# 1. Introduction

<mark>In April 2018, large parts of Tanzania were affected by severe flooding. Especially in the country’s commercial capital of Dar es Salaam, flooding caused the loss of lives and widespread damages and disruption. By one estimate, the flooding in Dar es Salaam affected between 900,000 and 1.7 million people, either directly or indirectly (Erman et al. 2019). These resulting economic losses to the population were equivalent to 4 percent of the city’s GDP. On average, affected households lost 23 percent of their annual income. And these economic figures do not reflect some of the hidden consequences of disasters, including impacts on people’s health and children’s educational attainment.</mark> <mark>Yet, the 2018 floods were by no means an isolated incident. Changing precipitation patterns, urban expansion into high-risk flood zones, and a lack of effective drainage infrastructure are all contributing to frequent and intense flood events. Recurring floods also mean that firms and households are constantly recovering from and bracing for flooding, which in turn affects their livelihoods and socio-economic prospects. Impacts on public services and infrastructure systems can also have substantial repercussions on those that rely on these services. For instance, this study shows that Tanzania’s power outages increase from an average of 18 hours per month in the dry season to 57 hours in the rainy season – with substantial knock-on effects on household well-being and firm productivity.</mark> <mark>Much progress has been made in developing our understanding of the impacts of natural shocks on households—not least through rich and dedicated household surveys that shed light on the drivers of exposure, vulnerability, and resilience (Erman et al 2019). However, firm surveys that explore</mark> the <mark>business costs of natural hazards and infrastructure disruptions are rare in most developing countries, and virtually nonexistent for Tanzania. As a result, there is only limited understanding of how firms are affected by and cope with natural shocks and the associated infrastructure disruptions. This makes it difficult for governments to fully assess economic losses after a disaster, and to identify and prioritize resilient infrastructure investments to ensure business continuity and enhance firms’ resilience to natural shocks.</mark> <mark>To address this gap, we conducted a specialized firm survey in Tanzania to explore the impacts of natural shocks—particularly floods—on firms and the infrastructure services they rely on. Analyzing the results of the survey, this study addresses several interrelated questions:</mark>

1. <mark>What are the impacts of natural shocks on firms? For example, destroyed assets, disrupted water, electricity, transportation, and telecommunications services; impacts on workers.</mark>

2. <mark>What is the role of supply chains in propagating and multiplying disruptions? In other words, from suppliers to clients and end-users.</mark> 3. <mark>What adaptation strategies are used by firms? For example, additional inventories, own generators, and own water sources or tanks.</mark> The results from this study confirm that natural shocks have substantial impacts on firms. A single flood in 2018 directly damaged and destroyed an estimated $7.8 million worth of Tanzanian firms’ buildings, machineries, and inventories. The study also finds that, in the aftermath of a disaster, indirect effects— particularly those resulting from disrupted transport infrastructure—prevent employees in up to 40 percent of firms from coming to work and hinder firms' ability to receive supplies on time or to maintain sales. It also finds that 30–50 percent of all supply and delivery delays of firms in the study region can be attributed to the propagation of shocks through supply networks. The study presents evidence that firms 2