Local Interests vs. Global Integration: Assessing Tanzania’s Protectionist Business Policies

In the latest trade policy development, Tanzania reserved several trade and small-scale enterprises exclusively for its citizens. The Business Licensing (Prohibition of Business Activities for Non-Citizens) Order, 2025 was issued this Thursday by Industry and Trade Minister Selemani Jafo, prohibiting non-citizens from engaging in at least 15 types of businesses amid concerns that foreigners are driving locals out of business and worsening unemployment.

Under the Order, licensing authorities are prohibited from issuing or renewing business licences for non-citizens in the reserved sectors. Any non-citizen found engaging in these businesses faces a minimum fine of TSh 10 million or imprisonment for up to six months. Tanzanians who assist non-citizens in operating such businesses face fines of up to TSh 5 million or imprisonment for up to three months.

However, existing valid licence holders will be allowed to continue operating until their licences expire.

This development is the latest protectionist measure by the Tanzanian government. In May, Dodoma banned the use of foreign currencies for local transactions, requiring all goods and services to be priced and paid for in Tanzanian shillings. The regulations also restrict contracts denominated in foreign currencies. In the mining sector, the Mining (Local Content) Regulations, 2018, have been in place for some time to safeguard and develop local capacity around mining sites.

Tanzania now joins several African countries, among them Ghana and Ethiopia, that have enacted measures reserving certain business activities for their nationals. These restrictions vary in scope but have traditionally been concentrated in sensitive sectors, such as mining, telecommunications, and banking, and in some instances, petty trade, as seen in Tanzania’s recent case.

In Ethiopia, foreign banks were prohibited from operating for decades. The restriction dates back to the 1960s and was reinforced by Proclamation No. 84/1994, which explicitly limited banking licenses to Ethiopian nationals or companies wholly owned by Ethiopians. This regime changed with the Banking Business Proclamation No. 1360/2024, which formally ended Ethiopia’s five-decade ban on foreign banks. 

The National Bank of Ethiopia followed up with the implementation of directives effective June 25, 2025, outlining licensing requirements for subsidiaries, branches, and representative offices of foreign banks. Related liberalisation has also occurred in mobile money, where, until 2021, services were restricted to local banks and telecoms. However, in May 2023, Safaricom Ethiopia was allowed to launch M-PESA, following policy reforms.

In Ghana, protectionist measures extend beyond banking to both mining and telecommunications. Under the Ghana Gold Board Act, passed on April 2, 2025, the newly established board was granted exclusive rights to buy and export artisanal gold. All previous licenses were voided, and foreigners are not allowed to engage in small-scale gold trading. Foreign companies wishing to purchase artisanal gold must apply directly to the board.

Separately, under the Electronic Communications Act of 2008, the National Communications Authority regulates the allocation of spectrum. For 800 MHz licenses used in mobile telecommunications, Ghana requires foreign applicants to form joint ventures or consortia with at least 25% Ghanaian ownership. Investors are given two years to meet this threshold, and ownership may be satisfied through listing on the Ghana Stock Exchange.

Advocates for protectionism raise several points, including the safeguarding of domestic employment. By shielding local industries from foreign competition, governments can help preserve existing jobs, especially in sectors where cheaper imports threaten to displace local workers. 

Another key argument for protectionism is the need to support emerging or “infant” industries. New industries often lack the production efficiencies and technological innovations that established foreign competitors enjoy. Protectionist policies provide these nascent sectors with the breathing room required to grow and achieve competitiveness on a global scale before facing the full force of international markets.

National security considerations also justify protectionist measures. Certain ‘essential’  industries such as defence manufacturing, energy production, and critical technologies are crucial to a country’s sovereignty and security. Allowing foreign control or heavy dependence on external sources in these sectors can expose a nation to vulnerabilities.

Ultimately, protectionism can serve as a tool for promoting inclusive growth by prioritising economic opportunities for local entrepreneurs and historically disadvantaged groups. By reserving certain sectors or imposing ownership requirements, governments can help ensure a fairer distribution of economic benefits and reduce inequality within society.

On the other hand, protections granted to so-called essential industries tend to be very costly to taxpayers and often become routine and taken for granted. Second, many industries claim to be crucial for national security, which raises the question: Should all of these sectors receive protection from international competition?

While protectionist measures are often praised for supporting the domestic market, they have been widely criticised for their long-term adverse effects on both the protected markets and international trade.

Recently, Kenyan lawmakers urged President William Ruto’s government to impose retaliatory sanctions against Tanzania, following the introduction of protectionist policies by President Samia Suluhu’s administration. 

Furthermore, while such measures reduce imports and may preserve some local jobs, they often lead to reduced exports, which in turn causes job losses in export-oriented industries. This dynamic tends to create a near-zero net employment effect.

The East African Community (EAC) Common Market Protocol, adopted in 2010, guarantees the free movement of people, goods, services, labour, and capital across member states, and upholds the principle of equal treatment for all nationals of partner states. In principle, this framework allows citizens of EAC countries to cross borders freely to trade and provide both professional and non-professional services.

While domestic political factors, such as Tanzania’s upcoming general elections in October, may have influenced the adoption of these protectionist measures, the move risks undermining regional integration. By prioritising short-term political and economic gains over treaty obligations, Tanzania could strain relations with its neighbours and erode confidence in the EAC’s commitment to a common market. Striking a balance between protecting local industries and honouring regional commitments will be critical for sustaining both national development and regional cooperation.