Eye on the economy: Will Kenya emerge from its political uncertainty?

Kenya’s Oct 26.  Repeat presidential election is not just about the country’s democratic process, but also about its economy.

The electorate voted in a presidential election Aug. 8, but the Supreme Court annulled the outcome because of irregularities.
Most investors have adopted a wait-and-see stance.

On one hand, for example, job creation has been steadily dwindling at 39.1 percent as of May.

Consumer prices increased by 7.06 percent year-on-year in September of 2017, following an 8.04 percent rise in August-  the lowest inflation rate since January amid a slowdown in food and electricity cost.

Read: Kenya’s National Treasury retains  inflation target range at 5pc

On the other hand, the Kenya Private Sector Alliance (Kepsa), the economic slowdown has been attributed to anxiety over elections outcome and street protests, drought, and slow credit uptake.

The Kenya Association of Manufacturers (KAM)  third-quarter manufacturing barometer observed that more than 52 percent of industrial manufacturers forecast zero or negative revenue growth in the next six months due to the prolonged electioneering period.

According to KAM, the high expectation of negative revenue growth is attributed to the unfavorable political climate in the country.

In the last three months, only 22 percent of the industrial manufacturers surveyed reported between one percent to nine percent revenue growth, while 11 percent reported a revenue growth of over 10 percent.

Matatu Owners Association reported losses in revenue of up to KSh700 million in the week following the elections and estimated daily losses of up to KSh75 million since September.

The National Treasury has revised the country’s 2017 economic growth forecast to 5.1 per cent from 5.9 per cent. “This was on account of revenue performance lagging behind as investors adopted a wait-and-see attitude,” said National Treasury Cabinet Secretary Henry Rotich.

Kenya’s economy expanded 4.7 percent in the first quarter of 2017 compared to 5.9 percent recorded in the same period of 2016. In the second quarter, it dropped marginally to 5 percent compared to 6.3 percent due to adverse weather conditions as per estimates by the Kenya National Bureau of Statistics.

However,  continued election process, plagued with killings, attacks on democratic institutions and numerous court disputes, has paralysed the economy for months.

President Uhuru Kenyatta Kenyatta in an address to the nation on Wednesday said Kenyans had a duty to vote because freedom fighters had shed blood for the right of Africans to vote.

“Experience has taught us that elections by their very nature polarize people,” he said.

He also said he would not let the country slide into anarchy, but urged for peace.

“We cannot remain in a perpetual state of politicking. Many wonder when if ever all this politicking will end,” he said, adding that it had cost business millions.

“I know that business, as well as the private sector, have not had an easy time recently. Opportunities worth billions of shillings and thousands of jobs have been lost; many wonders when, if ever, all this politicking will end,” he added.

He also assured investors and the international community that their business interests will be protected.

“ I will assure you that my Government will defend your property, your right to do business, your right to travel anywhere in our great Republic. You can go about your work in the knowledge that our nation is working for each and every one of us. And when all of this is over, we will work together to make up for the lost time.”

The Kenya Capital Markets Authority (CMA) Capital Markets Soundness Report Quarter 3, 2017 has indicated the optimism.

“Despite the uncertainties relating to elections, the Securities Market is expected to remain resilient as the country charts the way forward

However, the opposition which has transformed into the National Resistance Movement says they will embark on a national campaign of defiance of illegitimate governmental authority and non-cooperation with all its organs.

They stated that “They will marshall their supporters to boycott the goods and services offered by the businesses for whose benefit dictatorship is being established,” according to Raila Odinga.

All these developments are likely to exacerbate the already dwindling economy. “We are tired of electioneering. We have to move forward. Let us move on,” said Uhuru after he cast his vote on Thursday.