Tanzania’s election pivotal for MNCs, regional players

Tanzania’s election pivotal for MNCs, regional players

The outcome of Tanzania’s elections will be pivotal for the country’s economy and its political influence in East Africa.

Tanzania’s elections, scheduled for 25 October 2015, are set to be the most competitive and tightly contested since multi-party democracy was introduced in 1995.

Chama Cha Mapinduzi (CCM) has been in power for 54 years but Chama cha Demokrasia na Maendeleo (Chadema and the united opposition under UKAWA) are gaining significant political support.

Electoral Dynamics

John Magufuli is CCM’s candidate. He is seen as ‘hard working’ and ‘non-corrupt’, having been in government for 20 years with strong credentials, most recently as Minister for Works, but has a small public profile. His selection was a compromise born out of the context of internal party splits.


Opposition candidate and former Prime Minister Edward Lowassa is a political heavyweight. However, his prospects are hindered by his history of corruption and recent defection from CCM to Chadema, after losing the competition for candidacy. Regardless, his rallies have drawn vast crowds and his candidacy poses a real threat to CCM.

Magufuli and CCM have a strong chance in winning the elections, owing to a 6.4 million strong membership. This is not to understate the threat posed by the opposition: The electorate are largely youthful and strongly engaged in the electoral process.

While the opposition party is seen as dynamic and visionary, which attracts the youth, the CCM are suffering from an image of undelivered promises and economic under-performance.

Nonetheless, the majority of the electorate are rural agricultural communities, where the CCM continues to command a great deal of influence. Chadema’s (and UKAWA’s) support may wane as their prior anti-corruption credentials are tarnished by the leadership of Lowassa, who has been associated with high-level corruption cases.

Political Stability

In the short term, political stability should remain strong. The election result will be closer than in previous years but CCM are likely to win.

However, if the result is close or if there are allegations of rigging, then post-election violence is a possibility. The potential for violence is real, especially with the high numbers of citizens actively involved in the political process. In addition, all three of the largest parties have their own militias, which could easily be employed to stir up trouble.

If violence does occur it is unlikely to be hugely disruptive, with ethnic cohesion not being a problem. Nonetheless, this could deter investors, a number of whom are waiting for the new administration before furthering operations.

Great Expectations

In the long-term, there will be immense pressure on Magufuli or Lowassa to usher in a new era of economic prosperity and political stability. High expectations could be unrealistic and lead to instability if not met, especially as the political landscape becomes more competitive.

Furthermore, regional security problems enhance the aforementioned risks. Since Burundi’s electoral crisis, over 80,000 refugees have entered Tanzania. Dealing with large influxes of refugees in a poor country could negatively affect the harmonized ethnic structures in the country, particularly if economic livelihoods come under threat.

Risks to the new President’s popularity, if he does not handle these issues well, could increase his incentives for corruption and repressive political activities to maintain a grip on power.


Gas production will significantly change the commercial and political landscape in Tanzania, with many areas having been surveyed for exploration and drilling. To capitalize on this petrochemical potential, multinationals will have to ensure successful coordination with the incoming government and local communities.

There are significant expectations of the economic benefits brought through exploration and production activities, a perception encouraged by the elections. This is particularly problematic, as while politicians promise to increase jobs, the pool of jobs on the back of gas production is small. During the construction phase, there are many temporary jobs, but during production these decrease significantly.

The success of the industry will rely on the successful implementation of the production sharing agreements (PSAs) and revenue management. CCM have pushed through a new Petroleum Bill 2015 and Gas Revenue Management Bill 2015. This involved establishing an authority to oversee and manage the sector.

If regulations are not implemented properly by the authority and bureaucratic inefficiency becomes a problem, then the increased risk of corruption in the sector could ruin the benefits oil and gas would bring to Tanzania.

Regional Dynamics

Elections and the success of the nascent oil and gas sector will be pivotal in determining Tanzania’s future regional position, as Tanzania has been excluded from Kenya’s flagship LAPSETT project.

Despite these challenges, Tanzania is set to wield greater strategic significance than Kenya in East Africa. This is witnessed by the fact that Tanzania already receives the highest foreign direct investment (FDI) in East Africa and its economic growth out-paces Kenya’s.


Source: The Economist

FDI in gas could act as a catalyst for Tanzania developing a more dynamic economy than Kenya’s in the long-term. The significance of Tanzania’s growth might be overstated, as FDI in Tanzania is disproportionately gas related. However, it is investment in oil which has rendered Nigeria the biggest market in Africa.

A peaceful election in Tanzani might influence Uganda to invest in a pipeline through Tanzania, instead of one in Kenya. A Uganda-Kenya oil pipeline looks increasingly unlikely, with high long-term security risks in Turkana County and posed by Al-Shabaab.

Ethiopia also plans to build an Addis-Djibouti pipeline. This would leave Kenya with the burden of funding a pipeline with limited oil reserves and high security risks, undermining Kenya’s economic potential and strategic regional position, and blurring its ‘Vision 2030’.

The election outcome will be decisive for East Africa’s future and strategic decision making for multinationals. With competing oil and gas industries in the region, Tanzania may well take the lead.

About Author

Elliot Kratt

Elliot is a Freelance Analyst with The Economist Intelligence Unit. Prior to this, he held positions in a number of risk consultancies and has worked in East and West Africa. He has been quoted by journalists with the Financial Times and Wall Street Journal. Elliot holds a first class BA (Hons) in International Relations from the University of Leeds. All views expressed are his own.