In spite of years of experience in handling business operations in Tanzania, both Barrick Mining Corporation and its then-local subsidiary, Acacia Mining, struggled to detect and mitigate political risks in the period that preceded contentious extractive sector reform in 2017. The outcome? Protracted dispute, cost erosion and costly settlement. The political developments that ended up trapping Acacia Mining had taken place almost a decade earlier.
In 2008, a fracture took place in the ruling party’s dominant coalition and fundamentally changed the nature of its politics. This factional split, particularly the failure to repair it, had two main outcomes. Firstly, it weakened the dominant coalition’s ability to influence leadership succession, and secondly, it enabled the rise of a mercurial figure that would eventually upend the business environment.
The legacy of that contentious period continues to haunt the government and investors in the form of arbitration, costly settlements, and Corporate Social Responsibility (CSR) expenses. Keen observers might have understood why the 2024 road safety campaign stickers carried the name of a mining firm that had until recently been a subject of vilification.
A question that one could ask is, why do global firms, some with decades of operations in Africa, repeatedly struggle to discern and mitigate political risk? (As you read this piece, Barrick Mining has just announced a settlement to resolve a protracted dispute in Mali where staff were detained and operations disrupted for many months.)
Part of the answer lies in the ecosystem that helps international firms design and deploy projects. Major business funders often require supported businesses to procure insurance coverage from large and mostly Western entities. This is partly because of concerns about the capacity and reliability of local service providers. It follows that businesses choose to also procure risk monitoring services from similar or related firms.
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Unfortunately, distant risk monitoring firms rely mostly on patchy and normally open-sourced information, and repeatedly miss the significance of mundane but consequential political and social events. In my view, effective political risk monitoring requires consistency and sufficient knowledge of the local context. For instance, what happened in 2008 had a fundamental impact on business outcomes nearly a decade later (2017/2018).
New era of political risk
There is no doubt that certain businesses, such as those in the extractives sector, are notably prone to social and political risks. However, the recent electoral violence in Tanzania offers proof that any serious business needs to pay attention to political risk. About 40 gas stations owned by a single company suffered serious damage from targeted arson attacks. While in the past, companies viewed the state as the main source of political risk, recent events point to a fundamental shift in the nature of political risk in Tanzania.
The behaviour of the public, both as voters and consumers, is an aspect that used to generally rank low in various business risk reports on Tanzania. Although prospective investors of the Liquefied Natural Gas (LNG) project worried about future riots in Mtwara, this was largely seen as an isolated phenomenon. However, the events in October have challenged this perception.
Even serious brands that employ local artists for product popularisation purposes will now need to pay attention to voter and consumer behaviour. Young people (Gen Zs) have attempted to target firms that employ artists they consider to have behaved irresponsibly. This is, without doubt, a new era of political risk for sizable businesses in Tanzania.
Our own research at Evidentiary finds that the political settlement that guaranteed a measure of policy stability in the aftermath of 2017-2019 business sector reform has entered a renegotiation phase. While the dominant faction that anchors the current political establishment remains liberal and pro-business, it has been subjected to intense pressure over the last year. Substantive reform, as indicated recently through the State of the Nation address, is a necessary and inevitable concession. Businesses must understand what is likely to happen and plan for it.
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The ruling party’s manifesto (2025-2030) singles out strategic minerals and Artisanal and Small Scale Mining (ASM) as subsectors that will see targeted reform between now and 2030. Nonetheless, our analysis indicates that this cycle of anticipated reform will be broader than indicated and possibly last a decade due to the imperative for the political establishment to reinvent itself.
Tanzania remains a competitive investment destination, given its steady economic growth of slightly above five per cent, less than four per cent inflation, a fast-growing labour market, an increasingly stable national grid, and a huge investment in physical infrastructure. Nonetheless, businesses that are interested in this lucrative market can only underplay political risk at their own peril.
Dastan Kweka is a researcher, analyst and writer. He’s available at research@evidentiaryinsights.com or on X as @KwekaKweka. These are the writer’s own opinions and do not necessarily reflect the viewpoints of The Chanzo. Do you want to publish in this space? Contact our editors at editor@thechanzo.com for further inquiries.
