Ethiopia’s GERD: A Power Play Transforming East Africa’s Energy and Economy

Addis Ababa — Ethiopia’s inauguration of the Grand Ethiopian Renaissance Dam (GERD) on September 9, 2025, is more than a national milestone. At 5,150 megawatts, the dam positions Ethiopia as Africa’s leading hydroelectric power producer and a key player in regional energy markets. Its impact is being felt across East Africa, with Tanzania among the countries poised to reap economic and industrial benefits.

A Strategic Leap for Ethiopia

Located on the Blue Nile near Sudan, the GERD represents a $5 billion investment, 91% of which Ethiopia financed internally. The project’s first operational turbines now generate 750 MW, signaling the start of a phased rollout that will eventually supply both domestic demand and export markets.

For decades, Egypt and Sudan have contested Ethiopia’s upstream control of the Nile, citing water security concerns. Both countries argue that Ethiopia’s unilateral approach threatens their historical allocation under colonial-era treaties. Ethiopia counters that these treaties are outdated, asserting its sovereign right to harness the Nile for development.

The political tensions underscore the broader economic significance: energy is now a diplomatic tool, and GERD places Ethiopia in a stronger bargaining position in regional negotiations.

Regional Energy Integration

Ethiopia has already begun exporting electricity:

Kenya: 200 MW
Djibouti: 80 MW
Sudan: 100 MW
Tanzania: Projected 100 MW

For Tanzania, the additional electricity promises to ease chronic energy deficits, reduce reliance on costly diesel generation, and enable more consistent industrial output while allowing its national grid to export excess energy to Southern African countries such as Zambia, Malawi and Zimbabwe. Analysts note that regional power trade under the Eastern Africa Power Pool (EAPP) could stabilise energy markets and attract foreign direct investment.

Infrastructure will be key. Transmission networks in Tanzania must be upgraded to handle new inflows and prevent grid bottlenecks. Failure to do so could undermine both domestic gains and cross-border energy trade.

Economic Implications for Tanzania

Reliable power is a prerequisite for industrialisation. With GERD’s energy contribution, Tanzanian manufacturers can expand production, reduce downtime, and cut operational costs.

Cost Efficiency: Imported hydroelectricity is cheaper than local thermal generation, offering potential savings for businesses and government.
Industrial Clusters: Cities like Dar es Salaam and Mwanza could attract energy-intensive industries, creating jobs and fostering economic diversification.
Regional Competitiveness: Tanzania’s integration into Ethiopia-led energy exports strengthens East Africa’s position in global supply chains and lowers logistics and production costs.

Strategic Considerations

While the GERD presents opportunities, it also introduces dependency risks. Over-reliance on Ethiopian power could expose Tanzania to political or operational disruptions. Experts advise simultaneous investment in domestic renewables, including solar and wind, to safeguard energy security.

Diplomatic engagement is equally critical. Participation in Nile Basin and EAPP negotiations ensures Tanzania has a voice in water management and energy-sharing arrangements, reducing potential geopolitical frictions.

Power and Prosperity at Play

GERD’s operationalisation is a turning point for East Africa. For Tanzania, it’s an economic lever: affordable electricity, industrial growth, and enhanced regional trade prospects. But realisation of these benefits requires strategic planning, infrastructure readiness, and active regional collaboration.

In the long term, GERD may not just reshape Ethiopia’s energy profile; it could redefine East Africa’s economic landscape, positioning the region as a hub of power-driven growth and industrial competitiveness.