Tanzania’s Investors on Edge as Foreign Aid and Confidence Waver

Tanzania’s international image is tarnished.  Disputed elections, followed by a widely circulated CNN documentary highlighting the deadly post-election fallout, have intensified global scrutiny. With activists petitioning the International Criminal Court (ICC) and the threat of legal action hanging over the president, international actors are beginning to reassess their engagement, and some have already begun withdrawing support for the country.

The European Parliament’s Committees officially objected to a proposed €156 million development aid package for Tanzania, scheduled for 2026. They are also contemplating sanctions against the main perpetrators of human rights violations. The scrutiny is not limited to Western countries; the African Union and the Southern African Development Community (SADC) have also criticised the elections, stating they did not meet the criteria of free, fair, and transparent democratic standards, citing ballot irregularities, voter intimidation, and restrictions on opposition and media. Civil society organisations such as Amnesty International and the International Court of Justice (ICJ) have also condemned the human rights violations and abuses observed so far. 

This is just the beginning of many such actions by other international organisations that may not want to appear to support a repressive government. Foreign aid made up about 23% of government revenue in 2024, and the move comes at a challenging time following Trump’s withdrawal of financial support for programmes in Tanzania.

But perhaps the worst thing to happen to Tanzania at the moment is the climate of instability, especially as the demonstrations planned for December 9th could greatly impact the business environment, making investors jittery. Uncertain about the outcome of the current regime, foreign investors are likely to delay or scale back new investments, particularly in sectors that depend on political stability and transparency, such as tourism, large-scale infrastructure, and extractives. This is not the first time this has occurred. In 2024, the World Bank suspended further disbursements to the “Regrow” scheme, a major tourism and conservation project, following allegations of abuses and forced evictions linked to its implementation. Tourism is highly sensitive to perceptions of safety and security, as well as overall political stability; any reports of unrest, violence, or uncertainty can swiftly decrease tourist arrivals and revenue. Tourism’s share of Tanzania’s Gross Domestic Product (GDP) was estimated at 17.2% in 2024 and accounts for about 24% of the country’s exports. While Tanzania’s tourism sector appears to have remained robust and resilient after the recent election protests, this may not be sustainable if demonstrations persist.

Domestic companies are also likely to hedge against uncertainty and delay expansion projects, postpone hiring, or restrict capital expenditure due to policy and regulatory uncertainties, as well as potential liquidity constraints. Many firms may pivot to low-risk, quick-return ventures, such as trade and distribution of essential goods, retail, FMCG, and services that are less impacted by political volatility. Financial institutions may focus on treasury products, short-term lending, or hedging instruments instead of long-term development financing.

President Samia Suluhu Hassan, on the other hand, may turn to China and the Gulf states, which typically provide finance and infrastructure support without attaching conditions related to governance, human rights, or electoral processes. China is already a major financier in Tanzania, funding roads, ports, energy projects, and industrial parks. However, Chinese and other non-Western loans are often large, sometimes with shorter repayment periods or collateral requirements, which could increase Tanzania’s debt-to-GDP ratio. Samia’s shift towards the east will entail greater debt exposure and potential geopolitical tension. She is aware of this and has spoken about it, warning Tanzanians of potential economic and social consequences if instability persists and urging citizens to uphold peace and order.

But stability does not stem from orders from above; it arises when freedom is upheld, when citizens can express themselves without fear, and when democratic institutions operate transparently and fairly.