Listen to This Article Enhance your reading experience by listening to this article.

For decades, Kenya has been viewed as East Africa’s economic leader, a position bolstered by its strategic location, well-developed infrastructure, and a relatively diversified economy.
‘
Nairobi, often dubbed the “Silicon Savannah”, has served as a regional hub for multinationals, international organisations, and financial institutions. However, the country’s dominance in the region is increasingly under threat as neighbouring nations such as Tanzania, Uganda, and Rwanda record higher economic growth rates.

This shift raises critical questions about Kenya’s competitiveness and highlights the urgent need for reforms in both policy and the business environment.

Tanzania’s recent economic strides have been impressive. Its natural gas reserves, burgeoning mining sector, and emphasis on agricultural modernisation have propelled consistent growth.

President Samia Suluhu Hassan’s administration has taken a pro-business approach, fostering confidence among investors through reforms and international outreach. Infrastructure projects like the Julius Nyerere Hydropower Station and the expansion of the Dar es Salaam port are further enhancing Tanzania’s appeal as a business destination.

Meanwhile, Rwanda has emerged as a regional beacon for governance and innovation. Despite its small size and limited natural resources, Rwanda’s focus on ease of doing business, anti-corruption measures, and technology-driven solutions has made it a preferred destination for startups and international investors.

The Kigali Innovation City, for instance, is rapidly positioning Rwanda as a tech hub.

Uganda, on the other hand, is benefiting from significant investments in oil and gas, particularly the East African Crude Oil Pipeline, which promises to unlock new revenue streams. Infrastructure development, supported by Chinese financing, has also improved Uganda’s connectivity and trade potential.

Kenya’s economy, while still larger and more diversified than those of its neighbours, is grappling with significant structural issues that are limiting its growth. Public debt, corruption, an uneven business environment, and policy missteps have eroded its competitive edge.

Kenya’s public debt has ballooned to unsustainable levels, with the debt-to-GDP ratio now exceeding 65 percent. Servicing this debt consumes a significant portion of government revenue, leaving little room for investment in critical sectors such as health, education, and infrastructure.

High borrowing costs have also made Kenya’s business environment less attractive compared to its peers. For businesses, this debt burden translates into higher taxes and reduced government spending on initiatives that could spur private sector growth.

Corruption remains a persistent challenge, undermining Kenya’s economic potential. Irregular procurement processes, embezzlement of public funds, and regulatory inefficiencies discourage both domestic and foreign investors.

The private sector often bears the brunt of these inefficiencies, facing delays and inflated costs when dealing with government agencies. In contrast, Rwanda’s reputation for clean governance has made it a magnet for investors, creating a stark comparison.

Kenya’s historical dominance in the region has bred a level of complacency in both policy and business practices. While the country has focused on headline-grabbing projects such as the Standard Gauge Railway (SGR) and the Lamu Port-South Sudan-Ethiopia Transport (LAPSSET) corridor, these initiatives have not yielded the anticipated returns.

Kenya’s declining growth rate relative to its neighbours is a wake-up call for both policymakers and the business community. The country’s historical dominance in East Africa is no longer guaranteed, as Tanzania, Rwanda, and Uganda continue to make strides in governance, infrastructure, and economic diversification.

By addressing its debt burden, combating corruption, and fostering a more dynamic business environment, Kenya can reclaim its position as a regional leader.

However, this requires bold leadership, strategic thinking, and a commitment to long-term reforms. Failure to act risks relegating Kenya to a cautionary tale of lost potential in the rapidly evolving East African landscape.

— The writer is a Communication Consultant