Geopolitical Risk and Investment in East Africa: Assessing Tanzania's Political Instability and Regional Ripple Effects

Tanzania's 2025 general elections have become a flashpoint for geopolitical risk in East Africa, with cascading implications for foreign investment, regional trade, and economic integration. According to an African Union observer report, the elections fell short of democratic standards, citing restricted media access, internet blackouts, and reported violence. These developments have not only deepened domestic uncertainty but also raised alarms among investors and regional partners about the stability of one of Africa's largest economies.

A Fractured Investment Climate

Tanzania's political instability has directly undermined its attractiveness to foreign direct investment (FDI). While President Samia Suluhu Hassan has pledged to streamline regulatory processes and reduce bureaucratic hurdles, persistent challenges remain. A U.S. Department of State report highlights arbitrary tax enforcement, corruption, and regulatory inconsistency as major barriers. For instance, the Presidential Tax Reform Commission, established to harmonize incentives and tax collection, has seen slow implementation, leaving investors in limbo. Additionally, restrictions on land ownership and weak enforcement of investment guarantees continue to deter capital inflows, the report notes.

The ideological tug-of-war between socialist policies and market-friendly reforms further complicates the investment environment. Bureaucratic delays in inter-ministerial coordination have stalled infrastructure projects, including energy and transportation initiatives critical to long-term growth, according to the State Department analysis. As a result, Tanzania's ranking in global business climate indices has slipped, compounding investor skepticism.

Regional Trade and Integration at Risk

Tanzania's instability has sent shockwaves through East and Southern Africa. Landlocked nations like Malawi, Zambia, and Zimbabwe rely heavily on Dar es Salaam's port for fuel and agricultural inputs. During the 2025 election period, border closures and port disruptions exacerbated inflammation and supply shortages, particularly for farmers dependent on timely commodity flows, according to an AllAfrica report. Analysts warn that prolonged instability could force these countries to reroute trade through more expensive ports in Mozambique or South Africa, eroding competitiveness, a Deutsche Welle analysis suggests.

The East African Community (EAC), a key driver of regional integration, has struggled to enforce consistent trade policies amid Tanzania's protectionist turn. Kenya, for example, has faced repeated permit denials for traders in border towns like Namanga and Arusha, a Mashariki RPC analysis notes. In response, Kenya and Uganda have accelerated bilateral cooperation, signing eight memoranda of understanding in July 2025 to bolster trade, transport, and agriculture, the analysis adds. This strategic pivot reflects a broader trend: regional actors are increasingly bypassing EAC mechanisms in favor of more predictable bilateral arrangements.

Neighboring Responses and the Future of Regional Markets

The ripple effects of Tanzania's instability are reshaping East Africa's economic landscape. Kenya's investment in a railway linking Kampala to Malaba, complementing its Standard Gauge Railway, underscores a shift toward alternative trade corridors. Meanwhile, Malawi and Zimbabwe have faced acute economic strain due to Tanzania's port disruptions, with analysts predicting long-term inflationary pressures.

Regional bodies like SADC and EAC remain critical to mitigating these risks, but their effectiveness is constrained by institutional weaknesses. Without stronger enforcement of trade agreements and political reforms in Tanzania, the region risks fragmented markets and diminished investor confidence.

Conclusion

Tanzania's political instability in 2025 has exposed vulnerabilities in East Africa's economic architecture. While the government's reform pledges offer some hope, the slow pace of implementation and lingering governance issues continue to deter investment. For regional partners, the path forward involves diversifying trade routes and strengthening bilateral ties to offset the fallout. Investors, meanwhile, must weigh the risks of operating in an environment where policy shifts and political uncertainty remain persistent headwinds.