Pragmatism, efficiency key to economic competitiveness

Thursday October 15 2020



Charles Makakala

Charles Makakala 

By Charles Makalala

A nationwide survey in 2012 revealed that most Tanzanians harboured great suspicion of their East African neighbours. The survey observed that the degree of suspicion was greater than their suspicion towards the nation’s politicians and police officers! And that’s something.

Such is the magnitude of the challenge of restoring trust among the people of East Africa! Such is the reflection of the deeply ingrained misgivings that ought to be overcome to get the people to focus on real developmental problems, rather than petty cultural matters!

One of the issues that need to be addressed is to get Tanzanians to finally admit that the Kenyan economy is much more competitive than theirs. Given the statistics, it should be a foregone conclusion, but alas, things are never that easy in this region.

In an ideal world, when one observes a model that is working better than his own, one is expected to be excited and adjust one’s practices accordingly. But not when a nation’s pride and identity are invested in a failing model.

So, when Nyerere was advised to emulate what Jomo Kenyatta was doing in Kenya, in what has now become a famous exchange, Nyerere memorably responded by calling Kenya ‘a man-eat-man society’! Those words perfectly captured Tanzanians’ attitude, namely ‘let’s be poor but at least we should be proud’. Maskini jeuri. In a sense, that means they would rather die poor than admit they were wrong. It’s interesting to see this at play in these nations’ relationships. Probably Daniel arap Moi had a point in calling that approach ‘a man-eat-nothing’ approach. Very droll.

Comparatively, history has greatly favoured Kenya’s economy leading to its relatively stronger competitiveness. This was a thorny issue in the relations of the two nations during the first EAC’s project, leading to its ignominious end in 1977.

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That said, as LKY observed, a number of other policy factors also improved Kenya’s strategic positioning in the region, especially the adoption of market economics and respect for private property. This is what made Kenya’s economy come from behind, race past Tanzania in the 1980s, and reach a peak of being over twice the size of Tanzania’s economy in 1997.

While Tanzania’s economy rebounded in the decades that followed and grew seven times to significantly narrow the gap, leading to some experts to prematurely announce the change of economic guards in the region, Kenya has maintained the pole position, and forecasts show that that is not going to change any time soon. Why is this the case?

Firstly, because growth is driven by private enterprise. While governments’ spending can sometimes mask economic weaknesses, a strong private sector guarantees long-term competitiveness of the economy. For example, it is generally easier to do business in Kenya, as observed in the World Bank’s country ratings where Kenya leaves Tanzania behind by far - 56 to 141, respectively.

Secondly, growth is driven by innovation. Unlike Tanzania, Kenya is not well endowed with natural resources. Therefore, Kenyans cannot rely on extractive industry to fuel GDP growth, but have to compete to create value. Thus Kenyans are most likely to cross borders for trade, start new businesses, and launch innovative products. In fact, at one-point Kenyans were the second biggest investors in Tanzania itself, next only to the United Kingdom.

Thirdly, Kenya’s economy is more diversified and connected. While this comes with the risk associated with interconnectedness, as during Covid-19 pandemic, it makes the economy generally more robust during normal times. For example, a 2013 Policy Forum’s report observes that Kenya dominates trade in the region, exporting more than twice what Tanzania does.

Finally, efficiency. A World Bank’s Logistics Performance Index (LPI) shows that Kenya has been leading the EAC pack for a while, now ranking at number 63. While Tanzania has dramatically improved its rankings lately – moving a whopping 71 positions in four years to number 67, but that is a testament of how poor the situation was before. In fact, Tanzania was losing $1.7 billion every year because of inefficiencies at the port of Dar es salaam alone.

More could have been said with respect to the competitiveness of the Kenyan labour force, their ICT infrastructure, education, etc., but the point is that when we start to admit to each other who is doing better that means we are ready to move beyond petty competition and actually start to learn from each other.

Tanzania won’t overtake Kenya any time soon. It’s not that Kenya is great, but you can only beat those who are put in front of you. And given the fact that the region is extremely uncompetitive, the situation tends to flatter Kenya’s true position than not.

To succeed economically, ideology and pride need to give way to pragmatism and efficiency.

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Charles Makakala is a Technology and Management Consultant based in Dar es SalaamCharles