Watch out Kenya,Tanzania is catching up
By Linus Gitahi
Posted Wednesday, May 26 2010
As Kenya dithers on which way to go on governance with the constitution, how to implement Vision 2030 and how the various pillars of development can be kick started, its neighbour to the south is making steady progress.
As the chart below shows, Tanzania is exporting to Kenya almost as much as it is importing. For a long time the gap was so huge that many Kenyans wondered whether anything good can ever come from down south.
The sad thing, most of it is food related exports to Kenya! This is set to get worse with the possible export of natural gas from Tanzania to Kenya.
Statistics on GDP growth show that if Tanzania maintains its growth at 6% and Kenya continues to average 4%. This trend sees Tanzania becoming the biggest economy in East Africa in two years. Awesome!
(With Uganda’s recent oil discovery and possible exports to Kenya, it’s only a matter of time before that economy too overtakes Kenya, but let’s keep that for another day).
What should Kenya be doing?
First is to examine its traditional source of competitive advantage. I am persuaded that it was based on Nairobi and Kenya in general being made the manufacturing hub for the region since independence. Almost all key British and American multinationals set up here for serving the east African market. These include Cadbury’s, Nestle, Reckitts, Unilever, Wrigleys, Johnson Wax, GSK, and many more.
However, with the opening up of alternative markets, all these companies have relocated all or most of their manufacturing elsewhere, particularly Egypt and South Africa, and in a few cases India. They export their products directly to Tanzania and Uganda from those factories.
This therefore calls on Kenya to re-evaluate its source of competitive advantage viz a viz its neighbours. Let me suggest a few:
- Stop importing food. Instead, invest enough in terms of irrigation and encouraging farming in the semi arid areas by diverting waters (which at the moment is freely flowing into the Indian Ocean). This should be stuff for the current budget and not some future time “when funds become available”.
- Support homegrown SMEs in a real and practical way. Explore differentiated tax regimes driven by a transparent criteria, particularly the export orientated ones, to fill the void that is being rapidly created by exiting multinationals.
- Energy and infrastructure… These two components, besides the raw materials, have the greatest impact on a company’s cost of goods in Kenya. The cost of energy per unit is about US13 cents in Kenya compared to say US3 cents in Egypt. Truth be said, Kenya is investing greatly on infrastructure but we have a long way to go to reducing the cost of energy in a sustainable way.
- Creating Political/economic certainty. The uncertainty about the constitution will set Kenya back if not resolved soon. Kenya must not come out as a nation that is not sure, that is not certain about what ought to be. It’s important that this issue is settled once and for all.
- Finally, Kenyans must generally start driving things Kenyan. From genuine attractions for tourists that are Kenyan to selling mukimo and ugali at the Hilton to promoting Kiswahili as a language, Basically, promoting national psyche and pride. This will, among other things in the fullness of time, significantly improve the remittances from the Diaspora. No country ever developed by turning the other cheek or basically imitating others on core culture issues such as food, clothing, language etc. At a minimum, Kenya needs to excel in one to drive its image and distinction as a nation.