EAC: How Tanzania is shooting herself at the foot

 President Jakaya Kikwete: Shadow boxing
Regional integration?

TANZANIA'S LAGGARD stance on integration in the region, is stymying their own country, analysts say. Its spirited attempt at sabotaging Kenya, has not paid off, they add. If anything, Tanzania is losing out.   Her efforts to sabotage Kenya are guised as efforts to protect her family jewels in Tanzania.

 Initially, her concerns were reasonable and beneficial to the country. She feared that her weak industry will be elbowed out of the market by imports from Kenya. This resulted in asymmetrical tax system in which Kenyan exports were taxed at 90 per cent discount while Tanzania and Uganda Exports came to Kenya tax free.

The result has been an impressive 319 % rise Tanzania’s exports to Kenya between 1996 and 2010.  Official data shows that Tanzanian exports to Kenya stood US$6.6 million in 1996 -the first full year of the operation of the EA Customs Union toUS$210.5 million in 2011. Such growth would not have been possible without some form of protection for the weak Tanzanian manufacturing sector.

 However, as the region sought to deepen its integration, Tanzania’s concerns graduated to “Kenya Phobia.” According to Kenyan officials, “Tanzanians always think the first beneficiary of any progress in the region is Kenya. So they simply reject things out of hand.”  And they are hurting their country’s interests.

A Kenyan Factory: Many shun investing in Tanzania

The latest step is her refusal to ratify discussion on the proposed political Union in the region due to the issue on Land. The proposed document wants the citizens of the East African common market to be free to own land anywhere in the bloc. No says Tanzania. Our land is for Tanzanians only. Last week, Tanzanian government officials minced no words: “some countries in East Africa are greedily eyeing our land. We shall not bulge,” they told the local media.

 According to Kenyan officials familiar with the negotiations, in Tanzanian parlance “other countries” means Kenya. Kenyan officials dismiss this as “Kenya phobia and myopic stance. They claim that Tanzania objects to every move that in their eyes could benefit Kenya.  For years, for instance, they objected to exports of Kenyan assembled vehicles saying they do not meet the rules of origin of the East African community. Other members of the Community accorded Kenyan assembled vehicles a preferential status. Tanzania finally relented after stalling for nearly a decade.

It is distressing that Tanzania does not learn from her mistakes. Despite attempts at open sabotage, say observers in Nairobi, Kenya ends out maneuvering her. In early 2000s for instance, Kenya Airways’ (KQ) bid to buy Air Tanzania Corporation, ATC, was frustrated by politicians who preferred South African Airways (SAA), despite advice by ATC management to sale the airline to KQ. At that time politicians argued Kenya was only interested in Tanzania’s tourism circuit.

 In 2002, ATC was sold to SAA for a whopping $20 million. Five years down the road. The marriage failed and ATC was returned to Tanzania. By then, KQ which bought a privately owned Tanzanian airline, Precision air, had completely dominated the Tanzanian airspace. ATC could not even find an elbow room in the lucrative domestic routes.

In 2000, KQ flew to Dar-es-salaam only three times a week. To date, it flies five times a day Monday to Monday to Zanzibar-Dar-es-salaam-Kilimanjaro-Nairobi.

Now, ATC‘s survival is in doubt, being kept alive, by government handouts. The trend in the world, say analysts, is that Airlines that cannot sustain themselves are grounded. It is just a matter of time before ATC breaths its last.

Owing to its recalcitrance, Tanzania is no longer an exciting destination for Kenyan investors. In the mid-1990s and early 200s, Kenyan investors trooped to Tanzania, catapulting Kenya to the position of  the second largest investor in Tanzania after Britain.

Such Kenyan giants as East African Breweries, Nation Media group and Kenya Commercial bank set up shop in Tanzania. There were other smaller investors too. Although Data is not readily available there are indications that Kenyan investors are looking elsewhere and that the flow of Kenya investment funds has slowed down. Some investors such East Africa breweries, have pulled out altogether.

Kenya’s fastest growing companies are the banking industry and the retail chains. And they appear to have given Tanzania a wide berth. For instance, Major Kenya retail outlets appear to have shunned Tanzania denying the country’s manufacturing sector a major outlet for their products. Nakumatt Limited, the largest retail Chain in Kenya has already opened three branches in Uganda and one in Rwanda and two in Tanzania. Uchumi Supermarket has opened a branch in Dar-Es salaam, Tanzania and three in Uganda.

 Banks are also following a similar trend: Kenya Commercial bank, which ventured into the Tanzanian market in 1997 boasts of only 11 branches there. At the same time she boasts s of 14 branches in Uganda; 19 in South Sudan and 9 in Rwanda. It is noteworthy that KCB entered the latter three markets years after it set up shop in Tanzania.

 Equity Bank, the fastest growing bank in the region boasts of 38 branches in Uganda five branches in South Sudan; six in Rwanda and three in Tanzania. It is not worthy that Tanzania is the second largest economy in east Africa

So why is Tanzania becoming unattractive to Kenyans? The expansion of the East African community to include Rwanda and Burundi and the birth of South Sudan spelt trouble for Tanzania, say analysts. Initially Tanzania and Uganda were the favoured destinations for Kenyan investors. However, the entry of the three new countries into the market changed the equation. While Uganda is still attractive, Tanzania is sliding lower in the ranks of investment destinations.

Tanzania has to stop living in the past and wake up and smell the coffee. As far as investment destinations goes, she now ranks fourth and once the road to Ethiopia opens, she will slide down further. And the creation of a larger free trade zone will consign her to irrelevance.

She is not the only investment destination for Kenyans. There are other competing destinations in the region gunning for one suitor.  If she drags her feet, there will be nothing for her by the time she wakes up. As politicians chest thumb and fight ghosts, Tanzanians are definitely losing out. Time they woke up to that cruel fact.