Whimsical protectionism engenders poverty In Tanzania
|President Jakaya mrisho Kikwete of Tanzania: |
The Political class is hurting Tanzania's interests
I define whimsical protection as a form of protection that is not based on economic factors. It is impulsive and erratic and does not engender any economic benefits on the protected country or society.
In worst case scenario it stalls; investment, technology transfer, production and skills acquisition in a country. It is a recipe for deeper poverty and underdevelopment.
Such is the case with
country in East Africa. Although the second
largest economy in the 130 million people East Africa Common market bloc, she
is the laggard.
Protectionism initially served a purpose. Her weak manufacturing sector needed some form of protection from the stronger Kenyan manufacturing sector. This resulted in asymmetrical tax system in which Kenyan exports were taxed at 90 per cent discount while
Uganda Exports came to
tax free. Kenya
This resulted in a 2000 per cent rise
formal exports to
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 to US$135.4 million in 2010. Official Kenyan Data shows that Kenya Tanzania‘s exports to in the first half of 2011,
stood at US$112 million, exceeding exports for the whole of 2009. Such growth
would not have been possible without some form of protection for the weak Tanzanian
manufacturing sector. Kenya
But it is also a signal that the sector has come of age and should now be allowed to compete on an equal keel. In fact, the economic reason for protection is no more. But there are capricious reasons for it. And these do more harm to
than good. 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 . Our land is for
Tanzanians only.” A month ago, Tanzanian government officials minced no words
accusing some unnamed countries of “greedily eyeing our land. We shall not
bulge,” they told the local media. Tanzania
Kenyan officials familiar with
capricious nature say that in Tanzanian parlance “other countries” means .
Kenyan officials dismiss this as “ Kenya phobia and myopic stance.” Kenya
Owing to this “phobia” especially among the political class,
has made bad decisions
against its leading market in Africa- Kenya in particular. In 2001, Tanzania
pulled out of COMESA trading bloc citing the cost of fees in several blocs,
preferring to remain in SADC. Tanzania
That was strange since SADC was not a significant market for
. The immediate result, Tanzania Tanzania lost a significant market in .
The move, unconfirmed reports say, was due to a spat between a Burundi
firm and a Tanzanian Cabinet minister. Kenya
In 2002, 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
was only interested in ’s
tourism circuit. Tanzania
ATC was sold to SAA for a whopping $20 million. This was an imprudent decision since SAA itself was in financial doldrums owing to an investment gone awry. Five years down the road, the marriage collapsed and ATC was returned to
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.
Now, ATC‘s survival is in doubt for it depends on government support to
remain air bone. Tanzania
Two, years ago, a Tanzanian Cabinet minister was embroiled in a dispute wit a Kenyan firm,
dairies. The firm bought a Tanzanian milk processor, but soon discovered that
the farmers there could not deliver enough milk to keep the firm afloat. It opted to process the 12,000 litres it
collected in Tanzania in
since that was a cheaper option. Kenya
The minister wanted the factory repossessed although he knew very well that the farmers in
could not supply the 60,000 litres it needed to operate profitably. The
Solution was simple: Mobilise farmers to produce more milk. If necessary, he
should have called for importation of skills from Tanzania to teach them animal
husbandry. That was not popular. Kenya
According to a recent report in the Financial Times, Kenyan employees cannot be allowed to work in
freely. This has forced some investors to look elsewhere in the region. Consequently, Tanzania is no longer an exciting
destination for Kenyan investors. In the mid 1990s and early 200s, Kenyan investors
trooped to Tanzania Tanzania in
droves, making Kenya the
second largest investor in Tanzania
after . Britain
Most are now pulling out. The latest investor to pull out was East African Breweries which sold its 20 per cent stake in
breweries. There were other smaller investors who have pulled out too. Although
Data is not readily available there are indications that Kenyan investors are
looking elsewhere and that the flow of Kenyan investment funds has slowed down.
Those that remain are keeping their investment levels low.
’s most aggressive
expansionists are in the banking industry. And they appear to be reluctant
entrants into the Tanzanian market. Major Kenyan retail outlets have opened a
branch each in a country of 40 million people. Nakumatt Limited, has just set
up shop in Arusha while uchumi supermarket has a branch in Dar-Es salaam. All
complain of delays in getting work permits for Key staff Kenya
The financial sector appears to be looking elsewhere. Kenya Commercial bank, the first Kenyan Bank to venture into the Tanzanian market in the 1990s boasts of only 11 branches in
At the same time she boasts of 14 branches in Tanzania Uganda;
19 in South Sudan and 9 in .
It is noteworthy that KCB entered the latter three markets years after it set
up shop in Rwanda . Tanzania
Equity Bank, the fastest growing bank in the region boasts of 38 branches in
Uganda and 4 in South Sudan.
It has its eyes trained on Tanzania
and Rwanda but Rwanda is higher in the radar than .