Growth towards Economic Freedom

As East Africa aspires to claim a place in the global economy, it must confront an underlying obstacle hindering its progress, limited economic freedom with a regional average of 53.2 lower than world average. Despite its abundant natural resources, strategic geographic positioning, and a growing youthful population, the region continues to lag behind in global economic competitiveness. While traditional explanations such as limited capital, poor infrastructure, or technological gaps are often cited, these factors mask a deeper and more fundamental issue, constrained economic liberty.

The East African Community (EAC), now comprising eight member states, stands at a critical juncture where the promotion of economic freedom could unlock inclusive and sustained development. Without strong protections for property rights, freer markets, and efficient regulatory frameworks, the region’s economic potential will remain unrealized. Empowering individuals and businesses to innovate, invest, and trade freely will not only drive prosperity but also help East Africa reposition itself competitively on the global stage and fulfill its long-promised potential.

The Relevance of Economic Freedom to the EAC

In the context of the EAC, economic freedom plays a vital role in achieving regional integration, inclusive development, and long-term stability. The vision of the EAC cannot be achieved without addressing the economic constraints that limit opportunities for citizens and businesses alike.

Greater economic freedom within the region would enhance intra-regional trade, improve the investment climate, and reduce dependency on foreign aid. It would empower small and medium-sized enterprises (SMEs), encourage entrepreneurship among youth and women, and support the development of cross-border value chains. Moreover, by improving institutional quality and governance, economic freedom can strengthen public trust and support political stability across member states.

“Expanding economic freedom across the East African Community is essential for unlocking inclusive growth, fostering innovation, and ensuring the region’s sustainable development and global competitiveness”

Barriers Hindering Economic Freedom in East Africa

While progress has been made, several systemic and institutional challenges continue to hinder economic freedom in East Africa. Overregulation and bureaucratic inefficiencies make it difficult to start and run businesses, with lengthy registration processes and high compliance costs discouraging entrepreneurship. Corruption, especially in public procurement, customs, and the judiciary, undermines investor confidence, while weak institutions fail to uphold the rule of law or enforce contracts. Non-tariff trade barriers continue to obstruct regional trade. Additionally, limited access to finance, particularly in rural areas, constrains business growth due to underdeveloped financial systems and strict collateral requirements. In some countries, the dominance of state-controlled enterprises further distorts markets, stifles competition, and deters private sector investment.

Progress within the Region

Despite persistent challenges, there are promising examples within the EAC that highlight the benefits of economic freedom. Rwanda has overtaken Kenya to become the second most economically free country in the bloc, with a score of 54.8, behind Tanzania’s 59.3, reflecting strong gains in reducing corruption, streamlining regulations, and maintaining sound fiscal policies. Rwanda’s reforms have significantly improved its business environment. In contrast, Kenya, despite sharing the same score, dropped to 121st globally, weighed down by high government spending, tax burdens, weak rule of law, and regulatory inefficiencies. The case of Rwanda demonstrates that deliberate policy reforms to expand economic freedom can unlock investment, entrepreneurship, and sustained growth, setting a powerful example for the entire region.

Kenya’s advancement in mobile money technology and fintech is another notable example of how innovation can thrive in a supportive regulatory environment. The success of platforms like M-Pesa highlights the benefits of enabling market-driven solutions. For instance, access to mobile money services has increased household consumption and savings, contributing to a 2-percentage-points reduction in poverty rates in Kenya. If other EAC countries adopt similar regulatory openness and invest in digital financial infrastructure, it could foster greater economic freedom and inclusion across the region

Policy Imperatives for Enhancing Economic Freedom

Unlocking East Africa’s economic potential calls for coordinated reforms and stronger institutions across member states. Streamlining business regulations, ensuring transparent licensing, taxation and removal of trade barriers will ease the path for entrepreneurs. Strengthening judicial systems to uphold the rule of law enforce contracts, and combat corruption will enhance investor confidence. With the launch of strategic projects, the region will benefit from harmonized standards, enhanced customs cooperation, and improved cross-border infrastructure, all of which are crucial for reducing trade costs.

Expanding financial inclusion, especially through digital tools, can significantly improve access to credit for SMEs. This was evident in Kenya, where the launch of digital credit led to a 25 percent increase in borrowers’ income, enabling them to invest more in their businesses .On the other hand, reducing reliance on inefficient state-owned enterprises and encouraging open competition will improve service delivery and spur innovation.

The Key to Sustainable Development and Prosperity in East Africa

Economic freedom is not merely a policy preference but a prerequisite for sustainable development in East Africa. It empowers individuals to pursue economic opportunities, encourages entrepreneurship, and creates the conditions necessary for inclusive growth. While the East African Community has made strides in regional integration, the path to shared prosperity lies in breaking down the barriers that hinder economic liberty. With deliberate reform and stronger institutions, the region can move from potential to prosperity unlocking the wealth of its people and positioning itself competitively on the global stage.

These are the writer’s own opinions and do not necessarily reflect the viewpoints of Liberty Sparks. Do you want to publish in this space? Contact our editors at [email protected] for further clarification.