By Business Insider Reporter
Kenya and Uganda have taken a major step toward deepening regional trade by agreeing to eliminate all tariffs and non-tariff barriers between the two countries, even as Tanzania continues to restrict foreign participation in 15 key business sectors.
The landmark agreement, signed during a ministerial meeting in Mbale, Uganda late last month, aims to ease the flow of goods, reduce double taxation, and eliminate discriminatory excise duties on cross-border trade.
Kenya’s Trade Cabinet Secretary, Lee Kinyanjui, noted that the move is in line with East African Community (EAC) treaties and protocols and underscores both countries’ commitment to improving trade infrastructure and border efficiency.
The deal mandates that goods originating from Kenya and Uganda will now be treated as “transfers,” ensuring a smoother trade process.
It also requires border agencies at key crossing points, including Malaba and Busia, to clear congestion within 24 hours and operate continuously to prevent delays. Infrastructure improvements along major trade corridors are also a priority under the agreement.
Implications for Tanzania
Tanzania’s recent ban on foreigners – including Kenyans and Ugandans – from running businesses in 15 sectors such as retail, mobile money, phone repairs, salon services, clearing and forwarding, and small-scale industries puts it at odds with its neighbors’ push for deeper regional integration.
The directive, issued in July by Industry and Trade Minister Selemani Jafo, has raised concerns among EAC member states about potential trade friction.
For Tanzanian businesses, the decision could have several consequences including reduced regional competitiveness.
With Kenya and Uganda facilitating seamless trade, Tanzanian businesses could face higher costs and slower access to goods and inputs, making them less competitive in regional markets.
The Tanzania move has also led to retaliatory measures with Kenya initially indicating it may consider retaliatory actions, which could affect Tanzanian exports and cross-border investment.
There is also a danger of investment diversion as foreign investors, especially from Kenya and Uganda, may redirect capital to neighboring countries that offer a more open and predictable business environment.
Tanzania move also poses challenge on EAC integration efforts. The move undermines Tanzania’s commitment to EAC trade protocols, potentially complicating negotiations on broader regional economic initiatives.
The East Africa Law Society (EALS) has publicly criticised Tanzania’s licensing restrictions, stating that the ban contradicts the spirit of the EAC and could harm regional integration efforts.
Economists warn that if Tanzania does not adjust its policy, the country risks isolating its economy from two of its biggest regional trade partners.
“Trade flows are driven by predictability and efficiency,” says a Dar es Salaam-based trade analyst. “Tanzania’s restrictions could slow down growth, reduce foreign investment, and encourage businesses to operate in Kenya and Uganda instead.”
As Kenya and Uganda move forward with an open trade agenda, Tanzania’s approach may test the resilience of its domestic businesses and its position within the East African single market. The coming months will reveal whether Tanzania opts to maintain strict controls or recalibrate its policies to safeguard trade relations with its neighbors.
