Sunday, June 19, 2016

Why Tanzania is Not About to Eclipse Kenya
By Gathu Kaara
June 20, 2016

Photo: SGR workers fine-tune the equidistant positioning of sleepers and T-beams at the section near Kibwezi town. Photo/Dennis Onsongo

Kenyans are being treated to a season of gloom and doom because Kenya is supposedly about to be eclipsed as the region’s dominant economy by Tanzania. Kenyans have “authoritatively” been informed by expert economic analysts that Tanzania is the new king of East Africa, and Kenya has lost out big time. What is behind this invitation to Kenyans to beat themselves?

The first is the decision by Uganda to “abandon” its deal with Kenya to build a joint pipeline to the Port of Lamu in favour of one with Tanzania. The second is the decision by Rwanda to “abandon” Kenya’s Standard Gauge Railway (SGR) in favour of the one proposed by Tanzania. Never mind that not even one kilometer of track or pipeline has been laid, or even one dollar of the necessary finance been mobilized for both projects.

The truth is that when you compare Tanzania’s economy to Kenya, it’s almost laughable that anybody can actually state that it can supplant Kenya’s dominance in this region. This is just self-serving analysis meant to push a given political narrative.

What are the facts about these two economies? Tanzania’s 2016 budget of $ 13.5 billion (Sh1.35 trillion) pales beside Kenya’s budget of $ 22.6 billion (Sh 2.26 trillion), almost double in size.

Further, the size of Tanzania’s economy, measured through its Gross Domestic Product (GDP), at $ 48 billion, is almost 25 per cent smaller than Kenya’s at $ 61 billion.

These gaps have only grown in the last decade, and nothing suggests they will be narrowing anytime soon. Tanzania’s key port of Dar es Salaam has been declared much more inefficient than the Port of Mombasa, over and above clearing much less cargo for the region’s landlocked countries, principally the tiny economies of Rwanda and Burundi.

In fact, the World Bank estimates that the Tanzanian economy could gain over Sh8 billion annually if the Dar Port was as efficient as the Port of Mombasa. For the longest time, Kenyans were told by the selfsame experts that Dar es Salaam would soon supplant Mombasa as the key port in this region. Again, it looks like it is not going to happen anytime soon.

Those experts then “abandoned” Dar and latched onto the Port of Bagamoyo where Tanzania had planned a mega port. Kenyans were told that Bagamoyo will put Mombasa in the shade, never mind that then not a single stone had been laid, nor was there a highway to link the port with its landlocked neighbours to facilitate the proposed new corridor to supposedly compete with Mombasa and the Northern corridor.

The truth is that $ 10 billion Bagamoyo Port was a white elephant, and the Tanzanian government has abandoned it as unviable, and will instead concentrate on refurbishing and expanding the Port of Dar. It would have to be a hopeless optimist who would proclaim that the Northern corridor anchored on the Port of Mombasa is about to lose to a rudimentary corridor anchored on a port that is much more inefficient and is way behind in modernization and expansion.

The scenario is similar with Tanzania’s standard Gauge Railway linking Tanzania and Rwanda. While Kenya’s SGR is rapidly snaking its way across the Nyika, Tanzania’s is still on the drawing boards. Tanzania’s economy is still living in the past , and remains globally uncompetitive. Successive Tanzanian governments have lived in a Utopia where they think they can forever shield their economy from competition.

So, they control movement of labour, capital and other factors of production. No wonder there’s a huge skills gap in that economy. Tanzania has a mountain to climb. The turmoil that Kenya underwent as it liberalized and reformed its economy in the 90s is something that Tanzania must go through to become a modern economy. By the time Tanzania is through, Kenya will be eons away.

Tanzania’s first shock when it starts liberalizing will be capital flight as Tanzania’s elite move huge amounts of dollars abroad, and a massive depreciation of its currency as it finds its own market level amid a huge dollar outflow. Nairobi remains the financial and commercial flight hub for the entire Eastern and Central Africa.

The financial and ICT infrastructure the country has built over decades is among the most advanced anywhere in the continent. That’s why leading global brands like Google, General Electric, Huawei, Pepsi, Coca Cola, Diageo, Toyota, AVIC International and Visa Inc have made Kenya either their regional or continental headquarters.

It will take a huge flight of fantasy to imagine companies like IBM or Pfizer relocating from Nairobi to Dar es Salaam. It might be the politically correct narrative to talk up Tanzania as the new kid on the block set to put Kenya in its place.

The truth, however, is that Tanzania is really a backwater economy that is yet to begin the hard, backbreaking and nerve wracking work of reforming its economy to become competitive even by regional standards. Rwanda has done a much better job of it.

—Gathu Kaara can be reached at

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