Country Risk Rating

A very uncertain political and economic outlook and a business environment with many troublesome weaknesses can have a significant impact on corporate payment behavior. Corporate default probability is high. - Source: Coface

Business Climate Rating

The business environment is difficult. Corporate financial information is often unavailable and when available often unreliable. Debt collection is unpredictable. The institutional framework has many troublesome weaknesses. Intercompany transactions run major risks in the difficult environments rated C.


  • Rich in mineral resources (gold, copper)
  • Gas potential thanks to offshore reserves discovered in 2010
  • Tourism potential (national parks, coastline)
  • Regional co-operation strategy
  • International support in form of concessional loans
  • Development of monetary policy instruments


  • Heavy reliance on gold price
  • Dependent on the agricultural sector
    (21% of GDP and 65% of jobs) and on weather conditions
  • Inadequate infrastructure, especially in the electricity and transport sectors
  • Inconsistent industrial policy and business climate shortcomings
  • Religious tensions between Zanzibar and the mainland 

Current Trends

Sustained Growth Exposed to a Business Climate Under Pressure

Growth is expected to remain firm in 2018, stimulated by public infrastructure investment. Among the construction sites launched by the government under its industrialization policy is the Tanzania-Uganda oil pipeline project, as well as the modernization of the corridor railway project connecting the port of Dar-es-Salaam to neighboring countries (Burundi, Zambia, and DRC). However, progress on the work remains subject to obtaining adequate financing, so some delays are to be expected. Accordingly, work at Bagamoyo port has been temporarily halted after the Tanzanian government withdrew from the project, having failed to secure the finance needed to compensate landowners. The project is expected to continue with finance from China. Meanwhile, growth is likely to be constrained by sluggish activity in the mining sector, hit by new legal provisions curtailing profits. Specifically, in March 2017, the government introduced a ban on exporting raw copper and gold so as to favor the still-underdeveloped local processing industry. This measure comes on top of a new law on the mining sector, allowing the government to renegotiate contracts with mining and energy companies at any time, giving it a share of 16% in any project and making it impossible to access international arbitration. This new legal framework, as well as the still unresolved dispute with Acacia Mining (which was slapped with a USD 300-million fine for breaching the ban on exporting unrefined ores), is likely to put considerable pressure on mining production and investments in the sector. Nonetheless, foreign direct investments are expected to remain significant, focused on infrastructure projects and gas resources. Moreover, tourism is expected to continue to expand. Agriculture (21% of GDP) should benefit from credit growth, a consequence of monetary easing. Household consumption and retail trade are also likely to benefit. Consumption will also benefit from lower inflation thanks to lower food prices due to better harvests. Finally, net exports will make a negative contribution to growth because of demand for goods and capital imported to fuel the growth in private consumption and investments.

Growing Fiscal and Current Account Deficits

Finance for infrastructure projects plus the loss in income owing to lower mining output is putting pressure on the State budget, so increasing the deficit. Reforms are underway to improve tax collection (especially corporate tax) and boost receipts, which represent only 13% of GDP. Infrastructure-related spending is financed through external loans, divided equally between concessional and non-concessional, as well as by borrowing from domestic banks. However, the lack of a credit rating from the main credit rating agencies (to November 2017) limits access to the financial markets. Despite public debt mostly being external (78% in 2016/2017), risk remains low as it is made up primarily of multilateral loans at low rates.

From the perspective of the current account, the deficit is structurally high, with the country importing twice as much as it exports. Higher imports associated with infrastructure projects and the fall in mining exports are likely to increase the trade deficit. The balance of services is, in contrast, expected to show a surplus thanks to the growth in tourism revenues. The current account deficit is financed by FDIs (4.2% of GDP), loans and grants. Significant flows of FDI's are expected to mitigate the downward pressures on the shilling, whose depreciation should remain fairly moderate.

Political Stability at the Cost of Suppressing all Opposition

The traditional party of independence, Chama Cha Mapinduzi (CCM), victorious in the 2015 presidential and parliamentary elections, is strengthening its grip on the country. Under President John Magufuli, new laws have been adopted to silence opposition, including that expressed on social media. Those critical of the government’s actions from civil society and the main opposition party, Chadema, have been arrested (over 400 Chadema members arrested since the 2015 elections), with the courts interpreting the concept of “threat to national security” very broadly. A degree of uncertainty is, however, coming from factional struggles within the CCM, between supporters of John Magufuli and those contesting his hegemony. On the semi-autonomous Island of Zanzibar, the opposition party Chadema has much more weight, which it is using to keep up the pressure on local CCM representatives. The latter is, however, very likely to stay in power after the 2020 elections, with voters generally attracted by his anti-corruption policy targeting the large corporations. A continuity of policies detrimental to investors is, therefore, to be anticipated, constraining the business climate (country down from 132nd place to 137th place in the 2018 Doing Business rankings). Finally, the anti-corruption policy is expected to be pursued more vigorously after significant progress already made in 2016 and 2017.


Coface (01/2018)