Sibling rivalry: Is Kenya losing investment deals to Tanzania?

President William Ruto with his Tanzanian counterpart Samia Suluhu during a working visit to Dar es Salaam on October 10, 2022. [PCS]

Tanzanian President Samia Suluhu does not shy away from throwing jibes at Kenya from time to time.

Her recent remarks claiming that Tanzania is seeing an influx of foreign investors in the wake of the opposition-led protests in Kenya have kicked up another political storm between the two neighbouring countries that have had an uneasy trade relationship over the years.

Speaking during celebrations to usher in the new Islamic Year, President Hassan emphasised the importance of peace in a nation, saying it creates the right environment for investors.

“If we fight, those [investors] who show up will say ‘that is not a good business environment’,” she said.

She added: “The other day I listened to the Director General of Tanzania Investment Centre, who said the number of investors we received in May and June has never been recorded before. But when you look at the reason, it is because it is burning in our next-door neighbour’s [Kenya].”

She said an investor cannot stay in such a place. “They run to where there is peace and tranquillity,” said the President.

Tanzania Investment Centre (TIC) Director General Gilead Teri, during the interview referenced by President Hassan aired by Tanzania Broadcasting Corporation, detailed how the country between January and March saw investments worth $1.3 billion (Sh195 billion), equivalent to Tsh2.8 trillion.

This is from 93 projects, which will provide employment to about 16,000 Tanzanians.

In May, the country registered 52 new projects worth $ 327 million (Sh49.05 billion), which will provide not less than 6,000 jobs.

“This has never been witnessed in the last 10 years,” said Mr Teri. He explained that one of the reasons behind the new investments is a new law passed in December 2022 and started operating this year.

The law reduced the amount of investment set as the threshold for one to benefit from government incentives from $100,000 (Sh15 million) to $50,000 (Sh7.5 million).

This, he said, has allowed more Tanzanians to be recognised as investors and hence benefit from the incentives provided by the government under TIC like tax breaks.

The law, apart from recognising new investors, also applies to existing ones, who either want to rehabilitate or expand their businesses.

Weighing in on the supposed influx of investors to Tanzania over Kenya’s unfriendly political environment, Kenya Association of Manufacturers (KAM) Chairman Rajan Shah said the lobby body is continuously striving to advocate for reduced costs and ease of doing business.

“Whether is power, taxation or regulatory environment, we continue to do that. And whilst Kenya still remains a preferred destination, we are also opening up the region and for sure, there will be investments which will go to our neighbouring countries as well based on the competitive advantage of what are the resources available.”

Kenya Association of Manufacturers (KAM) Chairman Rajan Shah. [Wilberforce Okwiri, Standard]

The lobby claimed that if the protests by the opposition continue, the economy is likely to lose Sh2.8 billion daily as a result of disruption in the manufacturing sector, which contributes about Sh1 trillion to the country’s Gross Domestic Product (GDP) annually.

Mr Shah said plans to expand this from the current 7.2 per cent GDP contribution to 20 per cent by 2030 will be in jeopardy.

“If the headlines are about tyres burning and people running up and down, any investor will start thinking twice. Even though we have some advantages, we can’t take them for granted,” added the immediate former KAM chairman Mucai Kunyiha.

Numbers from the African Development Bank (AfDB) project that Kenya’s GDP is expected to grow 5.6 per cent in 2023 and 6.0 in 2024. This is driven by services and household consumption.

“Inflation is projected to rise by 8.6 per cent in 2023 and 5.9 per cent in 2024, driven by food and energy inflation,” says AfDB.

Alternatively, AfDB projects that real GDP for Tanzania is projected to rise to 5.3 per cent in 2023 and 6.3 per cent in 2024, driven by a sustained recovery in tourism and gradual stability in the supply value chain.

This shows that Kenya’s GDP will grow just 0.3 per cent more than Tanzania’s this year. However, Tanzania’s GDP growth for 2024 will overtake Kenya’s by also 0.3 per cent.  

In 2022, Tanzania’s GDP growth slowed down to 4.7 per cent from 4.9 per cent in 2022, while Kenya’s also dropped to 5.5 per cent over the same period from 7.5 per cent previously.

These postulations by AfDB also show that inflation in Tanzania, a pain point currently for Kenya, will be lower in Tanzania for both 2023 and 2024.

“Inflation is projected to increase to 4.7 per cent in 2023 due to higher food and energy prices before moderating to 4.0 per cent in 2024 due to better agricultural performance,” AfDB says.

Both economies are reeling from the Russia-Ukraine conflict and commodity price hikes during this period. Uniquely, Tanzania has the lingering possibility of new Covid-19 variants.