Why Tanzania’s trade rules could strain relations, again
By Noel Wandera, August 4, 2025Tanzania and Kenya are neighbours, partners, and rivals, an all-in-one approach to regional cooperation.
The two largest economies in East Africa have long had a complicated relationship, shaped by history, politics, and sharply contrasting economic philosophies.
Now, a new Tanzanian law is putting the fragile East African integration project to the test once again. Tanzania has introduced sweeping restrictions barring non-citizens from operating in 15 categories of informal businesses.
These include second-hand clothing stalls, food kiosks, retail shops, motorcycle transport, hair salons, and other low-capital ventures that have traditionally provided livelihoods for cross-border traders.
The penalties are stiff: Fines of up to $3,900 (Tsh10 million), imprisonment, or deportation.
Framed as a policy to protect local livelihoods, the impact has quickly spread across the region. Thousands of Kenyan micro-entrepreneurs operating in Tanzanian towns like Arusha, Mwanza, and Tarime are now withdrawing, uncertain whether their business permits will be upheld under the new rules.
Kenya’s traders have historically been among the most active in informal cross-border commerce within the East African Community (EAC), leveraging free movement protocols to establish small businesses in neighbouring countries. A significant portion of that activity falls squarely under the categories now banned in Tanzania.
Yet trade between the two countries is far from one-sided. Tanzanian traders have long benefited from the business freedoms offered in Kenya, especially in Nairobi’s Gikomba Market, where many are active in the second-hand clothing (mitumba) supply chain.
They source bales from Nairobi’s wholesalers and transport them back to towns across Tanzania. These quiet exchanges, often missed in formal trade data, are the lifeblood of regional integration at the grassroots.
Such everyday trade builds social capital that no policy summit can replicate. But it is also fragile. When unilateral measures are introduced without consultation or clarity, they do not just disrupt commerce; they undermine trust.
This is not the first time the two countries have clashed over trade. Previous rows have erupted over milk, maize, poultry, LPG, and even mobile money services. Most were resolved diplomatically or through EAC mediation.
But the recurrence points to a deeper fault line; regional agreements are only as strong as the willingness of partner states to honour them.
What makes the latest restriction different is its scope and timing. Tanzania is pursuing an assertive, state-led development agenda.
Under the late President John Magufuli and his successor, Samia Suluhu Hassan, the country has invested heavily in infrastructure, building a modern electric railway, new highways, port upgrades, and the 2,115MW Julius Nyerere Hydropower Dam.
Consistent growth
This model has delivered consistent growth, averaging around 6 per cent in recent years, while keeping public debt levels more contained than Kenya’s. In 2020, the World Bank classified Tanzania as a lower-middle-income economy.
With a gross domestic product (GDP) at about $85 billion (about Ksh10.9 trillion), it trails Kenya’s $110 billion (about Ksh14.2 trillion), but the gap is narrowing.
More importantly, Tanzania’s growth is perceived to be more grounded in internal resources and long-term planning.
Kenya, by contrast, remains outward-facing. Its diversified economy, vibrant tech scene, and financial services sector have long given it a regional edge.
But mounting macroeconomic pressures, including rising debt, tax burdens, and currency weakness, have taken a toll. Entrepreneurs remain active, but their resilience is being tested.
Some observers see the two countries as pursuing diverging visions. One is focused on infrastructure, industrialisation, and regional links within Africa.
The other is banking on services, foreign investment, and global integration. That divergence is now playing out in policy and growing trade friction.
The latest move has prompted concern at the EAC Secretariat. In a statement issued this week, Secretary General Veronica Nduva reminded member states of their commitments under the EAC Common Market Protocol, which guarantees the free movement of people, goods, labour, and capital.
She noted that partner states “shall not reverse or restrict sectors and trades they have previously liberalised,” referencing Annex V of the EAC Services Schedule.
Nduva said unilateral actions weaken the integrity of the regional single market and confirmed that the Secretariat is currently reviewing compliance by partner states. Any violations will be tabled before the next Sectoral Council on Trade, Industry, Finance, and Investment.
Kenya has signalled concern. Ministry of Investments, Trade and Industry officials are monitoring developments, with diplomatic engagement reportedly underway.
There’s reluctance to escalate matters publicly, given the Sh107 billion in bilateral trade recorded last year. But pressure is mounting, especially from small traders and associations that feel exposed.
Those most affected are not multinationals, but informal traders, border hawkers, and small-scale service providers. These are not corporations with legal departments.
They are boda boda riders, mitumba vendors, cooks, and kiosk owners who make up the everyday economy of East Africa. And it is precisely here, at the base of the economic pyramid, that regional integration was meant to deliver the greatest gains.
That is why unilateral policy shifts, no matter how well-intentioned domestically, can have outsized consequences regionally.