Factbox- Key political risks to watch in Tanzania

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Tanzania’s chronic power shortages, rising consumer prices and deep divisions in the ruling Chama Cha Mapinduzi (CCM) party are set to dominate the political scene in east Africa’s second-largest economy in the months ahead.

A senior CCM lawmaker, Rostam Aziz, resigned last month amid calls for politicians linked to large-scale corruption allegations to relinquish their leadership positions in the long-dominant party.

President Jakaya Kikwete faces the possibility of public protests over high food prices and a weak currency in a traditionally peaceful country that is also one of the fastest-growing economies in the world, Reuters reports.

INFLATION, POWER OUTAGE WOES

Running power cuts, plaguing the country for the last five years, and high living costs have stoked public anger, with opposition parties and union leaders threatening to hold nationwide demonstrations.

Rising food and fuel prices pushed Tanzania’s year-on-year inflation rate to 10.9 percent in June, more than double the central bank’s target inflation of 5 percent.

The Islamic holy month of Ramadan in August is also usually accompanied by rising food prices, which is likely to put more pressure on the inflation rate in the short term.

The state-run power company announced daily 12-hour power cuts indefinitely because of low water levels at hydropower dams and a shortage of fuel for thermal power generation.

The International Monetary Fund (IMF) cut its 2011 growth forecast for Tanzania to 6 percent from 7.2 percent in March, saying frequent power outages would hurt output while food and fuel prices could push inflation higher.

The shilling has been easing steadily since the start of 2010, making imports more expensive. Increased oil imports for power generation are driving strong demand for foreign currency in the country.

What to watch:
— Emergency power measures. The energy ministry was forced to withdraw its 2011/12 budget estimates in parliament last month after lawmakers threatened to block it because it lacked tangible measures to tackle the power crisis.
— Government resignations over power crisis. An internal investigation is underway into allegations the ministry’s permanent secretary offered cash to some lawmakers to approve the budget proposals. There have been calls for Energy Minister William Ngeleja to resign for failing to deal with the crisis.
— Popular discontent. Will the opposition and public discontent over soaring inflation and a weak currency threaten to spill into the streets?

POLITICAL INFIGHTING

Some senior CCM leaders have clashed publicly on several occasions, underlining rising tensions in a race to succeed President Kikwete, who must step down in 2015.

Kikwete is unlikely to name a successor, but future appointments of key CCM and cabinet officials might reveal his favourites.

The party leadership resigned in April and was swiftly replaced by fresh faces as Kikwete pledged to bring in reforms and sack corruption politicians who have tarnished CMM’s image.

Meanwhile, police have arrested several opposition lawmakers in recent months and charged them with unlawful assembly, raising political tensions in the traditionally peaceful nation.

Opposition leaders accuse the government of a crackdown and have vowed to step up street demonstrations to demand a new constitution and tougher action against corruption and poverty.

What to watch:
— Political reform. The government has pledged to unveil a new constitution in 2014, a year before its next parliamentary and presidential elections, amid opposition pressure for reform.
— Opposition moves. Will they take advantage of disarray within CCM’s ranks to turn into a serious force threatening CCM’s long hold on power?

GRAFT FIGHT

Kikwete promised to clean up corruption in government and politics when he first won office in 2005, but his first term was overshadowed by high-level scandals, forcing him to dissolve his cabinet in 2008.

Aziz, a former member of Kikwete’s inner circle, who resigned last month, has denied graft allegations and claimed he quit CCM to escape “gutter politics” and focus on his vast business interests.

His resignation put pressure on his two confidants — former Prime Minister Edward Lowassa and former minister Andrew Chenge — to follow suit as the ruling party tries to shore up its waning popularity against a resurgent opposition.

Donors have slashed funding pledges for the government’s 2011/12 budget for a second straight fiscal year, citing concerns about the slow pace of reforms and corruption.

The anti-corruption bureau has been criticised for its failure in tackling grand theft, focusing just on petty graft.

What to watch:
— More resignations. Pressure on politicians tainted by corruption allegations could pave the way for more high-profile resignations and show foreign investors the country is serious about tackling graft.
— Central bank trials. Two businessmen were jailed in May for defrauding Tanzania’s central bank of over $1 million in the first of a series of cases on scams on the bank that cost the country $87 million in 2005.
— Waning anti-graft war. Leaked cables from the U.S. embassy in Dar es Salaam showed Tanzania’s anti-corruption chief feared for his life and believed lack of political will was undermining the fight against graft in the country.

SOCIAL TENSIONS

There have been a series of boycotts, protests and demonstrations at public and private universities across the country over delayed and insufficient student loans.

Kikwete has accused his political rivals of orchestrating them in an attempt to make the country ungovernable.

What to watch:
— Jobless youths. A high unemployment rate is fuelling tensions between youths and authorities in major urban centres across Tanzania.
— Student protests. Analysts warn unrest over loans and tuition fees could spread to more universities in Tanzania.
— Unions. Trade union leaders have repeatedly threatened nationwide demonstrations over low salaries and rising costs of living. No date has been set.

MINING REFORM

Tanzania, Africa’s fourth biggest gold producer, said it is considering a “super profit” tax on earnings from minerals as one of the ways to fund its five-year development plan.

The move follows similar steps in Australia and other producer countries that have sought to increase fiscal revenue from the mining industry and to take advantage of rising prices.

Parliament passed a mining law last year raising royalties paid on minerals like gold to 4 percent from 3 percent.

African Barrick Gold said seven people were killed after hundreds of intruders raided its North Mara mine in an attempt to steal gold.

Market analysts said the attack underscored African Barrick’s difficult relations with the local community and risked eroding further the expectation that 2011 would provide the impetus for a re-rating in the shares.



What to watch:
— Investor jitters. Mining firms are worried about government suggestions of a super profit tax on their earnings.
— What rate will apply and how will the companies react? (Editing by Yara Bayoumy)