Only resilient businesses can withstand uncertainties

The growing pains we are experiencing as a young democracy should not be viewed as isolated events that threaten to throw everything into disarray, but rather as part of the bigger picture towards building a more cohesive nation with a better appreciation for the rule of law.

In other words, at this point, we have to consider that the whole, which is our national vision for a strong democracy, is greater than the sum of its parts.

I say this because, although we are in a dire economic situation that can be attributed to our current transitional period, the far-reaching goal is to set a firm foundation for responsive and open governance for future generations.

As our electoral processes become more robust and democratic institutions are strengthened, the result will be a more vibrant electorate that demands higher levels of accountability.

This will see more citizens involved in making decisions that affect economic and social policies.

In fact, even the current economic decline should not be viewed as a stand-alone occurrence caused by one variable—elections.

At the end of 2016 and beginning of this year, the country faced one of the worst drought periods in years that left about 2.6 million people without food. It also fueled inflation to a startling 9.21 percent in June.

These challenges coupled with poor harvests directly impacted the consumables contained in the bread basket.

Subsequently, the cost of living in general shot up as the competitiveness of local businesses took a hard hit.

But what if we were able to build resilience for businesses to withstand eventualities, both global and local, creating a buffer for our economy and allowing for the process of democratisation to take place without the fear of a looming irreversible economic catastrophe?

For example, Japan will hold a General Election on Sunday after Prime Minister Shinzo Abe called a snap election a year early. The country is also grappling with the usual uncertainties on the continuation (or lack) of the
country’s long-term plans and possible destabilisation of the economic progress made through policies introduced by the PM, now termed as ‘Abenomics’.

But the election notwithstanding, investor confidence remains intact in Japan.

In fact, since the announcement of the elections in September, Japanese stocks, which had been trading at a two-year high, went up 2.3 per cent.

Unfortunately, the same cannot be said of most African countries, where a change in administration is one of the most potent sources of volatility in markets and presents a critical test for business resilience.

In Kenya, the stock market started on a 6.9 per cent decline in January, with investors citing jitters about the August 8 election. After the Supreme Court decision to overturn the presidential election, the shilling weakened at 0.44 per cent before gaining some ground thereafter.

As for local Industry, KAM’s Manufacturing Barometer released this week, depicts that despite there being a marginal surge in optimism, from 13 per cent last quarter to 14 per cent presently, 64 per cent of manufacturers forecast zero or negative growth revenue for the next six months.

Overall the manufacturing sector registered only 2.3 per cent growth rate in the second quarter of 2017, compared to a 5.3 per cent growth same quarter in 2016.

So how can we achieve economic certainty during election periods? Increasing local businesses competitiveness through providing a predictable and nurturing regulatory environment is one sure way.

If by the time we are getting to the ballot, local industries are already faltering under the weight of multiple levies and taxation that affect competitiveness, then we are definitely bound to crack when faced with uncertainties of an election, more so a protracted one.

Making local businesses competitive enhances their ability to be resilient, guaranteeing undisrupted circulation of money in the economy during an election period.

This way, we can go about our democratisation process without fear of sabotaging the economy.

The writer is the CEO, Kenya Association of Manufacturers and the UN Global Compact Network Representative for Kenya — ceo@kam.co.ke