Tanzania Bans Foreigners From Small Businesses, Sparking Anger in Kenya and Region

Tanzania’s latest move to reserve small businesses exclusively for its citizens has sent shockwaves across the East African Community, threatening to unravel decades of regional integration efforts and potentially sparking a damaging trade war.

On July 28, Tanzania’s Trade Minister Selemani Saidi Jafo issued Government Notice No. 487A, effectively banning foreigners from operating 15 categories of small businesses, including salons, mobile money services, phone repairs, tour guiding, and small-scale mining.

The decision has been met with fierce criticism from Kenya and other EAC partners, who view it as a direct violation of the Common Market Protocol.

A direct hit on Kenyan interests

The policy poses significant challenges for Kenya, which has approximately 40,000 nationals living and working in Tanzania. Many Kenyans operate businesses in Tanzania’s informal sector, particularly along border communities where cross-border trade has flourished for generations.

Victor Shitakha, chairman of the Kenya Coast Tourism Association, warned that the ban would severely impact Kenyans providing tourism services in Tanzania.

“This week’s notice goes against the EAC protocol which allows free movement of people and cargo in the region,” he said, highlighting ongoing tensions that have seen Tanzania attempt to restrict Kenyan tour vehicles and even threaten Kenya Airways operations.

Violation of regional treaties

The Common Market Protocol, established in 2010, guarantees freedom of movement for people, goods, services, labor, and capital across EAC member states.

It enshrines principles of equal treatment for all partner state nationals, allowing citizens to cross borders freely to trade and offer professional services.

Busia Senator Okiya Omtatah termed Tanzania’s circular “retrogressive,” while National Assembly Trade Committee Chairman Bernard Shinali called for retaliatory measures.

“There are many Tanzanians working in our mining sites too,” Shinali noted, suggesting Kenya should impose similar restrictions on Tanzanian goods and services.

Tanzania’s decision appears driven by domestic political pressures, with President Samia Suluhu Hassan’s administration facing a general election on October 28.

The policy aims to create economic opportunities for Tanzania’s nearly 60 million citizens by promoting “citizen-led growth” and reshaping local business ownership structures.

The Ministry of Trade and Industry defended the move as part of a broader strategy to expand economic opportunities for Tanzanians.

However, this economic nationalism comes at the cost of regional integration commitments that have taken years to build.

A troubling precedent

Tanzania’s actions mirror similar protectionist measures adopted by other African nations including South Africa, Zimbabwe, Ghana, Nigeria, and Botswana.

This trend toward economic nationalism threatens the continental integration agenda championed by the African Union and regional economic communities.

The business ban follows Tanzania’s May decision to prohibit foreign currency transactions, requiring all local transactions to be conducted in Tanzanian shillings.

These cumulative measures suggest a broader shift toward economic isolationism.

The new regulations carry severe penalties, with violators facing fines of up to Tsh10 million (approximately Sh503,136), six months imprisonment, or both. Foreign nationals also risk losing their residence permits and visas.

Even Tanzanian citizens who assist foreigners in prohibited activities face penalties of up to Tsh5 million or three months in jail.

East African Business Council chairman John Lual Akol condemned the directive as contrary to EAC interests.

“This move is undermining the EAC Treaty and endangering SMEs in East Africa,” he said.

Kenya Private Sector Alliance Chairman Jas Bedi termed the policy counterproductive, questioning whether it represents a politically motivated decision ahead of Tanzania’s elections.

He warned that the move violates the Common Market Protocol and could be challenged by other partner states.

The controversy threatens to reignite the trade disputes that have periodically strained Kenya-Tanzania relations.

While the two countries signed a Memorandum of Understanding in December 2021 to remove non-tariff barriers and improve cross-border trade, Tanzania’s latest actions suggest these commitments are fragile.

As regional leaders grapple with this challenge, the broader question remains: Can the EAC maintain its integration agenda while member states pursue increasingly nationalist economic policies? The answer may determine the future of regional cooperation in East Africa.

For now, Kenya awaits an official government response, while business communities on both sides of the border brace for the economic fallout from this latest disruption to regional trade relations.