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|