Tanzania’s recent move to impose restrictions on foreign-owned businesses from operating in key sectors such as retail, hairdressing, mobile money transfer and real estate agency, has sparked widespread outcry within the region, but specifically in Kenya. Kenyan business owners and senior government officials have advised the President to impose retaliatory measures against Tanzania. This escalation, experts warn, may have far-reaching consequences for regional trade, investment and diplomatic relations. Tanzanian authorities argue that the enforcement is aimed at preserving opportunities for Tanzanians and aligning business operations with long standing laws that reserve certain trades for locals. Moreover, the Suluhu administration is under pressure to provide economic opportunities to its nearly 60 million people with the country’s general elections being less than three months away.
This restriction raises pressing questions about the strength and future of the East Africa Community’s common market. While Tanzania maintains that its actions are lawful under domestic statutes, critics argue that selective enforcement and lack of prior consultation risk weakening trust among member states. Regional economists caution that this move could prompt retaliatory measures, fragment cross-border investments, and disrupt the livelihoods of thousands of small traders who rely on open access to neighboring markets. This policy will have implications on Kenyan entrepreneurs such as, forced business closures. Once their trading licences expire, the owners will be forced to close shop since they are not subject to renewal. Businesses built over years are being shuttered abruptly, leading to direct financial losses in form of inventory left behind and disruption of customer relationships.
Second, job losses and ripple effect at home. Forced closures mean job cuts across the supply chain, reduced remittances from successful diaspora businesses and shrinking export opportunities from Kenyan goods that entered Tanzania through local agents. Third, increased pressure on domestic markets. With fewer opportunities abroad, more entrepreneurs are confined to the saturated Kenyan market. This intensifies competition, particularly in retail and services, driving down margins for small and medium-sized businesses. This move will also have an adverse effect on the East African Region. First, Tanzania’s move undermines the foundation of the EAC Common Market Protocol, which promises free movement of people, goods and services. Such actions could lead to erosion of EAC economic integration. Second, negative impact on informal cross border trade. Economies such as Namanga are mainly driven by informal trade. This restriction risks marginalizing small traders, many of whom are mainly the youth and increased smuggling and corruption as traders seek alternative routes. Third, undermining regional conflict resolution mechanisms. The lack of a swift and effective response from EAC institutions, such as the EAC secretariat, exposes institutional weaknesses. This weakens confidence in regional dispute resolution.
As the EAC continues to push for deeper economic integration, these restrictions is a test of how committed member states are to shared prosperity. For now, Kenyan entrepreneurs and investors will be watching closely to see whether diplomacy can override rising nationalism and whether the region will move forward together, or apart.
