Kenya's economy booms as Tanzania softens borders

Tanzania’s 'softened' borders with Kenya, reduced non-tariff barriers and solutions to bilateral issues have resulted in the growth of businesses in both countries, a year after President Samia Suluhu took office.

Data from the Kenya National Bureau of Statistics Economic Survey 2022 shows that Tanzania’s exports to Kenya doubled in just 10 months.  Before President Samia’s tenure, the two countries had a number of spats on trade matters, with Dar es Salaam looking inward and imposing restrictions on trade with Kenya.

The survey shows that the pandemic notwithstanding, Kenya imported more goods during the past year than before from Tanzania.

The report says Kenya’s economy grew by 7.5 percent, the highest rate since 2010, and more than 20 times the rate of 0.3 percent recorded at the height of the Covid-19 pandemic in 2020.

In May last year, President Samia and her Kenyan counterpart Uhuru Kenyatta agreed on a series of targets, including eliminating more than 14 identified non-tariff barriers in six months. At the time, the leaders told business lobbies in Nairobi that they were keen to improve trade.

“Real development is only realised when we develop together,” President Samia told an audience of business leaders at the Serena Hotel. “Business to business interactions provide an avenue for companies to exploit areas of interest and forge co-operation for mutual benefit. Such partnerships create jobs that boost the economic well-being of our people.”

Tanzania’s exports to Kenya recorded the highest figures since Independence, according to the report published on Thursday.

The report also states that Uganda is still the biggest export market for Kenyan goods in the region.

During the pandemic lockdown, Kenya’s agricultural sector shrunk, opening the market for Tanzania’s surplus produce to be sold in Kenya.

Increased trade

After President Samia’s visit last year, President Kenyatta directed the country’s agriculture officials to allow importation of Tanzanian maize that had been previously refused entry. He also directed that work permits should be harmonised, and relaxed the policy on business visas for traders.

“Concerned ministers must go to resolve the traffic snarl-ups at the borders in Taita Taveta and Namanga so that vehicles can continue to ferry goods between the two countries. Those who have Covid-19 health clearance certificates from Tanzania must also be allowed to enter Kenya and vice versa,” President Kenyatta directed after the meeting.

Kenya needed the imports. The KNBS report says aggregate maize production decreased from 42.1 million bags in 2020 to 36.7 million bags in 2021. Coffee production also dropped from 36, 900 to 34, 500 tonnes in the same period. Tea also decreased, with officials citing weather and restrictions from Covid-19 containment measures. About 920,000 jobs were created, six percent fewer than the year before. Some 753,000 of the jobs were informal, suggesting uncertainty or even irregular pay.

The gap in agriculture, coupled with improved border relations helped Tanzanian traders to supply the Kenyan market.

Tanzania exported more food to Kenya in 2021.

“Kenya’s imports from Tanzania nearly doubled from Ksh27.9 billion ($242.6 million) in 2020, to Ksh54.5 billion ($473.9 million) in 2021, partly attributable to increase in imports of maize and rice from this country,” states the report released by Kenya’s Treasury Cabinet Secretary Ukur Yatani on Thursday.

“Similarly, Kenya’s exports to Tanzania and DR Congo exhibited a significant rise from Ksh31.8 billion ($276.5 million) and Ksh14.3 billion ($124.3 million) in 2020, to Ksh45.6 billion ($396.5 million) and Ksh24.4 billion ($212.2 million) respectively.”

The rise was due to an increase in domestic exports of tea, cut flowers and coffee to DR Congo and soap to Tanzania.

Export market

Uganda remained the largest export market for Kenyan products according to the report, trade disputes notwithstanding.

“The value of exports to Uganda increased from Ksh72.2 billion ($627.8 million) in 2020, to Ksh91.7 billion ($797.4 million) in 2021, largely driven by increase in domestic exports of cement clinkers, palm oil, flat-rolled products of iron and non-alloy steel and re-exports of machines tools for drilling, boring sinking, milling, threading or taping,” the report states.

“As a result, Uganda continued to be the country’s key export destination accounting for 12.3 percent of total export earnings.

“Increased demand for sugar and milk led to the increased expenditure of imports from Uganda,” reads the report.

In the same period, exports to South Sudan declined by 26 percent to Ksh17.1billion ($148.7 million), resulting in a reduction in domestic exports of food supplements, and re-export of dried leguminous vegetables.

The value by destination for the period 2017 to 2021 indicates that Kenya’s total exports to Africa were Ksh309.3 billion ($2.69 billion), up from Ksh246.1 billion ($2.14 billion) in 2022, and accounted for the bulk of the country’s exports.

The growth was largely on account of an increase in exports to Uganda by 26.9 percent and Tanzania by 43.1 percent.

“This development was majorly boosted by increase in exports to the East African economic bloc, which rose from Ksh158.3 billion ($1.38 billion) to Ksh192.4 billion ($1.67 billion) contributing 54 percent of all exports to the African continent,” said Mr Yatani.

Rising imports

Imports from Africa rose from Ksh185.3 billion ($1.61 billion) in 2020 to Ksh230.8 billion ($2.01 billion) in 2021.

Imports from EAC accounted for 40.1 percent of total imports from Africa, rising by 64.5 percent to Ksh92.5 billion (804.3 million) in 2021.

In 2021, export earnings from the Comesa region were Ksh124.8 billion ($1.08 billion), an increase of 23.2 percent from the previous year.

The figures also indicate Kenya’s rising demand for food from the region.

In 2021, the Kenya shilling weakened against currencies of key trading countries as reflected in the Trade Weighted Index, which increased by 5.4 percent from 115.37 in 2020 to 121.60 in 2021.