Kenya eyes doubling Tanzania trade after Dar scraps industrial levy

KENYA hopes to more than double its exports to Tanzania following the removal of a long-standing Industrial Development Levy (IDL) on various products.

This is expected to unlock trade worth more than Sh130 billion between.

The tax waiver, secured after months of bilateral negotiations, is expected to restore the competitiveness of Kenyan goods in Tanzania and reverse last year's decline in exports, while strengthening regional integration under the East African Community (EAC).

Under Tanzania's Finance Act, 2026, the country has removed the Industrial Development Levy on goods originating from EAC Partner States, eliminating an additional cost that had been imposed on 49 Kenyan export products.

The levy, previously charged at rates ranging between five per cent and 15 per cent of the Cost, Insurance and Freight (CIF) value of imported goods, had increased the cost of Kenyan products entering the Tanzanian market.

Key beneficiaries include manufacturers of iron and steel products, road tractors, cement, furniture and ceramic tiles.

The breakthrough follows intensified regional efforts to eliminate Non-Tariff Barriers (NTBs), with the 25th EAC Heads of State Summit directing all partner states to remove outstanding trade barriers by June 30, 2026, to stimulate intra-regional commerce.

Kenya's East African Community Affairs and acting Principal Secretary in the State Department for ASALs and Regional Development, Caroline Karugu, said the removal of the levy presents an opportunity for Kenya to significantly expand exports to one of its largest regional markets.

"Tanzania is really a market that has enormous potential. We know the Tanzanian market is bigger than the Ugandan market, yet we are currently doing less than half of what is possible," Karugu said.

"With the removal of these barriers, we are looking forward to increasing our exports to Tanzania by more than 100 per cent. There is goodwill between the two countries, and we want to build on that confidence."

She noted that Kenya has equally maintained an open market for Tanzanian products and investors, creating an environment for mutually beneficial trade.

"We have opened our market to Tanzanian products and investors. We are seeing increased investments from Tanzania across several sectors, including cement industry and media. If both countries continue opening their markets to each other, the benefits will extend far beyond exports," she said.

Data from the Kenya National Bureau of Statistics (KNBS) shows the value of Kenya's exports to Tanzania fell to Sh63.6 billion in 2025, from Sh67.2 billion in 2024, largely due to lower shipments of soap, flat-rolled iron and non-alloy steel products.

Uganda retained its position as Kenya's largest export destination, with exports rising to Sh162.3 billion from Sh125.9 billion a year earlier.

Kenya believes removing the levy will restore competitiveness for Kenyan manufacturers and push the value of exports to Tanzania beyond Sh130 billion over the next few years.

Trade experts say the policy change comes at a time when both countries are investing heavily in transport infrastructure aimed at reducing the cost of moving goods across borders.

The two countries are connected through four One-Stop Border Posts (OSBPs) at Namanga, Taveta-Holili, Isebania-Sirari and Lungalunga-Horohoro, where customs and immigration procedures have been integrated to speed up cargo clearance and reduce delays.

Namanga remains the busiest crossing, serving as a critical gateway for tourism and commercial trade.

Further gains are expected from ongoing improvements to regional transport corridors, including the Malindi-Lunga Lunga-Tanga road project being implemented under the multinational financing framework.

The two governments are also investing in maritime transport on Lake Victoria and expanding regional road networks to improve connectivity between producers and markets.

The easing of trade barriers is expected to benefit manufacturers seeking larger export markets at a time when Kenya is pursuing export-led industrialisation and deeper regional value chains.

Industry players have long argued that non-tariff barriers, including discriminatory taxes, licensing requirements and administrative delays, have undermined the full potential of the East African Common Market despite the existence of a customs union.

The removal of Tanzania's Industrial Development Levy is therefore seen as one of the most significant trade facilitation measures between the two countries in recent years, with expectations that it will stimulate investment, expand manufacturing output and strengthen cross-border supply chains across the region.

For Kenyan exporters, the agreement provides a timely opportunity to regain market share in a country of more than 70 million consumers and reinforce Tanzania's position as one of Kenya's most strategic export destinations.