FACTBOX-Key political risks to watch in Tanzania

Constitutional reforms, divisions in the ruling Chama Cha Mapinduzi (CCM) party and a chronic power crisis are some of the key issues expected to dominate politics in 2012 in east Africa's second-largest economy.

President Jakaya Kikwete wants a new constitution in place in 2014, a year before the next parliamentary and presidential elections, but opposition leaders and activists have accused the government of trying to unduly influence the review process.

Following is a summary of key political risks in Tanzania:


Africa's fourth-biggest gold producer has enjoyed relative stability in a volatile region and has held four multi-party elections since 1995, but a dispute over the constitutional review process is clouding its prospects.

A constitutional review bill was pushed through parliament in November thanks to CCM's broad majority in the legislature, as MPs from the main opposition CHADEMA party walked out.

Kikwete agreed to meet with separate delegations of opposition parties who urged him to reject the bill, but he surprised them by ratifying the legislation to kick-start the reforms.

The Tanzanian leader said he would appoint an all-inclusive team that would go around the country collecting people's views in the second quarter of 2012 and come up with a draft constitution. He plans to call a referendum after the final document was approved by a constituent assembly.

Activists say the country's main law, adopted in 1977 under one-party rule, favours the long-dominant CCM party and denies citizens fundamental rights and liberties. The CCM has been in power since independence from Britain in 1961.

Opposition leaders want to limit presidential powers, introduce electoral reforms and allow independent candidates to stand for parliament and as president. They also want the law to allow presidential results to be challenged in court.

What to watch:

-- Anti-government protests. Opposition leaders and activists have rejected the president's handling of the constitutional review process and have threatened to stage demonstrations.

Police have banned public protests, claiming there was a permanent terror threat from Somalia's al Shabaab rebels.

-- Will opposition leaders agree to serve on the constitutional review team if appointed by the president?


CCM said in November it would implement swift anti-corruption measures nationwide and publicly acknowledged for the first time that a succession row had split the party.

The leadership of the ruling CCM party resigned in April and was replaced by fresh faces amid infighting among senior politicians in a bitter power struggle.

CCM will hold internal national elections in 2012, which could present an opportunity for the party to sack individuals tainted with corruption allegations.

What to watch:

-- Political infighting. Kikwete still has three more years left to rule but rival camps in CCM are already fighting to succeed him, splitting the party.

Several politicians, including cabinet ministers, both past and present, are said to be eyeing the country's top job.

-- Graft. Two businessmen were jailed in May for defrauding the central bank of more than $1 million. The case was one in a series of bank scams that cost the central bank $87 million in 2005. Will more cases follow?


The state-run power company is seeking an emergency 155 percent price rise from Jan. 1, pointing to rising inflation. The hike is awaiting regulatory approval.

The year-on-year inflation rate in the country rose for the thirteenth straight month in November to 19.2 percent from 17.9 percent previously.

The International Monetary Fund (IMF) cut its 2011 growth forecast to 6 percent from 7.2 percent in March, saying frequent power outages would hurt output.

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

Discontent at rising living costs has been bubbling, with trade union leaders repeatedly threatening nationwide strikes to push for salary increases for workers.

-- Unemployment. Kikwete said in December nearly 2.4 million people - most of them youths - were unemployed, representing 10.7 percent of the population.

-- Central bank. The central bank has been taking measures to lower the inflation rate and halt the shilling's depreciation. Will it succeed?

-- Emergency power measures. Tanzania plans to spend 1.2 trillion shillings ($755 million) by the end of next year on emergency power projects to reduce the cuts.

-- China. China has significantly expanded its footprint. Sichuan Hongda Co Ltd signed a $3 billion deal with Tanzania to mine coal and iron ore. The two countries also signed a $1 billion loan agreement to build a natural gas pipeline. To what extent will the growing Chinese presence benefit Tanzania?

-- Mining. Mining firms are worried about the tax reform plan. Africa's biggest gold miner AngloGold Ashanti is paying 30 percent corporate tax to the government this year for its Geita mine, but firms are resistant to higher royalties.

-- National debt. The IMF has warned that overall recurrent spending has outpaced revenues and grant financing, contributing to growing fiscal deficits and higher public debt stock, expected to reach close to 42 percent of GDP in 2011. (Editing by George Obulutsa and Sophie Hares)