Why Tanzania will eventually overtake Kenya as East Africa’s economic powerhouse

With $104 billion in Gross Domestic Product, Kenya’s economy is the largest in the East African region. It is also the most diversified and broad-based. Between 2007 and 2022, it expanded at an average annual growth rate of 4.8 per cent.

Its dominance is partly because it pioneered the market economy. Kenya embraced economic liberalism faster at a time her peers were still floundering.

Tanzania was gambling with Julius Nyerere’s cooperative economic model of Ujamaa while Uganda was in the grip of a military dictatorship.

However, sooner or later, the situation might change. The region’s dominant economy is increasingly facing stiff competition from countries like Rwanda and Tanzania. An $80 billion economy, the latter is particularly giving Kenya a run for its money.

During the EAC Heads of State summit in November, President William Ruto acknowledged that Tanzania had overtaken Kenya in trade volumes within the bloc.

The modern port of Dar es Salaam also overtook Mombasa in the latest World Bank’s Container Port Performance Index, attracting more transporters due to lower charges and better infrastructure. This cannot be ignored since the Central Corridor is the principal alternative gateway into the Common Market for Eastern and Southern Africa market.

Another area in which Tanzania is consistently rivalling Kenya is the services sector, particularly tourism. This has resulted from its aggressive marketing campaigns and introduction of new innovative and unique products. Tour operators have opined that the doubling of Maasai Mara park fees last year diverted business to Serengeti.

Over the past few years, Tanzania’s fiscal position has also strengthened. Not only is its debt-to-GDP ratio below the 55 per cent benchmark, but its financial sector has also grown, with a lower share of non-performing loans.

If Tanzania gets its structural reforms right, it has the potential to dislodge Kenya from the pinnacle of the East African Community. But the victory lap is still far away.

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