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Country Report

Tanzania

December 2011
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Tanzania

Tanzania
Executive summary
3
Highlights

Outlook for 2012-16


4 5 7
Political outlook Economic policy outlook Economic forecast

Monthly review: December 2011


10 12 13
The political scene Economic policy Economic performance

Data and charts


16 17 18 19 20 21
Annual data and forecast Quarterly data Monthly data Annual trends charts Monthly trends charts Comparative economic indicators

Country snapshot
22 23
Basic data Political structure

Editors: Editorial closing date: All queries: Next report:

Philip Walker (editor); Joseph Lake (consulting editor) November 22nd 2011 Tel: (44.20) 7576 8000 E-mail: london@eiu.com To request the latest schedule, e-mail schedule@eiu.com

Country Report December 2011

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Tanzania

UGANDA D.R.C.

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MOZAMBIQUE MALAWI

The Economist Intelligence Unit Limited 2011

Country Report December 2011

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Tanzania

Executive summary
Highlights
December 2011
Outlook for 2012-16 The president, Jakaya Kikwete, and his party, Chama Cha Mapinduzi (CCM), will continue to dominate the political scene. However, the CCM is far from united, and divisions are likely to grow as the 2015 elections approach. The CCM and its next presidential candidateMr Kikwete cannot stand againare expected to win the 2015 elections, but with the opposition securing greater representation. Economic policy throughout the forecast period will continue to focus on pushing up the growth rate in order to reduce poverty, although this goal will have to be balanced against the need to reduce the fiscal deficit. Bringing down the fiscal deficit will be a slow process given pressing infrastructure development requirements. The fiscal deficit is forecast to fall from 6.1% of GDP in fiscal year 2011/12 (July-June) to 5.1% of GDP in 2015/16. Real GDP growth is forecast to average over 7% in 2012-16, assuming more favourable rains and a pick-up in investment, trade and tourism. However, poor energy and transport infrastructure will keep growth below potential. Inflation will decline only slowly in 2012, to an average of 12%, as falls in import prices are offset by a weaker currency. The fall will be more marked in 2013-16, with inflation averaging 6.6% in 2016. Drought is a risk to this forecast. The current-account deficit should come down after peaking in 2014, as commodity prices start to rise and hydrocarbons exports start. Monthly review Having dropped out of the spotlight in recent months, the debate over the adoption of a new constitution for Tanzania looks set to intensify in 2012. With the debate over the new constitution between the CCM and the opposition becoming increasingly heated, Mr Kikwete has a key mediating role to play. He agreed to meet opposition representatives in late November. A Toronto-listed company, Tanzanian Royalty Exploration (TRE), has signed a joint-venture agreement with the Tanzanian government. In effect, TRE will redevelop the Buckreef Gold Mine. At a time when rising food prices are continuing to push up Tanzania's inflation rateto 17.9% year on year in Octoberthe government hosted a twoday Grow Africa Forum in mid-November. After some delay, Orca Exploration, the parent company of PanAfrican Energy, has outlined detailed plans to double the production of natural gas from its Songo Songo gasfield.

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Outlook for 2012-16


Political outlook
Political stability Tanzania is unlikely to face any significant threats to its political stability during the run-up to the next election due in October 2015, owing to the dominance of the president, Jakaya Kikwete, and the ruling party, Chama Cha Mapinduzi (CCM). However, there will be a background rumble of discontent as the Chama Cha Demokrasia na Maendeleo (Chadema), which emerged as the main opposition party in the 2010 election, tries to establish a more high-profile role. Although the political battle with Chadema and discontent at domestic economic conditions will dominate the headlines from time to time, they will not present a major threat to overall political stability unless they are badly mismanaged by the dominant CCM. Aside from seeking to address pressing economic issues, Mr Kikwete's main focus will be on whether, during his final term in office, liberated from the constraints of pleasing different factions within the CCM in order to maintain support, he can speed up his tentative efforts to reform the party. However, it remains unclear whether the changes so far are a genuine effort at overhauling the CCM or part of a more superficial campaign to marginalise various factions within the party that will ultimately place Mr Kikwete in a stronger position to decide who succeeds him as the next CCM presidential candidate. Indeed, the issue of who will succeed Mr Kikwete will rise in prominence as the 2015 election approaches. Mr Kikwete will want to see the decision put off as long as possible to avoid becoming a lame duck, but he will be unable to prevent growing speculation and behind the scene manoeuvring. There are two main factions within the CCM, and the struggle between these two for their choice of candidate is likely to be intense. There is a small chance that the party could split over the issue, but the desire to remain in power, which will require unity in the face of Chadema's challenge, is expected to win out. One element that is expected to help Mr Kikwete is that for the next few years it is unlikely that the political elite on the mainland will be distracted by political unrest on the islands of Zanzibar. After years of discord, the formation of a government of national unity (GNU) in 2010 has created a political compromise that is acceptable to all parties. However, the Zanzibar question is unlikely to disappear in the coming years. First, in the event of a commercially viable hydrocarbons find close to the archipelago, which seems likely, a higher degree of political nationalism on the islands is likely to emerge. Second, and perhaps crucially, there is a strong chance that a leading Zanzibar politician will emerge with a strong claim to be the CCM's 2015 presidential candidate, having been overlooked when Mr Kikwete was selected in 2000. Election watch The government agreed to a formal review of the constitution to address some of the opposition and civil society complaints about the current one, such as the excessive powers it gives the executive, as well as to try to avoid a repeat of the problems experienced in the 2010 elections, including an opaque vote-

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counting process. The constitutional reform process is a contentious one with Chadema and other opposition parties unhappy at the apparent domination of the process by the CCM. The opposition's desire for a constitution according less power to the presidency and a more level playing field at elections is unlikely to be fully realised, but should see the 2015 election conducted under at least a slightly fairer constitution. The CCM, assuming it remains united, is likely to remain on top at the elections themselves, with its candidate, whoever that may be, installed as president. However, the opposition is likely to continue to make gains, and there is the prospect that a genuine multiparty democracy will start to emerge, ending the CCM's domination since independence. International relations One of the criticisms that dogged Mr Kikwete's first term in office was that his international profile was too high and that he was therefore not focusing sufficiently on pressing domestic issues. In view of this, the Economist Intelligence Unit expects the president to adopt a lower international profile during his second term in office. At a regional level, the government will continue to support the development of the East African Community (EAC), although further integrationincluding full monetary unionwill be a source of contention. The government appears to be aware that the development of the EAC will underpin its longer-term economic ambitions, but it will need to accommodate nationalistic concerns over land and immigration. Tanzania will therefore continue to act as a brake on closer EAC integration, and this will lead to a deterioration in its relations with other member states, especially Kenya and Uganda.

Economic policy outlook


Policy trends Economic policy throughout the forecast period will continue to focus on pushing up the growth rate in order to have a meaningful impact on poverty reduction, although this will have to be balanced against the need to reduce the fiscal deficit and tighten monetary policy in the face of high inflation, at least in the early part of the forecast period. However, even with fiscal consolidation, the government will seek to increase capital spending, which has continually been held back by capacity constraints. In this respect, the government's main aim is to boost spending on infrastructure development, financed both by raising new funds and by public-private partnerships. A key component of this will be the need to reform the electricity sector, given the rolling power outages the country has suffered in 2011. Further reforms in the agricultural sector are still needed to boost the fortunes of the two-thirds of Tanzanians who earn a living from the land. However, the government is likely to continue to shy away from the fundamental changes necessary to increase growth in the sector, particularly in the area of land rights. Encouragingly, the cabinet consists of ministers who are not only loyal to the president but also reflect his thinking on many key policy issues, so progress with much-needed liberalisation and reform is a distinct possibility. Nevertheless, breaking away from Tanzania's long history of slow policy reform will be difficult to achieve.

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Fiscal policy

The government has allowed fiscal discipline to slip substantially in recent years, with the deficit provisionally estimated at 6.9% of GDP in fiscal year 2010/11 (July-June). As a result, the next few budgets will have to focus on a gradual reduction of the deficit. As detailed in the 2011/12 budget and the FiveYear Development Plan, this will entail renewed efforts to boost domestic revenue, which is showing signs of having levelled out at around 16% of GDP in recent years. As a result the government will have to announce new measures aimed at widening the tax base. Some increases in mining taxes have been agreed, but others will take time as an understanding with the mining companies is reached. The other priority will be to keep recurrent expenditure notably wage spendingunder control, while also seeking to boost development spending. As a separate issue, the government will need to address capacity constraints, as a result of which development expenditure comes in below target. With steady, if unspectacular, progress along these lines, we expect the fiscal deficit to fall back to 6.1% of GDP in 2011/12 and 4.8% of GDP in 2014/15. We forecast a small increase in the deficit, to 5.1% of GDP, in 2015/16 with the expectation that the pre-presidential election budget will contain some populist measures as well as the cost of the elections themselves. Disquiet among donors over corruption scandals and the slow pace of reform, as well as their own budgetary pressures, means that direct budget support will not keep pace with growth in domestic revenue. Despite this, project support will remain vigorous. In addition, there is still considerable scope to increase domestic borrowing. The government will continue to consider issuing a debut Eurobond in the second half of the forecast period when global conditions improve, although in the meantime it will carry on borrowing at nonconcessional rates from international banks.

Monetary policy

In recent years the main thrust of the monetary policy of the Bank of Tanzania (BoT, the central bank) has been to control the growth of broad money supply and credit growth to the private sector, in order to keep inflation down and support economic growth. The ongoing rise in inflation coupled with a weak shilling and regional pressure forced it, somewhat belatedly, to tighten monetary policy quite aggressively in late 2011. This trend is likely to continue into 2012, when the BoT will face a conundrum about when to start easing policy and how aggressively in the light of the expected downturn of the global economy. With inflation expected to trend downwards over the remainder of the forecast period, a gradual loosening of monetary policy will be possible, although the authorities are likely to remain relatively cautious in their outlook. On a more structural basis, despite strong growth in lending to the private sector, the BoT has a long-standing concern about the lending rates charged by commercial banks. Over the past few years these rates have moved little, regardless of what the central bank has done in terms of monetary policy. To this end, the BoT is expected to push ahead with what it terms its "second generation" of financial sector reform. However, to make a real impact the government will also need to implement difficult reforms, such as making it easier to use land as collateral.

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Economic forecast
International assumptions
2011 2012 Economic growth (%) US GDP 1.7 1.3 OECD GDP 1.7 0.9 World trade 6.8 4.8 Inflation indicators (% unless otherwise indicated) US CPI 3.2 2.1 OECD CPI 2.8 2.1 Manufactures (measured in US$) 7.2 0.2 Oil (Brent; US$/b) 111.0 95.0 Non-oil commodities (measured in US$) 27.4 -11.4 Financial variables US$ 3-month commercial paper rate (av; %) 0.2 0.2 US$: (av) 1.37 1.27 :US$ 79.23 75.02 2013 1.9 1.9 6.2 2.3 2.2 -0.5 97.5 -3.5 2014 2.2 2.1 6.4 2.1 2.2 0.8 100.0 -0.3 2015 2.3 2.3 6.6 2.2 2.2 2.2 104.0 1.0 2016 2.3 2.3 6.6 2.2 2.3 2.1 110.0 3.0

0.4 1.24 78.89

1.2 1.22 82.00

2.2 1.23 84.00

2.9 1.25 82.00

Economic growth

The key to driving Tanzania's growth rate up in the coming five years is a sustained improvement in the growth rate of the agricultural sector, the largest employer. There are some provisional signs that this is possible, with ongoing commercial investments into the agricultural sector, but the dependence on smallholder farmers and rain-fed irrigation will remain a problem (as will low levels of fertiliser application). Growth would also be helped if the electricity constraint could be overcome, which would allow a more sustained increase in manufacturing sector growth. The other main trend will be in the mining sector, where gold will lose its place as the driver of growth to oil and gas and other minerals. Robust growth in the construction and services sectors is also expected. Construction growth will be driven by donor-funded infrastructure developmentnotably in roadbuilding and the power sectorand by commercial and residential development in major cities. Growth in services will be driven by telecommunications and transport, and financial services will benefit from the banking sector's relative isolation from global markets. Overall GDP growth is forecast to average above 7% in 2012-16, with the potential for a slight dip in 2015 as election-related uncertainty increases. However, the rate of growth could be greater if the global economy performs better than expected and if the government steps up its efforts to improve electricity supply. Set against this, government bureaucracy and weak policy responses will continue to be a drag on growth. As a result, although the projected growth rates look robust, they are below potential and will have only a modest impact on reducing poverty.

Inflation

The sharp rise in inflation in 2011, especially from June to October, driven largely by food and fuel prices, will set a high benchmark for inflation in the early part of the forecast period. Given the weakness of the Tanzanian shilling in 2011, reasonably robust growth against the background of the economy's structural rigidities and the unwillingness to tighten monetary and fiscal policy aggressively, inflation will decline only modestly as 2012 progresses and the BoT will struggle to meet its single-digit inflation target for June 2012year-end

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would be a more realistic target. We currently expect that inflation will average 12% for the year. However, assuming a reasonable harvest in 2012, combined with tighter fiscal policy, lower international fuel prices and greater shilling stability, inflation in 2013 is expected to ease to an annual average of 7.6%. This moderate downward trend is then expected to continue for the remainder of the forecast period, reaching an average of 6.6% in 2016. A large caveat with this forecast is that of prevailing weather conditions; it is reasonably likely that at some point in the next five years there will be another drought and a consequent increase in food prices. It is impossible to predict accurately when this might happen and so represents a noteworthy downside risk to the inflation forecast. Exchange rates All three East African shillings weakened substantially in the first three quarters of 2011 against the background of a sharp rise in inflation, large fiscal deficits and broader global economic uncertainty. What is not clear is whether following the general weakness of the past few years, we are now heading into a period of greater stability, or whether the shillings will remain under pressure in 2012-13. At present, the former seems more likely, given that inflation should ease and that overall economic performance will remain robust. In 2012, given the scale of the shilling's fall in recent years, the currency is likely to be more stable, assuming that inflation starts to come down, monetary policy is tightened and fiscal consolidation makes some progress, although it will still fall modestly in view of the continued large current-account deficit. But after a year of stability, the shilling could potentially come under some pressure during 2013, especially as lower gold prices and higher oil prices will lead to a widening of the current-account deficit. A similar trend is expected in 2014-16, albeit with a larger depreciation in 2015 than in the other years owing to election-related uncertainty. Overall, the shilling is expected to fall from an average of TSh1,582:US$1 in 2012 to TSh2,125:US$1 in 2016. Trends in global commodity prices will continue to have a large bearing on Tanzania's overall current account in 2012-16. Further increases in gold prices in 2012 will be partly offset by falls in the prices for Tanzania's other commodity exports, slowing overall export growth. This slowdown will be mirrored in the import billalthough capital imports will continue to grow, prices for many key imports, including fuel and food, will fall. However, it will be a different picture in 2013-14 as a fall in gold prices triggers an overall decline in exports. Import growth will pick up again on the back of strong GDP growth and pressing infrastructure development demand, causing a significant deterioration of the trade account. Prospects are a little more favourable in 2015 as gold volume increases should outweigh the smaller fall in prices, while prices for coffee, tea and cotton see some gains. The same is true in 2016, to which we have tentatively added a small-scale commencement of hydrocarbons exports following the promising survey results of recent years. The services surplus will be hit by the slowdown in global growth in the early part of the forecast period, which will affect tourist numbers, but should recover in 2014-16. The deficit on the income account is expected to narrow as gold-mining companies repatriate lower profits in line with falling prices, but

External sector

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the surplus on the current transfers account will remain large, reflecting continued donor support. As a result of these trends, the overall current-account deficit is expected to widen from 8.4% of GDP in 2012 to 12.6% of GDP in 2014, before gradually falling back to 10.1% of GDP in 2016.
Forecast summary
(% unless otherwise indicated) 2011 a Real GDP growth 6.4 Consumer prices (av, 2000=100) 12.3 Consumer price inflation (end-period) 17.5 Lending interest rate (av) 16.3 Government balance (% of GDP)d -6.9 Exports of goods fob (US$ m) 5,479 Imports of goods fob (US$ m) -8,650 Current-account balance (US$ m) -2,251 Current-account balance (% of GDP) -8.9 External debt (year-end; US$ bn) 9.1 Exchange rate TSh:US$ (av) 1,409.3 Exchange rate TSh:100 (av) 1,606.0 Exchange rate TSh: (end-period) 1,959.1 Exchange rate TSh:SDR (end-period) 2,295.2 2012 b 6.9 12.0 9.0 15.5 -6.1 5,753 -8,937 -2,339 -8.4 9.9 1,582.2 1,996.9 2,285.3 2,705.6 2013 b 7.1 7.6 7.2 15.1 -5.5 4,678 -9,095 -3,315 -10.8 10.9 1,717.4 2,289.2 2,169.9 2,648.3 2014 b 7.3 7.2 7.0 14.2 -5.1 3,969 -9,533 -4,232 -12.6 12.1 1,814.4 2,300.0 2,330.7 2,881.7 2015 b 7.1 7.1 7.5 14.1 -4.8 4,084 -9,992 -4,320 -11.9 13.5 2,025.1 2,531.3 2,605.8 3,201.1 2016 b 7.2 6.6 6.5 13.6 -5.1 4,804 -10,475 -3,984 -10.1 14.9 2,125.4 2,656.8 2,621.5 3,220.3

a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts. d Fiscal years (July-June).

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Tanzania

Monthly review: December 2011


The political scene
Constitutional controversy is reignited After dropping out of the spotlight in recent months, the debate on the adoption of a new constitution for Tanzania now looks set to intensify sharply in 2012. This follows the decision by the main opposition party, Chama Cha Demokrasia na Maendeleo (Chadema), not to take part in the debate over the constitutional review bill that the justice and constitutional affairs minister, Celina Kombani reintroduced into the Bunge (parliament) on November 15th for its second reading. Chadema are unhappy with what they view as the government's domination of the constitutional review process. On the one hand, the decision by Chadema did not have any practical significance. Given that the ruling party, the Chama Cha Mapinduzi (CCM), has a significant majority in parliament, it simply passed the bill itself, which now sets in motion the steps to engage in a nationwide consultation and the publication of a new constitution. The problem for the CCM is that by choosing to pass the bill without any serious scrutiny from the opposition, there is a legitimate concern that this highhanded approach will undermine public support for the new constitution and its overall political legitimacy. If this were the case, it would mean that the next elections in 2015 could be conducted in a very difficult political atmosphere. A general lack of public support for the new constitution could arise from two specific concerns about the proposed review process. First, despite promises of widespread public consultations, there is a belief among political activists, and most notably within Chadema, that these will be rather limited, if not half-hearted. In particular, they argue that the allocation of just three days for public consultations is just too limited. As a result, they have concerns that crucial issues, such as the powers of the president, will not be fully discussed, and that the new constitution will contain only minor changes, rather than being fundamentally reviewed and rewritten. The CCM, of course, would argue the contrary, and point out that they are committed to printing 5m copies of the draft constitution for circulation around the country, which will give everyone the chance to engage in the debate. (The CCM has argued that, according to national statistics, just over 70% of the population are able to read.) The second concern, voiced by those with more legal training, such as the Tanganyika Law Society and the Tanzania Retired Judges Association, is that the current bill contains a series of errors that have not been corrected in the review process to date. Much now depends on Chadema's next steps Despite its decision to opt out of the parliamentary debate, however, Chadema so far seems to be adopting a relatively prudent approach in its opposition to the passage of the bill. Speaking to the press, the deputy secretary-general and arguably the rising star of the party, Zitto Kabwe, argued that the most pressing issue for Chadema was to build a national consensus over the issue of
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11

constitutional reform, so that all the relevant parties felt that they owned the process rather than having it imposed upon them. In this spirit, Chadema has also stated that rather than debate the bill in the Bunge, it will seek to speak directly to the people (the wananchi in Swahili). However, the problem for Chadema is that having chosen to boycott the debate, it may lose some traction with this approach, as the CCM allies itself with some of the smaller opposition parties to argue that the Chadema boycott is both unpatriotic and self-serving. How Chadema resolves these issues, and whether it can build the national consensus desired by Mr Kabwe in the coming weeks, will prove crucial in how political events shape up in the coming months. Mr Kikwete eventually takes action With the debate over the new constitution between the CCM and the opposition becoming increasingly heated, perhaps the most interesting issue is the role that the president, Jakaya Kikwete, decides to adopt. During much of the recent controversy the president largely withdrew from the political fray. Although this could be explained on the basis that he did not want to be seen to give any support to the opposition, it is still surprising given that he is now well into his second term, which means he is unable to stand again and therefore could easily present himself as national figurehead, more concerned about the future political direction of the country than about immediate political point scoring. Alternatively, one possible reason for his inaction was not that he was worried about being seen to support the opposition, but that he finds himself caught between the two main factions of the CCM and feels unable to act decisively without alienating one or the other. If this is the case, then it does send worrying signals about his potential effectiveness for the remainder of his term in office. The situation changed at the end of November when Mr Kikwete accepted calls from Chadema to meet some of the opposition party's members to discuss their concerns. The meetings took place behind closed doors, with little indication at the time of writing of whether any common ground had been found. The president is unlikely to heed calls for him to withhold assent to the bill, as this would be unacceptable to his party. Perhaps what may come out of this is the formation of a wider committee, including all political parties rather than being dominated by the CCM, to monitor the consultation process. However, what would be perceived as a surrendering of ground to Chadema by the president would still upset many CCM members of parliament (MPs). Therefore, tensions over the constitution are expected to persist. The level of public support for nationwide protests is unclear If agreement can not be reached between Chadema and the CCM, the likelihood seems to be that the opposition party will seek to organise a series of rallies protesting against the way the new constitution is being adopted; its youth wing has already publicly stated that this is its plan. The problem for Chadema is that if turnout at these rallies is low, it will be even more marginalised in the review process and will hand a huge political victory to the CCM. Two factors suggest that support for the protests will be low. First, although the public is concerned about the drafting of the new constitution, there are more pressing economic issues, such as the ongoing rise

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Tanzania

in inflation and electricity shortages, issues that are causing greater anger and on which Chadema has political traction. Second, there is a concern about the potential for violence. There has already been significant violence between Chadema and the police around a number of demonstrations held this year, notably in January (January 2011, The political scene), and the problem came to fore again on November 8th when the police actively dispersed a Chadema demonstration in Arusha and arrested a number of the party's senior leaders, including its secretary-general, Wilbroad Slaa. Chadema had organised the protests to highlight the arrest of a local politician, Godbless Lema. The chairman of the party, Freeman Mbowe, subsequently also handed himself into the police. Although the alternative political options to organising mass protests are not clear, one way forward would be for Chadema to sign up to the recent initiative announced by a smaller party, the National Convention for Construction and Reform-Mageuzi (NCCR-Mageuzi), under which it will embark on a parallel process to that being organised by the government, which will result in it drawing up its own constitution. Although some of NCCR-Mageuzi's four MPs have joined the Chadema boycott of parliamentary readings of the bill, so far the party seems to be avoiding the more confrontational route of calling for mass protests.

In focus: Blaming foreigners or "subversive envoys"


As is periodically the case when there is a battle between the government and the opposition in Tanzania, foreign donors find themselves dragged into the crossfire. In this case, during a debate on the adoption of a new constitution in the Bunge (parliament), a number of members of parliament (MPs) from the ruling party, the Chama Cha Mapinduzi (CCM), have used the floor to argue that both foreign governments and non-governmental organisations are providing funds to those opposing the current constitutional review process, although there appears to be no firm evidence to support the claims. Perhaps one reason why the claims have surfaced this time is because of recent comments by the British prime minister, David Cameron, following the recent Commonwealth Heads of Government meeting in Australia, that the British government would withhold aid to countries that did not recognise the rights of minorities, including homosexuals. This has met a strong backlash in a number of African countries, including Tanzania, where the foreign minister, Bernard Membe, was quoted in The Guardian, a local newspaper, arguing that "Tanzania will never accept Cameron's proposal because we have our own moral values". Although there is an argument that this dispute is little more than a storm in a teacup, the reality is that it has reignited the debate in many countries about excessive donor interference in what many governments see as solely domestic issues.

Economic policy
The mining sector responds to pressure for shared ownership The development of Tanzania's gold mining sector has taken an interesting step forward in the past month, when a Toronto-listed company, Tanzanian Royalty Exploration (TRE), signed a joint-venture agreement with the Tanzanian government. In effect, TRE will redevelop the Buckreef Gold Mine, through its
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13

Tanzanian subsidiary, Tanzam, but will only have a 55% stake in the new mine, with the other 45% owned by the state-owned State Mining Corporation (STAMICO). STAMICO had owned the mining rights, but did not have the resources or the capabilities to develop it. TRE has also apparently offered STAMICO a 15% stake in another project in Kigosi. The government has, unsurprisingly, been very keen to talk up the Buckreef project as the first example of how it would like its new mineral policy to move forward. Moreover, there are clearly some potential benefits to TRE, which having applied for an increase in the size of the mining area around Buckreef, from around 4 sq km to 20 sq km, has secured strong government support for its application. The expansion will allow it to build a full mine. TRE estimates that the new mine has an inferred gold resource of 826,000 ounces and will cost around US$280m to develop, with scope for further expansion. Other mining companies are highlighting their contribution There are a growing number of ways in which it is increasingly apparent that mining companies operating in the country are responding to government urgings for them to contribute more to Tanzania's development. AngloGold Ashanti, for example, announced in late October than it would start paying corporate tax in Tanzania this year, from its Geita gold mine, for the first time since it started production in 2000. In the case of other companies, such as Ophir Energy and Kibo Mining, the approach is to instead seek a local listing. Speaking at an African oil and gas conference in Cape Town in early November, the deputy executive chairman of Ophir, Alan Stein, argued that as part of the company's overall engagement process with Tanzania, such a move would be a very sensible one. Kibo is registered in Ireland and is engaged in exploration and development of gold and nickel deposits in Tanzania. In mid-November it was also announced that the Tanzanian authorities had given permission for the London-listed African Barrick Gold (ABG), to cross list on the Dar es Salaam Stock Exchange, a move similar to the Tullow Oil listing in Ghana. As Deo Mwanyika, ABG's vice-president for corporate affairs, argued when announcing the plan, the move by AGB is not to raise capital, but "to encourage the participation of Tanzanians in the ownership of ABG" while highlighting the fact that the company is in the country for "the long haul". ABG also announced, in late September, the launch of its Maendeleo Fund, which is aimed at funding projects in communities in and around its mines in Tanzania. The company will contribute US$10m a year to the fund.

Economic performance
The government continues to push the SAGCOT project At a time when rising food prices are continuing to push up Tanzania's inflation rateto 17.9% year on year in Octoberthe government hosted a two-day Grow Africa Forum in mid-November. Although essentially a conference looking at agricultural issues throughout Africa, the government used its host status to highlight the potential of its Southern Agricultural Growth Corridor of Tanzania (SAGCOT) project aimed at boosting commercial agriculture in vast swathes of the country (February 2011, Economic policy). It also announced that it hoped to bring potential investors back to Tanzania in early 2012 to explore further the

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opportunities presented by SAGCOT. Meanwhile, one project that could move forward relatively quickly is that announced by Obtala Resources, a Channel Islands-listed company, which through its subsidiary, Montara Continental, has reached an outline agreement with its Tanzanian partner (the ownership split is 70-30) to farm 14,000 ha of land in southern Tanzania to produce food for both local and international markets.

Southern Agricultural Growth Corridor of Tanzania


BURUNDI

KENYA

DODOMA (Political capital)


yika

D.R.C.

ga n

T A N Z A N I A
Iringa

Kinonko Morogoro Kilosa Zombo Mkuranga

Mlandizi Kibaha DAR ES SALAAM (Commercial capital) INDIAN OCEAN

La k
eT
0 km 0 miles 100

an

Southern Agricultural Growth Corridor


Mbeya Tunduma Makumbako

ZAMBIA MALAWI
200 100 300 200 Lake Nyasa

Mtwara Mbamba Bay

MOZAMBIQUE

Songo Songo gas production is set to double

After some delay, Orca Exploration, the parent company of PanAfrican Energy, has outlined detailed plans to double the production of natural gas from its Songo Songo gasfield (February 2011, Economic performance). According to Orca, the plan is to invest a total of US$130m to drill two new wells and to expand production at an existing well, which should allow an increase in production from the current level of 113m cu ft/day to 250m cu ft/d. The gas produced at Songo Songo is currently sold to a number of end-users, led by the Songas power project and Tanesco, but also including 35 industrial customers. With the drilling of the new wells expected to start before the end of the year, and the arrival of the drilling rig in mid-November, the increase in production should be possible in the second half of 2012. In late October, in a sign that Tanzania is becoming a destination from a wider range of investors, a Dubai-based company, City Energy and Infrastructure, announced that it had signed a Memorandum of Understanding with the Kigoma government to build three projects over the coming years. A copper refinery, which would process 1.2m tonnes of copper ore to produce 300,000 tonnes of blister copper a year. A sugar factory with an annual output of 600,000 tonnes. The company will be given 100,000 ha of land on which to grow sugarcane, which will be put

New investment projects have been announced

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through a 20,000-tonnes/day cane-crushing plant before being delivered to the factory. A 150-250-mw coal-fired power plant. Although the company already has a range of similar projects up and running, notably in India, there are still some questions about how quickly these projects will materialise. Already City Energy and Infrastructure has indicated that it will only build the coal-fired power plant if it obtains sufficient reserves of coal, and a question mark must hang over where it will also get sufficient supplies of copper to run the smelter. At present, the plan seems vague, with The Citizen reporting that supplies would come from small-scale copper miners and other unspecified mines. Some reports have also indicated that additional supplies, when there are local shortfalls, would come from Zambia and the Democratic Republic of Congo, although transport issues (notably a lack of infrastructure, and therefore high costs) make this unlikely. There are significant quantities of copper in Tanzania, and many of the gold mines actually mine gold in copper-bearing ores. But whether it is logical to move this ore from the Mwanza/Shinyanga region to Kigoma (around 400 to 500 miles) for processing is far from clear. This would indicate that the main project, at least initially, may be the sugar factory, where setting up a reliable supply, while local demand remains robust, seems a more plausible project to get off the ground quickly. Finally, although City Energy and Infrastructure does have experience of coal and iron-ore mining, again in India, it does not currently run a commercial copper project.

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Data and charts


Annual data and forecast
Pl ea se se e g ra p hi c b el ow

2007 a 16,825 20,948 7.1 6.0 9.5 14.5 16.8 16.3 4.0 9.5 8.1 41.1 1,194 19.1 24.6 -5.5 28.1 1,132 1,653 6.4 17.7 20.5 16.1 -2,634 2,227 -4,861 462 -329 652 -1,849 5,008 64 20 44 122 2,870

2008 a 20,762 24,838 7.4 4.8 13.2 7.8 19.6 12.3 4.6 8.6 8.5 42.3 1,274 22.8 22.8 0.0 26.2 1,280 1,782 13.5 19.9 19.8 15.0 -3,434 3,579 -7,012 350 -201 609 -2,675 5,964 65 22 42 268 2,848

2009 a 21,368 28,213 6.0 3.5 5.1 10.0 5.1 2.6 3.2 7.0 7.2 43.5 1,325 20.9 25.7 -4.8 32.2 b 1,327 1,902 12.2 23.8 17.7 15.0 -2,540 3,295 -5,834 146 -237 697 -1,934 7,325 164 105 59 260 3,206

2010 b 23,793 33,531 7.0 5.7 8.5 6.5 6.5 4.5 4.5 8.1 7.8 44.8 1,392 20.5 26.9 -6.4 33.5 1,463 a 1,959 a 5.6 a 20.2 a 25.4 a 14.6 a -2,828 a 4,297 a -7,125 a 242 a -216 a 824 a -1,978 a 8,260 187 113 75 235 3,645 a

2011 b 25,364 40,131 6.4 5.5 7.2 6.5 8.0 6.0 3.0 6.8 8.0 46.2 1,464 20.8 27.7 -6.9 35.2 1,712 2,285 17.5 17.3 14.2 16.3 -3,172 5,479 -8,650 296 -269 894 -2,251 9,116 210 128 82 210 3,572

2012 c 28,007 48,099 6.9 5.9 7.5 7.0 7.2 5.5 4.4 7.2 8.0 47.7 1,555 20.8 26.9 -6.1 35.3 1,722 2,170 9.0 22.8 24.0 15.5 -3,184 5,753 -8,937 193 -288 940 -2,339 9,897 234 140 94 234 3,751

2013 c 30,568 55,462 7.1 6.2 7.0 8.0 7.8 6.4 4.6 7.3 8.2 49.2 1,653 20.7 26.2 -5.5 35.6 1,895 2,331 7.2 22.2 18.9 15.1 -4,418 4,678 -9,095 286 -275 1,091 -3,315 10,871 239 135 104 281 3,526

GDP Nominal GDP (US$ m) Nominal GDP (TSh bn) Real GDP growth (%) Expenditure on GDP (% real change) Private consumption Government consumption Gross fixed investment Exports of goods & services Imports of goods & services Origin of GDP (% real change) Agriculture Industry Services Population and income Population (m) GDP per head (US$ at PPP) Fiscal indicators (% of GDP) Central government budget revenue Central government budget expenditure Central government budget balanced Public debt Prices and financial indicators Exchange rate TSh:US$ (end-period) Exchange rate TSh: (end-period) Consumer prices (end-period; %) Stock of money M1 (% change) Stock of money M2 (% change) Lending interest rate (av; %) Current account (US$ m) Trade balance Goods: exports fob Goods: imports fob Services balance Income balance Current transfers balance Current-account balance External debt (US$ m) Debt stock Debt service paid Principal repayments Interest Debt service due International reserves (US$ m) Total international reserves
Source: IMF, International Financial Statistics.

a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts. d Fiscal years (July-June).

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Quarterly data
Pl ea se se e g ra p hi c b el ow

2009 3 Qtr Central government finance (TSh bn) Revenue Expenditure Balance Prices Consumer prices (2000=100) Consumer prices (% change, year on year) Financial indicators Exchange rate TSh:US$ (av) Exchange rate TSh:US$ (end-period) Deposit rate (av; %) Discount rate (end-period; %) Lending rate (av; %) Treasury-bill rate (av; %) M1 (end-period; TSh bn) M1 (% change, year on year) M2 (end-period; TSh bn) M2 (% change, year on year) Foreign trade (TSh bn) Exports fob Imports cif Trade balance Foreign reserves (US$ m) Reserves excl gold (end-period) 1,634.8 1,904.3 -269.6 142.1 12.5 1,317.6 1,312.7 8.10 4.40 15.05 3.55 3,628.2 21.9 8,443.4 19.0 1,023.6 -2,274.0 -1,250.4 3,235

4 Qtr 1,668.6 2,100.9 -432.3 144.5 10.2 1,322.5 1,326.8 7.15 3.70 14.63 4.91 3,924.5 23.8 8,780.1 17.7 1,211.6 -2,353.1 -1,141.4 3,206

2010 1 Qtr 1,492.0 1,880.7 -388.7 149.3 6.3 1,337.2 1,330.2 7.26 7.58 14.67 5.06 4,061.8 21.2 9,075.1 18.9 1,077.5 -2,446.0 -1,368.5 3,227

2 Qtr 1,259.2 2,492.8 -1,233.6 151.2 7.5 1,371.7 1,379.6 6.31 7.58 14.56 2.27 4,173.3 19.5 9,801.4 25.1 1,086.8 -2,562.3 -1,475.5 3,218

3 Qtr 1,512.5 1,980.7 -468.2 150.7 6.0 1,444.9 1,483.8 6.55 7.58 14.39 3.27 4,456.9 22.8 10,348.7 22.6 1,457.5 -2,842.7 -1,385.2 3,284

4 Qtr n/a n/a n/a 151.9 5.1 1,483.3 1,455.2 6.14 7.58 14.57 4.87 4,715.5 20.2 11,012.6 25.4 1,681.0 -3,207.5 -1,526.5 3,645

2011 1 Qtr n/a n/a n/a 160.2 7.3 1,500.0 1,488.9 6.22 7.58 14.86 5.70 5,001.1 23.1 11,234.1 23.8 1,683.5 -3,155.3 -1,471.8 3,377

2 Qtr n/a n/a n/a 165.9 9.7 1,530.1 1,582.4 6.05 7.58 15.23 3.97 n/a n/a n/a n/a n/a n/a n/a 3,229

Sources: UN Food and Agriculture Organisation; Bank of Tanzania, Economic Bulletin; IMF, International Financial Statistics.

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Monthly data
Pl ea se se e g ra p hi c b el ow

Jan Feb Mar Exchange rate TSh:US$ (av) 2009 1,318 1,318 1,309 2010 1,332 1,338 1,341 2011 1,485 1,505 1,509 Exchange rate TSh:US$ (end-period) 2009 1,287 1,303 1,314 2010 1,324 1,326 1,330 2011 1,485 1,502 1,489 M1 (% change, year on year) 2009 15.1 19.1 16.6 2010 26.7 24.2 21.2 2011 20.8 18.3 23.1 M2 (% change, year on year) 2009 17.7 18.4 14.3 2010 20.1 19.3 18.9 2011 25.4 24.1 23.8 Deposit rate (av; %) 2009 8.4 7.9 8.9 2010 7.5 7.0 7.2 2011 6.2 5.9 6.5 Lending rate (av; %) 2009 14.9 15.0 15.1 2010 14.4 14.8 14.8 2011 14.7 14.8 15.0 Consumer prices (av; % change, year on year) 2009 13.7 14.1 13.8 2010 6.5 6.0 6.3 2011 6.4 7.5 8.0 Exports fob (TSh bn) 2009 260.4 268.8 297.7 2010 326.6 321.6 429.3 2011 633.0 460.1 590.3 Imports cif (TSh bn) 2009 681.5 630.5 689.3 2010 836.6 824.2 785.2 2011 1038.6 862.5 1254.2 Trade balance fob-cif (TSh bn) 2009 -421.0 -361.8 -391.5 2010 -510.0 -502.6 -355.9 2011 -405.6 -402.4 -663.9 Foreign-exchange reserves excl gold (US$ m) 2009 2,714 2,685 2,666 2010 3,524 3,499 3,483 2011 3,873 3,714 3,643
Sources: IMF, International Financial Statistics; Haver Analytics.

Apr 1,335 1,350 1,510 1,320 1,344 1,490 13.6 24.0 22.3 13.8 23.4 22.2 8.2 6.5 6.1 15.5 14.5 15.4 12.8 7.3 8.6 264.4 395.0 450.1 439.8 792.2 1045.9 -175.4 -397.2 -595.8 2,718 3,567 3,696

May 1,330 1,373 1,520 1,310 1,376 1,520 15.5 23.3 22.9 15.3 22.0 25.1 7.8 6.1 5.9 15.4 14.5 15.3 12.1 7.5 9.7 242.9 276.1 491.5 649.2 844.1 1594.7 -406.3 -568.0 -1103.1 2,697 3,450 3,578

Jun 1,313 1,392 1,560 1,314 1,380 1,582 24.7 19.5 n/a 18.5 25.1 n/a 8.6 6.3 6.2 15.5 14.7 15.0 11.4 7.7 10.9 249.9 415.7 n/a 673.1 926.0 n/a -423.1 -510.3 n/a 2,863 3,468 3,498

Jul 1,325 1,395 1,578 1,326 1,382 1,576 32.3 18.4 n/a 21.5 24.4 n/a 8.4 5.9 7.1 15.1 14.3 15.7 11.7 6.8 13.0 334.3 384.6 n/a 794.4 938.2 n/a -460.1 -553.6 n/a 3,141 3,568 3,528

Aug 1,319 1,445 1,610 1,317 1,472 1,605 26.9 22.5 n/a 18.9 26.4 n/a 7.8 7.0 7.0 15.1 14.4 15.8 12.9 6.8 14.1 304.2 478.5 n/a 708.9 964.8 n/a -404.7 -486.3 n/a 3,429 3,496 3,600

Sep 1,309 1,495 1,640 1,313 1,484 1,623 21.9 22.8 n/a 19.0 22.6 n/a 8.2 6.8 n/a 14.9 14.5 n/a 12.9 4.5 16.8 385.1 594.4 n/a 770.7 939.7 n/a -385.6 -345.3 n/a 3,503 3,546 3,471

Oct 1,315 1,495 n/a 1,321 1,483 n/a 19.6 21.1 n/a 14.2 25.3 n/a 7.4 6.2 n/a 14.8 14.5 n/a 12.4 4.2 17.9 492.2 537.6 n/a 804.2 975.6 n/a -312.0 -438.0 n/a 3,450 3,731 n/a

Nov 1,325 1,492 n/a 1,328 1,471 n/a 19.6 21.0 n/a 15.3 25.8 n/a 7.3 6.0 n/a 14.7 14.3 n/a 9.7 5.5 n/a 330.2 541.2 n/a 775.3 1013.1 n/a -445.1 -471.9 n/a 3,460 3,723 n/a

Dec 1,327 1,463 n/a 1,327 1,455 n/a 23.8 20.2 n/a 17.7 25.4 n/a 6.7 6.2 n/a 14.4 14.9 n/a 8.7 5.6 n/a 389.2 602.2 n/a 773.6 1218.9 n/a -384.4 -616.7 n/a 3,470 3,905 n/a

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Annual trends charts


Pl ea se se e g ra p hi c b el ow

Annual trends charts


Real GDP growth
(% change)
Tanzania 8.0 6.0 4.0 2.0 6.0 0.0 -2.0 -4.0 2007 08 09 10 11 12 13 4.0 2.0 0.0 2007 08 09 10 11 12 13 Sub-Saharan Africa World 14.0 12.0 10.0 8.0

Consumer price inflation


(av; %)
Tanzania Sub-Saharan Africa World

Source: Economist Intelligence Unit.

Source: Economist Intelligence Unit.

Budget balance
(% of GDP)
Tanzania 2.0 1.0 0.0 -1.0 -2.0 -3.0 -4.0 -5.0 -6.0 -7.0 -8.0 Sub-Saharan Africa 10.0 5.0 0.0 -5.0 -10.0 -15.0 2007 08 09 10 11 12 13 -20.0

Trade balance
(% of GDP)
Tanzania Sub-Saharan Africa

2007

08

09

10

11

12

13

Source: Economist Intelligence Unit.

Source: Economist Intelligence Unit.

Main destinations of exports, 2009


(share of total)
Others 65.9% India 12.1%

Main origins of imports, 2009


(share of total)
Others 55.4% China 15.4%

China 9.4% Japan 6.7% Netherlands 5.9% India 14.9% South Africa 7.6% Kenya 6.7%

Source: Economist Intelligence Unit.

Source: Economist Intelligence Unit.

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Monthly trends charts


Pl ea se se e g ra p hi c b el ow

Monthly trends charts


Exchange rate
(TSh:US$; av)
1,700 1,600 1,500 1,400 1,300 1,200 1,100 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul 2008 09 10 11
Source: Economist Intelligence Unit.

Consumer price inflation


(% change, year on year)

Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul 2008 09 10 11
Source: Economist Intelligence Unit.

Interest rates
(av; %)
Deposit rate 18.0 16.0 14.0 12.0 20.0 10.0 8.0 6.0 4.0 Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul 2008 09 10 11
Source: Economist Intelligence Unit.

Monetary aggregates
(% change, year on year)
Lending rate 35.0 30.0 25.0 M1 M2

15.0 10.0 5.0 Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr 2008 09 10 11
Source: Economist Intelligence Unit.

Foreign-exchange reserves
(US$ m)
4,000 3,800 3,600 3,400 3,200 3,000 2,800 2,600 2,400 Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul 2008 09 10 11
Source: Economist Intelligence Unit.

Gold: London price


(US$/troy oz; av)
1,800 1,600 1,400 1,200 1,000 800 600

Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul 2008 09 10 11
Source: Economist Intelligence Unit.

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Comparative economic indicators


Pl ea se se e g ra p hi c b el ow

Comparative economic indicators, 2010


Gross domestic product
(US$ bn; market exchange rates)
Kenya Ethiopia Tanzania Uganda Madagascar Rwanda Eritrea Burundi Djibouti Seychelles Comoros 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 Seychelles Djibouti Kenya Comoros Tanzania Rwanda Uganda Eritrea Madagascar Ethiopia Burundi 0.0 0.5 1.0 1.5 2.0

Gross domestic product per head


(US$ '000; market exchange rates)
10.8

Sources: Economist Intelligence Unit estimates; national sources.

Sources: Economist Intelligence Unit estimates; national sources.

Gross domestic product


(% change, year on year)
Rwanda Tanzania Ethiopia Seychelles Uganda Kenya Eritrea Burundi Djibouti Comoros Madagascar 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 Eritrea Madagascar Ethiopia Tanzania Burundi Uganda Kenya Djibouti Comoros Rwanda Seychelles

Consumer prices
(% change, year on year)

-5.0

0.0

5.0

10.0

15.0

20.0

Sources: Economist Intelligence Unit estimates; national sources.

Sources: Economist Intelligence Unit estimates; national sources.

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Country snapshot
Basic data
Land area 883,749 sq km (881,289 sq km mainland, 2,460 sq km Zanzibar), plus lakes totalling 59,100 sq km 46.2m (2011 estimate) Population (2002 census) Dodoma (political capital) Dar es Salaam (commercial capital) Mwanza Mbeya Tanga Arusha Zanzibar Town Climate Weather in Dar es Salaam (altitude 14 metres) Languages Measures Currency Fiscal year Time Public holidays 1,699,000 2,498,000 2,942,000 2,070,800 1,642,200 1,292,700 391,600

Population

Tropical on the coast, semi-temperate inland Hottest month, January, 23-32C; coldest month, July, 18-29C; driest month, September, 26 mm average rainfall; wettest month, April, 263 mm average rainfall Swahili, English Metric system Tanzanian shilling (TSh) July 1st-June 30th Three hours ahead of GMT January 12th, Zanzibar Revolution Day; March 5th, Union Day; May 1st, Workers' Day; July 7th, Sabasaba; August 8th, Farmers' Day; December 9th, Independence Day; December 25th, 26th and 27th; Tanzania also observes Eid al-Haj, Mawlid and Eid al-Fitr, which vary according to the Islamic lunar calendar

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Political structure
Official name Form of state Legal system National legislature United Republic of Tanzania Republic, formed by the 1964 union of Tanganyika and Zanzibar Based on English common law, the 1977 union and 1985 Zanzibar constitutions, as amended National Assembly, comprising 295 members (232 directly elected on the mainland; five delegates from the Zanzibar parliament; the rest appointed); Zanzibar's House of Representatives (59 members, including nine women appointees) legislates on internal matters Mainland legislative and presidential elections were last held in October 2010; Zanzibar presidency and House of Representatives elections were last held in October 2010; next elections scheduled for October 2015 President, elected by universal adult suffrage every five years The president, vice-president and Council of Ministers Chama Cha Mapinduzi (CCM); Civic United Front (CUF); National Convention for Construction and Reform (NCCR-Mageuzi); United Democratic Party (UDP); Chama Cha Demokrasia na Maendeleo (Chadema); Tanzania Labour Party (TLP) President Vice-president President of Zanzibar Prime minister Key ministers Agriculture, food security & co-operatives Community development, gender & children Defence & national service East African co-operation affairs Education Energy & mineral resources Finance & economic affairs Foreign affairs & international co-operation Health & social welfare Home affairs including public safety Industry, trade & marketing Justice & constitutional affairs Labour, employment & youth development Lands, housing & human settlements development Natural resources & tourism Water & irrigation Benno Ndulu Jakaya Kikwete Mohamed Ghalib Bilal Ali Mohamed Shein Mizengo Pinda Jumanne Maghembe Sophia Simba Hussein Mwinyi Samuel Sitta Shukuru Kawambwa William Ngeleja Mustafa Mkulo Bernard Membe Haji Mpanda Shamsi Vuai Nahodha Cyril Chami Celina Kombani Gaudensia Kabaka Anna Tibaijuka Ezekiel Maige Mark Mwandosya

National elections

Head of state National government Main political parties

Central bank governor

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