Kenya and Tanzania’s Rivalry For Trade and Foreign Investment Dominance

This week unfolded another economic drama between Kenya and Tanzania and this time it touched the airspace. It started with an announcement from the Tanzania Civil Aviation Authority that all Kenya Airway flights between Nairobi and Tanzania were suspended. I must say that with a trip planned in March 2024 to Kenya, I was a little bit concerned about having to pass through Ethiopia and my trip going from one hour to at least 4 hours. However, I was pleased to see that both the Minister of Foreign Affairs in Kenya and Tanzania decided to resolve the matter amicable. Fast forward, flights from Kenya Airways will not be suspended in exchange for Tanzania Airways to secure cargo traffic rights in Kenya.

This friction is not new. At least once a year, there is some trade issue between Kenya and Tanzania. Do you remember when the chickens and other poultry products from Kenya were burned at the border of Namanga, on the Tanzania side? We thought there was no return there to amiable relations, but then in April 2022, I had participated in the business road show to Kenya with H.E. Samia Suluhu Hassan where there was a special task force comprising of government authorities from both Kenya and Tanzania, tasked to look into all the Non-Tariff Trade Barriers between both countries and other matters hindering trade and resolve the issue. Efforts were made to resolve issues and to allow free trade flows between Tanzania and Kenya. Clearly, the calm did not last for long.

But why is there friction between Kenya and Tanzania? Why are Tanzania and Kenya Frenemies?

To understand the present rivalry and the competitive relationship when it comes to attracting foreign investment, it's crucial to explore the historical context that shaped the economic trajectories of Kenya and Tanzania. Both nations gained independence in the early 1960s, but they adopted different economic models. Kenya embraced a market-oriented approach, promoting private sector growth, while Tanzania pursued socialist policies under the leadership of Julius Nyerere. These distinct economic paths laid the foundation for the divergence in their development strategies and influenced their current economic rivalry. This has led to different economic policies and governance structures. Kenya has positioned itself as an economic powerhouse in East Africa, implementing market-friendly reforms, fostering innovation, and encouraging foreign investment. On the other hand, Tanzania has historically maintained a more cautious approach, emphasizing state control and nationalization and while it is embracing free market economics, there is a big socialist hangover that still exists and the State still controls a considerable part of the economy. Another effect of the different economic policies is seen in the World Bank's "Ease of Doing Business" inde where in recent years, Kenya has consistently outperformed Tanzania, creating a more attractive landscape for investors. Kenya's infrastructure development, efficient regulatory systems, and business-friendly policies have made it a preferred destination for foreign direct investment.

Another area of rivalry is in infrastructure, which plays a pivotal role in attracting foreign investment, and both Kenya and Tanzania have made significant strides in this area. The rivalry between Tanzania and Kenya extends beyond borders, particularly when it comes to the strategic sector of maritime trade and ports. With both nations vying for dominance and economic benefits, the competition in this domain has intensified.

The maritime rivalry between Tanzania and Kenya has historical roots that go back to their colonial pasts. Both countries possess extensive coastlines along the Indian Ocean, making them crucial players in the East African trade landscape. Over the years, each nation has sought to establish and expand its port infrastructure to enhance its economic standing and influence in the region.

1. Port of Dar es Salaam (Tanzania)

?Situated along the eastern coastline, the Port of Dar es Salaam is Tanzania's primary gateway for international trade. Its strategic location provides access to landlocked countries in East and Central Africa. Tanzania has invested significantly in upgrading the port's infrastructure, improving container handling facilities, and enhancing efficiency to attract more shipping traffic.

2. Port of Mombasa (Kenya)

The Port of Mombasa has long been a historic maritime hub in East Africa, serving as a gateway to Kenya and neighbouring landlocked countries. Kenya has undertaken ambitious expansion projects to modernize and expand the capacity of the Mombasa port, aiming to position it as a leading maritime facility on the continent.

Both ports seek dominance over key trade corridors, with Kenya's Mombasa targeting routes to the landlocked countries of Uganda, Rwanda, and South Sudan, while Tanzania's Dar es Salaam aims to serve as the primary gateway to countries like Zambia and Malawi.

Both Kenya and Tanzania are engaged in substantial infrastructure investments to upgrade their respective ports, including the expansion of berths, modernization of cargo handling facilities, and implementation of advanced technologies to enhance efficiency and competitiveness.

The competition is not just about individual ports but extends to the broader goal of regional influence. Whichever country establishes itself as the preferred maritime gateway stands to gain not only economically but also diplomatically within the East African Community (EAC) and beyond.

The abundance of natural resources in both countries contributes to the rivalry. Kenya is known for its diverse economy, with sectors like agriculture, technology, and services driving growth. Tanzania, rich in minerals, agriculture, and tourism, competes directly with Kenya for foreign investment across these sectors, leading to a constant tug-of-war.

While the rivalry between Kenya and Tanzania in the tourism sector creates healthy competition, it also underscores the need for strategic collaboration to promote East Africa as a premier tourist destination. Joint initiatives, regional marketing campaigns, and coordinated efforts in sustainable tourism practices could amplify the appeal of the entire region, ensuring that the beauty and wonders of East Africa continue to captivate travelers from around the globe. While Kenya has been willing to engage in joint efforts to market East Africa a single tourist destination, Tanzania has shown reluctance of the years and has gone as far as rejecting the single visa for the East Africa area.

The historical, economic, and infrastructural rivalries between Kenya and Tanzania are deeply rooted, and their impacts reverberate across various sectors, from aviation to ports, trade, and tourism. However, amidst the tensions, there are glimmers of cooperation and attempts at resolution. The recent diplomatic efforts to resolve the airspace dispute, as well as the establishment of a special task force to address trade barriers, indicate a recognition of the need for collaboration. Both nations share common interests in economic growth, regional stability, and attracting foreign investments. As they navigate the delicate balance between competition and cooperation, it becomes increasingly evident that a harmonious relationship is not only desirable but essential for the overall development of East Africa.

The challenges faced by these two East African nations present an opportunity for introspection and a revaluation of their strategies. Balancing the pursuit of individual economic goals with collaborative efforts to strengthen the East African Community could yield substantial benefits. Joint marketing initiatives, shared infrastructure projects, and a commitment to ease of doing business could position the region as a unified and attractive investment destination.

Kenya and Tanzania have the potential to transform their "frenemy" relationship into a genuine partnership that propels East Africa towards sustained prosperity. This is the vision of the future that both Nations should commit to.

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