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More regional competition is exactly what Kenya needs

Monday May 23 2016

By BITANGE NDEMO
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It is now official. Kenya will no longer be the gateway to Africa’s Great Lakes Region.

Rwanda announced last week that it would join Uganda to develop a new gateway to Tanzanian ports. 

This announcement follows hot on the heels of an earlier announcement by Uganda that its oil pipeline to the sea would go through Tanzania, contrary to the expectation that it would pass through Kenya. 

Some pundits may see this turn of events as a strategy to isolate Kenya in the region, but it may herald a new competitive environment that would benefit the entire region.

For more than half a century, Uganda, Rwanda, Burundi and the Democratic Republic of Congo relied on the port of Mombasa, the East African Railways, and the relatively better road network in Kenya to import and export goods to and from these countries. 

Kenya took this opportunity for granted.  Unofficial, non-tariff barriers frustrated desperate landlocked countries. 

Due to the huge delays, perishable goods often got damaged on the way. Corruption added injury to an already-increasing pain on Kenyan roads. 

Tanzania, which has massive resources on the Indian Ocean, slept on the goldmine of the Dar and Tanga ports. 

Then came Magufuli, and he is turning out to be Tanzania’s knight in shining armour. The man is seen as a believable, reassuring, no-nonsense fixer.

In one fell swoop, he has demolished the “coalition of the willing,” which threatened to isolate Tanzania as the unwilling partner in East African integration. 

Consequently, Tanzania may be on track to play her rightful role as the gateway to the region.    

The competitive spirit from the Tanzanians is perhaps what Kenya needed in order to wake up, put her house in order and act to please her greatest trading partners.

GREATER INTEGRATION

There is no need for Kenya to sulk about the turn of events in Eastern Africa.  Kenya should just embrace the decisions her neighbours have made and propose to support a regional infrastructure network similar to the regional fibre optic network. 

Competition brings greater opportunity to create more efficient markets, especially in Central Africa where much of the resources lie unexploited. It may also enable Kenya to identify new areas of enterprise that may have been overlooked before.

Kenya’s strategy now must focus on greater integration as proposed by the 2013 African Development Bank’s (AfDB) Ten-Year Strategy for the continent

The strategy, as noted in the report, focuses on the ‘twin overarching objectives of inclusive growth and a transition to green growth.

The first objective seeks to unlock the continent’s potential by expanding its economic base across age, gender and geography, thereby targeting deep reductions in poverty and inequality.

The second objective strives to ensure that the mode of growth transitions toward sustainable and renewable pillars, to ease the pressure on natural resources and build resilience to potential shocks from climate change.’

The strategy, the report says, will rely upon five priority channels to deliver results: infrastructure development, regional integration, private sector development, measures to improve governance and accountability, and human capital development (via vocational education and training, technology acquisition and innovation).

It will also address the root causes of state fragility. Discrimination on the basis of age or gender and food insecurity are cross-cutting strategic concerns that are expected to permeate all relevant interventions. 

Regional inclusive partnerships are expected to lead to greater incomes and markets, and Kenya has benefited immensely from East African integration, with her well-developed private sector expanding to neighbouring countries. 

Indeed Kenya’s emerging multinational companies are growing on the backdrop of regional integration.

SHORTER ROUTES

Aside from the new infrastructure that Kenya is grumbling about, the real deal in Kenya is the rate at which the services industry is expanding.  It is where our focus should be now.

Many economists may say that we need manufacturing industry to grow the economy but that is nonsense.  Kenya can leapfrog into the services sector and indeed become an economic powerhouse in the region. 

The 2016 World Bank data confirm that services sector powers the Kenyan economy having increased by 5.2 per cent last year, ahead of industry (4.9 per cent), manufacturing (3.6 per cent) and agriculture (2.5 per cent).

What Kenya needs most is to re-establish her past vigour in building human resource capacity to further expand the services sector. 

The hospitality industry, especially the training facilities at Utalii College, needs to be revamped and expanded. 

Many of the college’s graduates now dominate jobs not just regionally but also in the Middle East. 

Retail, banking and insurance expansion from Kenya into the East African market must be encouraged through incentives since they create market for Kenyan goods and services. 

Kenya Airways is not just a carrier for Kenya but also many African countries and, most importantly, a leading Kenyan brand. 

Unfortunately, we have failed to exploit these resources to the fullest.  This is where we have a competitive advantage over the neighbours, for if Tanzanian routes are shorter, there is absolutely nothing we can do about it.

Kenya and Tanzania are strategic partners in every sense.  Tanzania knows Kenya’s importance in the region and specifically to Tanzanians. 

The Executive Director of Tanzania Investment Centre, Juliet Kairuki, said in last year’s visit to Nairobi that Kenyan investments in Tanzania have reached $1.685 billion in 518 projects creating 55,762 jobs. 

Kenya is the fifth-largest foreign investor in Tanzania. There is greater need for collaborations that mutually benefit citizens of the two countries. 

PRIZED ASSETS

What we see now as a strategy to isolate Kenya in the region is a figment of the imaginations of people with little knowledge in the region.  It cannot hold.

The real enemies of Kenya are not neighbouring countries, but greedy businessmen and corrupt public officials. If we go by what is circulating on social media, these greedy men want to remotely run down Uchumi and Kenya Airways to a bare minimum then buy the two local multinationals for a song. 

The world is watching how this heist will happen. Regrettably, many will dance to and praise the raiders as patriots who have saved national brands. 

It defeats logic that KQ will sell off its prized assets to stay in business when the price of fuel, the largest expense on its books, is down to the lowest that it can be. 

Virtually everyone with interest in Kenya expects the country to grow consistently but somehow she finds a way of pulling herself backwards. The latest KQ strategic reaction confirms this defeatist attitude that undermines prosperity.

West Africans travelling to Asia had made Kenya their favourite hub.  Eastern Africa, Southern Africa and the Indian Ocean archipelago turned Nairobi into the hub it is. 

The airport needed to be spruced up, expanded and made as comfortable as possible to sustain its hub status. But Kenyans as always took it for granted.

To demonstrate absolute lack of anticipative planning, thousands of transit passengers litter the floors for lack of waiting lounges, restaurants are few, shopping offerings are limited, and there are no recreational facilities at the airport. 

OPPORTUNITIES GALORE

Our officials treat West Africans as aliens, subjected to profiling, strict scrutiny and discrimination. 

With a little thinking, the airport can provide thousands of jobs providing services to transit passengers just like happens in many airports.  Imagine if there were 200,000 daily transit passengers at Jomo Kenyatta International Airport (JKIA) spending at least $10 on food and perhaps $5 on recreational activity. 

This translates to some $3 million dollars per day or about $1 billion per year, some of which will trickle down to local farmers. 

JKIA is emerging as a major logistics airport but we shouldn’t take it for granted. It is a status that needs to be exploited fully to make the airport a major contributor to GDP. This so-called strategy to isolate Kenya from the rest of East Africa is in effect an opportunity to evaluate what else the country can do to sustainably grow the economy. 

Opportunities galore in the services sector have hitherto been ignored because most economists think economies only grow in a linear format. 

This must change. We must begin to think about inclusive growth for the region.

The writer is an associate professor at University of Nairobi’s School of Business.Twitter: @bantigito