Tanzania’s recent decision to ban foreign small businesses from operating in key sectors has rippled across the East African Community (EAC), igniting concerns over regional integration and economic cooperation.
The unilateral policy move aimed at reserving retail, service, and informal sector opportunities exclusively for Tanzanian nationals has triggered friction among partner states, notably Kenya and Uganda, whose traders and SMEs rely heavily on cross-border commerce.
The Tanzanian government, citing the need to protect domestic livelihoods and curb unemployment, issued directives earlier this year barring foreign-owned small-scale enterprises from selling goods and services at shops, markets, and street stalls.
While the ban is framed as part of national economic empowerment, EAC stakeholders argue it violates key provisions of the Common Market Protocol, including free movement of persons, goods and services.
The East African Business Council (EABC) has urged Dar es Salaam to reconsider, warning that the new rules threaten the fluidity of trade and undermine investor confidence.
In particular, EABC executive Lilian Awinja highlighted costly additional work and residence permit regimes recently introduced by Tanzanian authorities, accusing the move of contravening EAC commitments to seamless labor mobility.
Meanwhile, small business associations across Kenya and Uganda report that their citizens operating informally in Tanzanian markets have faced harassment, permit denials, and forced closures driving traders back into non-compliant, unstable business practices.
The timing compounds existing trade tensions. Tanzania has already banned pricing of goods in foreign currency and required contracts denominated in US dollars or Kenyan shillings to be renegotiated within a fixed timeframe, causing disruption to thousands of cross-border contracts valued in dollars.
This dramatic shift in monetary policy has imposed conversion headaches and legal uncertainty on informal and formal traders alike.
As a result, EAC lawmakers are convening to address these non-tariff barriers through regional dispute mechanisms. A special committee led by EALA is reviewing trade disruptions at key border points like Namanga, citing Kenyan complaints over Tanzanian obstructions of joint market access.
The committee seeks to uphold the free trade principles enshrined in the EAC Treaty, aiming to defuse bilateral friction before it deepens.
Analysts warn these dynamics are altering investor behavior. According to a business report, East Africa’s ease-of-doing-business rating declined across all performance indicators in 2024, largely due to inconsistent trade rules and rising regulatory barriers inside the bloc.
If unchecked, unilateral policy shifts like Tanzania’s small-business restrictions could undermine the trust and predictability underpinning regional economic cooperation.
EAC secretariat officials are now under pressure to clarify whether Tanzania’s actions remain consistent with regional integration goals. Meanwhile, affected SMEs even those operating legally in Tanzania face escalating uncertainty as they grapple with permit costs exceeding $2,000, disrupted supply chains, and shrinking cross-border opportunities.
As this policy ripple continues, many EAC stakeholders fear the bloc is confronting a test of its unity. Without swift harmonization and adjudication through EAC instruments, the ban on foreign small businesses may signal a retreat from the integration ideal and stall progress toward a truly seamless East African economic community.
Written By Ian Maleve
