specialties team. At Marsh JLT Specialty, Eleanor analyses developments in political risks, and advises clients on their effect in a range of sectors. Eleanor is also responsible for delivery of World Risk Review, JLT’s country risk ratings platform, to clients and prospects.


    Eleanor has a first-class degree in History with Spanish from UCL, and a Masters in International Public Policy from the same institution. With experience in a range of sectors, including diplomatic missions and not-for-profit, Eleanor can help clients understand their risk exposure.

    If you would like to talk about any of the issues raised in this article, please contact Eleanor Smith, Senior Political Risk Analyst on +44 (0)20 8108 9544.

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