Tanzania Business Projection Industry Update Quarter 1 2012

Executive Summary ... 5
Core Views ....5
Major Forecast Changes ...5
Key Risks To Outlook ..5
Chapter 1: Political Outlook .. 7
SWOT Analysis .. 7
BMI Political Risk Ratings 7
Domestic Politics ... 8
No Easy Answers To Addressing Discontent In Zanzibar .8
Recent unrest in the archipelago of Zanzibar shows that discontent continues to pervade the islands despite a 2010 power-sharing
agreement having been signed by rival political parties. Given the complexity of the causes of the unrest, a lasting resolution will be
difficult to achieve. Possible outcomes include outright secession of the archipelago, a rearrangement of the union in a forthcoming new
constitution or a crackdown on perpetrators of unrest by the Tanzanian authorities in a bid to crush opposition.
TABLE: POLITICAL OVERVIEW ....8
Long-Term Political Outlook . 9
Corruption And Reliance On Foreign Money High On The Agenda ..9
We believe Tanzania will continue to enjoy broad political stability over the coming decade, with little to suggest that the ruling Chama
Cha Mapinduzi party's authority will be threatened. That is not to say the 10-year forecast period will be without challenges. Chief
among these will be dealing with high levels of corruption and addressing the country's dependence on foreign aid.
Chapter 2: Economic Outlook .. 11
SWOT Analysis 11
BMI Economic Risk Ratings 11
Economic Activity 12
2013 Growth Downgrade, But Medium-Term Prospects Remain Bright ....12
We have downgraded our 2013 growth forecast for Tanzania to 7.1%, from 7.4% previously, on account of expectations for lower gold
production growth. That said, we continue to believe that the economy will see annual growth of between 7.0% and 8.0% over the
coming years thanks to strong investment and robust private consumption.
TABLE: ECONOMIC ACTIVITY 12
Balance Of Payments . 14
Current Account Deficit To Persist 14
We continue to believe that Tanzania's current account will remain in a deep deficit for the foreseeable future, as import demand
remains strong on the back of robust economic activity and ambitious infrastructure investment plans. Although exports will also grow,
they are unlikely to do so at a pace sufficient to offset import growth. Natural gas has the potential to materially alter Tanzania's external
position.
TABLE: CURRENT ACCOUNT .14
Monetary Policy .... 16
Disinflation To Continue .16
We believe that Tanzanian inflation will continue to decline in 2013 thanks to energy and food price disinflation and beneficial statistical
base effects. The major risks to this expectation stem from a recurrence of drought and from a possible sell-off in the currency.
TABLE: MONETARY POLICY ..16
Fiscal Policy 17
Fiscal Accounts Sustainable, But Challenges Ahead .17
Although Tanzania's fiscal account will remain in deficit and reliant on foreign assistance over the coming years, growing revenues
and relative political stability mean that we believe that the situation is sustainable. That said, there will be several challenges for the
authorities. In our view, finding the right balance between deriving revenues from and attracting investment into the country's natural
resources will be the most crucial.
TABLE: FISCAL POLICY 18
Chapter 3: 10-Year Forecast 21
The Tanzanian Economy To 2021 ... 21
Strong Long-Term Growth Expected ..21
With telecoms, food and drink, transport, construction, energy and mining forecast to be drivers of growth in the years ahead, and with
conditions supportive for long-run productivity gains in the important agricultural sector, we are projecting robust economic expansion
over the next 10 years. The weather is likely to remain the key risk to our outlook owing to the country's dependence on hydroelectricity
and the agricultural sector.
TABLE: LONG-TERM MACROECONOMIC FORECASTS 21
Chapter 4: Business Environment 23
SWOT Analysis 23
BMI Business Environment Risk Ratings 23
Business Environment Outlook 24
Institutions .. 24
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS 24
TABLE: BMI LEGAL FRAMEWORK RATING ....25
TABLE: LABOUR FORCE QUALITY ...26
Infrastructure ... 27
TABLE: AFRICA – ANNUAL FDI INFLOWS .27
TABLE: TRADE AND INVESTMENT RATINGS .28
Market Orientation 29
TABLE: TOP EXPORT DESTINATIONS (US$MN) .29
Operational Risk ... 31
Chapter 5: Key Sectors .. 33
Infrastructure .. 33
Other Key Sectors 37
TABLE: AUTOS SECTOR KEY INDICATORS ...37
TABLE: PHARMA SECTOR KEY INDICATORS 37
TABLE: TELECOMS SECTOR KEY INDICATORS ..37
Chapter 6: BMI Global Assumptions .. 39
Global Outlook . 39
Downward Revisions, But Core Views Remain Unchanged .39
TABLE: GLOBAL ASSUMPTIONS 39
TABLE: DEVELOPED STATES REAL GDP GROWTH FORECAST .40
TABLE: REAL GDP GROWTH CONSENSUS FORECASTS .40
TABLE: EMERGING MARKETS REAL GDP GROWTH FORECAST 41

Accounting and Corporate Finance in Tanzania