Kenyatta Era - East African Community
Kenya's economy had benefited greatly during the colonial period from its access to the less developed markets in Uganda and Tanganyika. After 1920, when the latter came under British administration, the three territories constituted in effect a common market in which goods, services, capital, and labor moved freely across their common borders. In 1923 Kenya and Uganda formed a customs union that was joined by Tanganyika in 1927.
Their external customs departments were integrated in 1949, when a common income tax system was also introduced. Railroads and harbors were administered by single authorities as were the postal service and telecommunications. The East Africa Currency Board, established in 1919, formulated a regional monetary policy and issued a common currency. An inter-territorial appellate court exercised jurisdiction over the region. Policy questions of mutual interest were resolved at an annual meeting of the three colonial governors until 1948 when a permanent regional administration, the East African High Commission, was created. It was renamed the East African Common Services Organization (EACSO) after Tanganyika became independent in 1961 but continued to function essentially in the same manner.
As Kenya and Uganda approached independence, however, the un ity achieved under EACSO began to disintegrate under pressure of the members' competing economic interests. The modern sector, particularly its industrial component, had developed more rapidly in Kenya, and as a result Kenya enjoyed a substantially favorable balance of trade with its partners. In 1964 Uganda and Tanzania (the name adopted after merger of Tanganyika and Zanzibar that same year) sought agreement on a quota system to regulate Kenyan imports in order to foster development of their own infant industries.
When the Kenyan government failed to ratify the proposal, Uganda and Tanzania unilaterally imposed restrictions on Kenyan goods and on travel, and in 1965 the decision was made to create separate currencies. Disappointed by a turn in events that was so clearly in conflict with their declarations in favor of African unity, the leaders of the three nations agreed in September 1965 to a solution that would retain the advantages of common services and preferential access to combined internal markets while seeking means to redress the imbalance in the pattern of trade. A commission was appointed under the chairmanship of Danish economist Kjeld Philip to examine the current and long-term problems of East African cooperation. The report of the Philip Commission formed the basis for a treaty, which came into force in December 1967, formally establishing the East African Community (EAC).
With minor modifications, the institutional structure of the EAC was patterned on that of the EACSO. Executive authority over community matters was vested in the three heads of state, acting jointly as the East African Authority. A minister for East African affairs with cabinet rank was appointed by each of the three governments to collaborate with his counterparts in coordinating the work of five councils on which they were joined by other ministers responsible for relevant portfolios in their respective governments.
The treaty provided for a uniform system of taxation and fiscal incentives for investment. The partners pledged to maintain a common external tariff. Although the treaty created an instrumentality for progressing toward a common market in the long run, its short-term aim was one of narrowing the trade gap between Kenya and the other two members. The East Africa Development Bank was established to promote balanced industrial growth in conjunction with the World Bank. Common services included the East African Railways Corporation, East African Airways (EAA), the East Africa National Shipping Line, and other similar community agencies for river and road traffic, harbors, and posts and telecommunications that were carried over from the EACSO.
Fissures appeared almost immediately in the EAC edifice, however. The EAC was not popular in official circles in Kenya which, it was felt, bore too much of the burden of operating expenses and had been called on to make more than its share of sacrifices to accommodate the less developed economies of Tanzania and Uganda. Given that disparity, Kenyans had difficulty in viewing the EAC as an association of coequals.
Nor did the different personalities and political assumptions of Kenyatta, Tanzania's Julius Nyerere, and Uganda's president, Milton Obote, contribute to close cooperation. Controversies arose over the financing of community agencies and the methods of operating them, over the division of gains and responsibilities, and ultimately over the purpose of association. Kenya, for example, sought expanded markets for its superior manufacturing capacity, while the Tanzanians urged economic interdependence.
Kenya's economy was capitalist, Tanzania's socialist. Kenya prided itself on its democratic institutions, while Tanzania unfavorably contrasted Kenya's "neocolonialist" approach to development with its own policy of "self-reliance." Tanzania charged that Kenya was unduly influenced by the United States, while Kenyan leaders were troubled by Tanzania's interaction in many areas with communist countries. Kenya anticipated the creation of a common market, free of restrictions, that would allow it to increase its regional industrial advantage in cooperation with foreign-owned corporations.
Tanzania looked for acceptance of central planning for allocation of goods and coordination of production. When Nyerere charged that Kenya's capitalist orientation prevented the restructuring of the EAC along these lines, Kenyans responded that Tanzania was sabotaging progress toward a common market and reprimanded its president for his socialist dogmatism.
Although Tanzania insisted that continued joint management of community services was essential to any future consideration of dropping trade quotas or of movement toward a common market, it was delinquent in its remittances to support their administering agencies, and Uganda's bill went unpaid. The East African Railways Corporation ceased to operate as a single unit in 1974 after disagreement on financing and standards of equipment maintenance. When Tanzania rejected Kenya's application for community action to enlarge port facilities at Mombasa, Kenya refused to make further payments to the EAC harbor authority which, like other services, soon splintered into separate national systems.
The violent events that took place in Uganda after the military coup there in 1971 put a further strain on regional cooperation in East Africa. In January of that year Obote's government was toppled by army units led by Major General (later Field Marshal) Idi Amin Dada. The ousted Ugandan president was granted asylum in Tanzania by Nyerere, who made no secret of his sympathy for Obote and his personal animosity for Amin. Armed clashes between Ugandan and Tanzanian soldiers occurred on several occasions along the border, and in September 1972 Obote supporters used Tanzania as a base for an ill-fated invasion of Uganda. Fighting continued until October, when a peace was arranged between Tanzania and Uganda through Kenyatta's mediation.
The conflict between its EAC partners affected Kenya in two ways. First, at the executive level the EAC was virtually paralyzed because of Nyerere's refusal to attend any meeting in which Amin participated. Second, Kenya's bilateral relations were also troubled. The Kenyan government was disturbed by continuing signs of instability in Uganda, the threat to Kenya's security posed by the Ugandan military, the Soviet arms that were reaching them, and the unpredictability of Amin's actions. The situation in Uganda also had an economic impact on Kenya, which had profited not only from its own trade with the landlocked country but also from the transit of goods between Mombasa and their destinations in Uganda.
Relations with Uganda were further strained by the disappearance of Kenyans working and studying there, who were apparently caught up in the waves of indiscriminate killings perpetrated by Ugandan soldiers. Although Kenya continued formally to adhere to a policy of offering neither criticism nor praise of the Amin regime, relations turned decidedly for the worse in February 1976, when Amin laid claim to the large section of western Kenya that had been ceded to the East Africa Protectorate during the colonial period and closed Uganda's border with Kenya. In July ties deteriorated to the verge of war when Uganda charged Kenya with complicity in the Israeli commando operation that liberated hostages held at the Entebbe airport.
Talks in November 1977 between Moi and Amin brought an agreement reopening the border to trade. Two months later Peter Mungai Kenyatta, the president's son and an assistant minister of foreign affairs, was dispatched to Kampala to reassure Amin of Kenya's "brotherly" and "friendly" attitude toward Uganda.
In the early 1970s Tanzania had taken additional steps to limit Kenyan imports in order to conserve foreign exchange and protect domestic producers. Measures included putting a stiff licensing fee on imports and insisting that shipments from Kenya be delivered either by air or by sea. In addition to protesting these restrictions, Kenya complained that Tanzania was importing goods from outside the EAC, particularly cement from China, that were available in Kenya. The Tanzanians responded that China had offered better terms of trade, but it was not difficult for the Kenyans to see in this trend a departure from EAC movement toward a common market.
The weakening of the EAC infrastructure and the growing barriers to its trade with Tanzania led Kenya to strengthen its economic ties with other countries in eastern Africa and to improve transportation and communications links with them. Commercial contacts with Zambia in particular had been improving since the late 1960s as that country sought outlets to the sea free from dependence on Southern Rhodesia.
Initially, most Zambian traffic was routed through Tanzania to Dar esSalaam, but serious overcrowding there caused much Zambian cargo to be shifted to Mombasa. Tanzania, in retaliation for the loss of business at its major port, cut off truck traffic from Zambia to Kenya briefly in 1974. Early in 1977, Tanzania closed its border with Kenya to all commercial and tourist traffic.
Within the EAC framework, public utilities in Kenya had registered net losses. Road transport to Tanzania had been severely restricted. All international and intercontinental flights on EAA, the flagship line of the EAC, were routed to Dar es Salaam, while the international-class airports at Nairobi and Mombasa were limited to interregional flights. Every attempt to expand their capacity in order to bring tourists from overseas directly to Kenya was frustrated. In January 1977 Kenya acted unilaterally to dissolve the EAA, forming Kenya Airways as its national carrier with EAA equipment in Kenya and opening its major airports to international traffic. Tanzania at first refused to recognize Kenya's right to split the system and denied landing rights to Kenya Airways aircraft, but Kenya's action had effectively sealed the fate of the EAC.
In the months that followed, some effort was made to reorganize trade relations and restore transportation links but, despite World Bank mediation, no mutually acceptable formula could be found for salvaging the EAC. The regional association was dismantled, and a commission was assigned to distribute assets and sort out liabilities among the onetime partners.
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