Political Risk Analysis - Expropriation Reinforces Investment Risks - 02 OCT 2017

BMI View: A recent dispute between the Tanzanian government and the London-listed mining company Petra Diamonds highlights the challenging operating environment in Tanzania and will only further stymie investor confidence . Indeed, while the mining sector has been hardest hit by regulatory changes in the country, we believe investors in other sectors are also adopting a more cautious stance, which will offer headwinds to growth in the long term.

The Tanzanian government's recent seizure of nearly USD15mn worth of diamonds reinforces our long-standing view that elevated operational risks are likely to temper investment and growth in the country over a multiyear time horizon. On August 31, the government confiscated the diamonds from Williamson Diamonds, a local firm majority-owned by the UK-listed Petra Diamonds. In explaining its reasoning, the government cited suspicions that the company was undervaluing its exports in order to lower its tax bill -- a charge that Petra denies. This latest move by the Tanzanian government follows the enactment of a number of less favourable policies on the mining sector as well as the issuing of an USD190bn fine against Acacia Mining, the biggest gold miner in the country, following a dispute arose after the imposition of an export ban export of unprocessed metals enacted in March ( see ' Protectionism And Populism Threaten Economic Trajectory ' , September 1). We have already revised down GDP growth from 6.3% in 2017 and 6.5% in 2018 to 5.3% and 5.7% respectively on the back of the more challenging business environment, and we could revise it down again should we see further measures.

Protectionist Policy Preferences Here To Stay

Hostile Regulatory Environment Will See Growth Slow
Tanzania - Real GDP Growth
f = BMI forecast. Source: BMI, National Bureau of Statistics

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