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Kenya is slowly losing its regional economic powerhouse status

By Mohamed Guleid | August 17th 2021
By Mohamed Guleid | August 17th 2021

Mohammed Guleid, CEO Frontier Counties Development Council.

Since independence, Kenya has been the regional economic hub. Most international investors and institutions have preferred to set up shop here because of relative peace and stability. It is also true that we have succeeded to craft an image of a country that is investor-friendly. The best-known brand Kenya sold abroad is her foreign policy.

Even in the face of provocation, Kenya has maintained a reconciliatory attitude. The magnanimity of Kenyans was displayed when more than half a million refugees escaping violence Somalia and South Sudan were received warmly and given shelter. Generally, as a country, we have maintained a free market economy where trading with neighbours has been encouraged.

Uganda is still our number one trading partner and very much dependent on our port in Mombasa. Rwanda and the Democratic Republic of Congo also depend on Kenya to access products such as petroleum. However, things are changing. Our traditional trading partners have started looking towards Tanzania which appears to have more attractive terms.

A friend in the logistics and petroleum business intimated to me recently that his business is doing poorly because his clients in Congo and Rwanda are now getting their products via Tanzania. He has a fleet of trucks, many of them procured through bank loans. Now, there is a possibility of the trucks being auctioned. Transporting petroleum products from the port of Mombasa to Kigali costs more than moving the same from Dar-es-Salaam.

The other major challenge for Kenya is of course foreign policy. Under the Jubilee administration, particularly since 2017, Kenya's foreign policy has been driven by vindictiveness and aggression. Kenya's attitude to our largest trading partners Uganda and Somalia has proven that we have largely departed from our traditional friendship and brotherly attitude. Generally, Kenya is no longer the darling of its neighbours. Tanzania, Uganda, South Sudan, Somalia and even Rwanda have been exhibiting a cold attitude towards Kenya.

But I have a feeling our government still assumes that things are still rosy. Kenya is still basking in its past glory. In the meantime, our neighours are moving on. Today, Rwanda is considered as a model for Africa for zero tolerance to corruption and their attitude for embracing change. They have adopted the latest technologies to serve their people.

To maintain our regional economic status, the government and the people must stop depending on the old narrative that Kenya is the largest economy in the region. It might be so for now, but things are changing fast. In future, countries like Uganda and Tanzania might overtake us. How we manage our foreign policy will impact, not only our relationship with our neighbours but also the volume of trade. When our neighbours have alternatives, it is risky to assume we are indispensable. To make matters worse, some investors now prefer neighbouring countries. Recently, US company Proctor and Gamble relocated to Ethiopia due to the high cost of production in Kenya. We, therefore, need to relook at how best we can maintain our regional position by being more innovative in how we do business and relate to our neighbours.

Mr Guleid is CEO, Frontier Counties Development Council. [email protected]

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