Why Tanzanians are elated

Tanzania's President Suluhu Hassan:
 her charm offensive paying off

Tanzanians are elated that for the first time, the country posted a trade surplus with Kenya. According to media reports, the country posted a US$90.15 million surplus against Kenya in the period January to September 2021. Tanzania exported US$ 396.8 million worth to Kenya compared to Kenya’s exports worth $305.3 million, reported The Citizen newspaper.

This publication has not independently verified the data from the unnamed official source. However, we have no reason to doubt it because the December edition of Leading Economic Indicators, published by the National Statistics Office in Kenya, shows that Kenya’s exports to Tanzania rose 252 percent over the same period.

Further, the Statistical Bulletin published by the Central of Kenya shows that for the first time in years, Tanzania’s exports to Kenya breached the US$30 million mark for four consecutive months to June 2021.  Thus the report is probably accurate giving reason to cheer.

The growth in trade between East Africa’s top two economies signifies improved trade relations between the two countries, said the media report.

We agree. Since May 2021, the new President, Samia Suluhu Hassan, has been on a charm offensive among her neighbors targeting improved economic ties. The trade data shows marked growth since March 2021 leading to the conclusion that her charm offensive is paying off handsomely, not just for Tanzania but her neighbor too. 

A review of trade data since 2017 reveals a pattern of a ceiling of sorts to trade between the two countries. Kenya, it appears, set a ceiling of just under $300 million a year for Tanzanian imports. This works to an average of US$25 million a month with occasional breaches.  For instance, in June and July 2019, Tanzania’s exports breached the $30 million mark before shrinking to the “normal range” of under $20 million.

Kenyan exports also faced a similar ceiling, generally under US$27 million a month, with occasional breaches past $30 million.  These occasional breaches are evidence that the trade potential between the two countries is high if you keep politicians out of the way.

This is what politicians on the Tanzanian side have done- stepped aside- allowing trade to find its level. The ceilings have been breached!  The 2021 trade data reveals a growth trajectory on both sides. Kenya’s exports to Tanzania more than doubled, even as Tanzania exports posted a large growth.

The Data shows that Kenya’s exports to Tanzania in the first ten months of last year rose 252 percent from US$22.7 million in January to $58.6 million in October, breaching the US$40 million mark for the first time. Tanzania’s trade grew 102 percent year on year, according to media reports.

I particularly do not like using data for the year 2020. It was a bad year. Covid-19 control protocols disrupted economic activity. It is thus a bad year to assess policy successes or failures. According to media reports, Tanzania’s exports to Kenya in the nine months of 2020 stood at $190 million doubling to  $390 million over a similar period in 2021.  Trade with Kenya in the previous years hovered around the same level, that is,$190 million. Therefore, the sharp rise in 2021 is significant.

Due to this surge, Tanzania has pushed past Britain as the second-largest destination for Kenyan Exports. Uganda is ill the leading market consuming an average of US$57 million a month. Could Uganda cede the top perch to Tanzania?

It is possible. After all, Kenya’s exports to Tanzania hit $58 million a month in October.  Is Tanzania Kenya’s fastest-growing export market?  It seems.  What is not certain is if the current surplus in favor of Tanzania is sustainable.

Tanzania’s external trade in Africa is characterized by surges and retreats.  For instance, Tanzania’s exports to Ugandan and Burundi rose suddenly, nay exploded, between June 2020 and July 2021 and then just collapsed.  The East Africa Trade Report, published by TradeMark East Africa reported a surge in mineral exports from Uganda and Burundi since June 2020.  At the same time, Tanzania's gold exports to these countries surged with Uganda Importing $1.09 billion worth of Gold from Tanzania.

Tanzanian gold export in EA
collapsed as fast as it began

The TMEA report shows that Burundi’s extra-EAC trade exploded from minus 7 percent in May 2020 to an astonishing 804 percent in July before declining to 52 percent in September 2020. Over the same period, Uganda’s Extra-EAC trade rose from minus 54 percent in May 2020 to 15 percent in June and then to 31 percent in July, then 16 percent in October. In June 2021, Uganda imposed taxes on Gold Imports resulting in the collapse of the gold trade.

 Dissecting the data to establish the potential for consistency is important for it weeds out noisy exports. Noisy exports are seasonal surges that collapse in the future. For instance, Kenya is currently dealing with food insecurity due to poor rains in 2020. Her imports of food commodities from Tanzania have thus surged. The risk here is, once the situation improves in Kenya, demand for Tanzanian imports could decline.

 Regardless of the nature of the imports and their future risks, however, the surge in cross-border trade between Kenya and Tanzania points to a greater benefit. It increases the quantity of goods and services available in the region and expands the market for local produce.  That is the major goal of trade.

That is why Kenya must resolve frequent spats with Uganda quickly.  Kenya, the giant economy in East Africa should also be looking past these two countries to expand her export destinations into D R Congo, Ethiopia, and other parts of Africa.

There are underlying fears that a persistent trade deficit by one country against another is exporting local jobs. In East Africa, regional trade is sabotaged by politics and economic nationalism. However, if allowed to find its level, trade is likely to increase employment in both countries as trade satisfies unmet demand. This means that the importer does not produce enough to meet domestic demand. Imports, therefore, do not displace domestic producers but supplement them.