Kenya's economic growth is being hindered by its overreliance on raw material exports, according to a recent African Union report. This has resulted in a significant gap between Kenya and its neighbor, Tanzania, in terms of trade diversification and economic sophistication.
The report, titled "2025 African Union Continent Integration Report," highlights that the East African region as a whole is underperforming when compared to the continental average. Kenya, in particular, is struggling with a less diverse economy, heavily reliant on raw inputs, which is hindering its industrial and manufacturing development.
This lack of diversification means fewer job opportunities, which is crucial for tackling unemployment and poverty. The EAC's diversification score of 0.3920 is slightly below the African average of 0.4072, with raw material exports dominating trade (approximately 0.68), while manufacturing exports lag behind imports (0.3420 vs 0.5986).
Tanzania leads the way in diversification (0.4457), followed by Burundi and Kenya. In contrast, Uganda, Rwanda, and South Sudan have lower scores, indicating a significant gap between trade intensity and sophistication. The report emphasizes the need for stronger regional production networks and intermediate goods trade.
To address this trade imbalance, experts recommend promoting intra-regional sourcing and boosting manufacturing capacity. The report suggests that developing regional value chains in agro-processing and light industry could help bridge the import-export gap. Enhancing transport corridors, such as the Mombasa and Dar es Salaam routes, is vital for deeper integration.
Furthermore, fragile states like Somalia and South Sudan require tailored support, including infrastructure development and security cooperation. Accelerating services trade through mutual recognition of qualifications and digital trade facilitation is also recommended. Finally, focusing on industrial coordination, skills development, and innovation, building on Tanzania's strengths, could enhance regional competitiveness.
When comparing regional economic blocs across the continent, SADC emerges as the most integrated and sophisticated. The report states that SADC "stands as the uncontested leader in African regional integration," achieving the highest scores in intra-African trade flows (0.3579) and diversification/sophistication (0.4119). This dual excellence positions SADC as Africa's most comprehensively integrated regional bloc regarding market integration, with an integration score approximately 30% above the continental average.
SADC's leadership position is likely attributed to its relatively developed transport infrastructure and the institutional depth of the Southern African Customs Union. In the second tier, Comesa and Ecowas demonstrate strong but specialized integration profiles. Comesa excels in trade flows (0.2791), ranking second continent-wide, while Ecowas shows relatively strong diversification (0.4035) despite modest trade flows (0.2453).
The EAC, largely dependent on Kenya's economy, falls into the middle tier, sharing a similar position with Igad. Both blocs have near-continental-average scores in trade flows but slightly below-average diversification scores. While they have made progress in specific integration dimensions, they face similar challenges, including infrastructure gaps and limited industrialization.
This report sheds light on the complex dynamics of regional economic integration and the need for strategic interventions to promote sustainable development and reduce economic disparities across Africa.
