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Home > Communications > Telecommunications > General Telecom
Tanzania Business Forecast Report Q2 2008
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Set For a Strong Quarter
Tanzania’s outlook for economic growth remains strong, with promising short-term prospectsin mining, tourism and telecoms and potential long-term growth in agriculture if key reforms areenacted. Going forward these high-growth sectors should help the country adapt to the removal ofimport tariffs which protect domestic industries against competition from the EU. Strong growth, inaddition to a shrinking current account deficit and moderating inflation, should support continuedcurrency appreciation over our forecast period. We see the country benefiting in the short termfrom a services boom as tourism and transport sectors in Kenya shift south to avoid the riskyclimate. On the politics side, the absence of social unrest despite major upheaval in the cabinet,underscores the stability Tanzania has long enjoyed. We are also encouraged by indicators thatsuggest corruption is on the decline. In the long run however, reforms to the country’s politicalstructure, dominated by the ruling party, will be necessary to further stamp out corruption.
Prime Minister Edward Lowassa resigned in February 2008 amidst corruption charges, promptingthe dissolution of the cabinet. Within days a new prime minister, Mizengo Pinda, and cabinetwere in place and governance returned to normality. We see little scope for major changes to thecountry’s political stability or policy direction following these changes and are instead encouragedby the increasing accountability top government officials seem to possess. The prime minister’sresignation, in addition to improving corruption statistics and a new law strengthening anti-corruptionefforts, indicate President Jakaya Kikwete’s campaign against corruption is having somesuccess and we are forecasting continued gains through the medium term.
The economy of Tanzania has good prospects. Strong growth potential, a boom in services, continueddonor support and a relatively favourable investment climate all underscore our forecaststrengthening of the shilling through 2012. The main constraints to growth are weak infrastructure,which holds back tourism and transport, and banking sector shortcomings, which hold back domesticinvestment in agriculture, the economy’s largest sector. Investment in infrastructure is scheduledto proceed over the next several years, but risks are present over the whole period. The economyremains vulnerable to droughts, as they hurt the economy both through agriculture and the powersector, which relies on hydro-power.
The business environment, while still suffering some major weaknesses, is improving. Corruptionis slowly declining and investment in the national infrastructure is pushing forward. There are stillnumerous shortcomings which need addressing; property rights remain weak, skilled labour isin short supply and some regulations, particularly the restrictions on hiring foreign workers, areonerous. Nonetheless, the country still manages to attract high levels of FDI on the back of thehigh growth opportunities, efficient commercial courts, long-standing political stability and a fairlycompetitive tax regime.
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