Assessing Geopolitical and Economic Risks in East Africa: The Tanzania Election Crisis and Its Impact on Investment Confidence

The October 2025 presidential election in Tanzania has plunged the nation into its most severe political crisis in decades, with profound implications for regional stability and investor confidence. The incumbent president, Samia Suluhu Hassan, was declared the winner with an implausibly high 97.66% of the vote, sparking widespread protests and a brutal government crackdown. According to a report by Human Rights Watch, security forces used live ammunition and tear gas to disperse demonstrators, while a nationwide internet shutdown stifled information flow. Opposition groups, including Chadema, allege systemic electoral fraud and report over 1,000 deaths, though these figures remain unverified. The crisis has not only destabilized Tanzania but also raised urgent questions about the future of investment in East Africa.

Geopolitical Instability and Sovereign Risk

Tanzania's election crisis has shattered its long-standing reputation as a stable democracy in East Africa. The African Union and Southern African Development Community have openly questioned the election's legitimacy, citing ballot-stuffing and repression. International bodies like the United Nations have called for investigations into extrajudicial killings, further isolating the government. This erosion of trust extends to investors, who now face heightened sovereign risk. While Tanzania's economy had shown resilience-projected to grow 5.4% in 2024-political instability threatens to reverse gains. The U.S. State Department's 2024 Investment Climate Statement highlights persistent challenges, including bureaucratic inefficiencies and corruption, which are now compounded by the crisis.

President Hassan's administration has defended the election as "fair and transparent," blaming foreign actors for inciting unrest. However, the detention of opposition leader Tundu Lissu and the suppression of dissent suggest a shift toward authoritarianism. Such actions deter foreign direct investment (FDI), which reached $661 million in 2022 but now faces greater uncertainty. Investors are particularly wary of sectors like mining and agriculture, where regulatory barriers and land acquisition disputes already pose risks.

Regional Economic Ripple Effects

The crisis has broader implications for East Africa. Tanzania's instability could disrupt regional trade networks and deter cross-border investments. The East African Shilling (TZS) has already weakened against major currencies, reflecting market anxiety. While the International Monetary Fund (IMF) and World Bank have not yet revised Tanzania's sovereign risk ratings, analysts warn that prolonged unrest could trigger downgrades. The absence of immediate rating changes does not negate the crisis's impact; rather, it underscores the lag between political events and formal assessments.

Investors are also reevaluating their exposure to East Africa. Neighboring countries like Kenya and Uganda, which have their own governance challenges, may see a reallocation of capital toward more stable markets in the region. The Tanzania National Business Council's efforts to engage the private sector now face an uphill battle, as the government's credibility has been severely damaged.

Navigating the New Landscape

For investors, the path forward requires a nuanced approach. While Tanzania's economic potential-particularly in tourism, energy, and agriculture-remains intact, the political climate demands caution. Diversifying portfolios to include regional markets with stronger governance frameworks could mitigate risks. Additionally, leveraging international arbitration mechanisms, as outlined in Tanzania's 2022 Investment Act, may offer some legal recourse for disputes.

However, the absence of concrete data on sovereign risk rating changes from agencies like Moody's or S&P highlights a critical gap in current analysis. Investors must rely on real-time geopolitical assessments and contingency planning to navigate the uncertainty.

Conclusion

Tanzania's election crisis is a stark reminder of how political instability can rapidly undermine economic progress. The government's crackdown on dissent and the resulting international backlash have created a toxic environment for investment. While the country's economic fundamentals are not inherently flawed, the erosion of institutional trust and the rise in sovereign risk will likely deter capital inflows in the short term. Investors must weigh the long-term potential of Tanzania's markets against the immediate volatility, prioritizing resilience and adaptability in their strategies.