Tanzania: Port deal causes controversy but does not threaten political stability
An intergovernmental agreement (IGA) with the emirate of Dubai was leaked earlier this year. The agreement covers the management of the port of Dar es Salaam by Emirati logistics company DP World. Its critics contend that it disproportionately favours the Emirati company and fails to provide enough economic benefits for Tanzania. Moreover, opponents of the deal claim that it severely weakens Tanzania’s ability to protect its national interests. Reasons for this last allegation include a clause that prevents withdrawal from the deal “under any circumstances”, or the fact that dispute resolution should take place in South Africa, instead of within Tanzanian jurisdiction. Even though protests are not widespread, Human Rights Watch has reported that the Tanzanian authorities have detained or threatened at least 22 people since 10 June, after they criticised the deal.
These detentions might indicate a reversal of Tanzania opening up its political space in the last years. Moreover, the popularity of President Samia Suluhu Hassan has been falling since the IGA about the port deal became public.
President Hassan (often referred to as Samia) became president of Tanzania after the unexpected death of John Magufuli in March 2021. During her first years in office, she tried to attract more foreign investors to the country and reached out to the opposition by lifting a ban on opposition rallies in January this year. On the other hand, she also consolidated her grip on the ruling Chama Cha Mapinduzi (CCM) party, removing critics within the party from important positions, such as speaker of the house Job Ndugai, who resigned in January 2022.
However, her consolidation efforts have been weakened by the revelation of the contents of the document, which prompted criticism from within her own party. Nevertheless, her leadership of the party has not been seriously challenged.
The ruling CCM party was the only legally permitted party in the country until 1992, and has won every presidential election since then. Because of this, President Hassan is still the clear favourite to win the 2025 presidential elections.
On the economic side, Tanzania’s economic activity has weathered the Covid-19 pandemic well. Increases in fuel and fertiliser prizes caused by the war in Ukraine have led to higher inflation, which was augmented by a shortfall in rain that has impacted food production. Increased food prices make life more difficult in a country where around half of the population experiences some degree of food insecurity. Despite these factors, economic growth is expected to remain robust.
The Tanzanian shilling has recently hit an all-time low against the US dollar, with the exchange rate rising in the last couple of months, after having been relatively stable for the last few years. This could be a sign of increased flexibility with regard to the exchange rate. If this is the case, this would be a positive development for Tanzania’s foreign exchange reserves, which have been under downward pressure recently.
Tanzania’s public finances are considered to be sustainable, with a public debt-to-GDP ratio of around 40%. Public spending increased during the Covid-19 pandemic, but is since under control. The low government revenues do mean that the size of the ratio of public debt to public income is somewhat higher, at around 270% for 2023. The IMF judges that the country is at a moderate risk of debt distress, which sets it apart from many of its peers in Sub-Saharan Africa, where the number of countries in high debt distress has been climbing.
Tanzania’s short-term political risk rating is currently in category 4/7. The medium- to long-term political risk rating is in category 6/7. Despite the increase in political tension, these ratings are expected to remain stable.
Analyst: Jonathan Schotte – email@example.com