Political campaigns bad for business
If foreign investors are spooked because of the prevailing “our turn to eat” style of politics, the level of FDIs could decelerate. This could have far reaching consequences for the economy
With the general election less than a year away, campaigns around the country have picked up in earnest and political temperatures are quickly escalating by the day. Although some may argue that campaigns are a critical component in a thriving and healthy democracy, which is true, the fundamental importance of modesty and prudence during these activities must not be overlooked. Sadly, our campaigns are rarely about modesty, let alone prudence. Rather, they are about taking swipes against perceived rivals and cheap displays of flamboyance. This only serves to polarise the country and heighten political risks.
This mediocre brand of politics is not only a stark antithesis to the true spirit of democracy, but also a serious impediment to business stability and economic growth. Consequently, investor sentiment is likely to dampen as we draw closer to the elections. This is a huge concern for the business community.
As the chairman of the foremost private sector lobby, the Kenya National Chamber of Commerce and Industry (KNCCI), I have had the privilege of talking to well-placed businessmen about the rising political temperatures in the country. All of them have expressed strong reservations about this issue, saying that politics will make business harder next year.Foreign investors, who typically leverage on the Chamber as a critical knowledge partner, are also increasingly ambivalent about whether or not they will ramp up investment activity ahead of the elections.
Investors’ uneasiness over elections is not only informed by the inflammatory statements that politicians routinely make, but also by past experience. The experience in Kenya has always been that the economy slows down before and after a general election, limiting business opportunities.
According to a study by Nation Newsplex, Kenya’s economy slowed to a virtual standstill in the 1992 elections, shrinking by 0.8 per cent. The economy grew marginally by 0.5 per cent in 1997 and 2002. The violent aftermath of the 2007 election also adversely impacted growth. They was also a significant lull in 2013 elections over fears that 200708 would repeat itself all over again.
Overall, the Kenyan economy slowed or failed to grow in three of the five multiparty elections and in two of the five single party elections that have been held in the past, the study further shows.Clearly, the prevailing style of politics in the country is bad for business. For things to change in the upcoming elections, Kenyans themselves need to change. If things don’t change, and Kenyans don’t abandon their vitriolic style of politics, we could witness a flight of capital away from Kenya next year. Although I am not inclined to doom and gloom prophecy, it doesn’t take a crystal ball to read the signs of the times. The writing is literally on the wall. For instance, Kenya’s credit rating could face a downgrade in the coming year.
This essentially means that it could become more expensive to borrow money next year, limiting the growth prospects of businesses and compelling them to turn to layoffs in order to preserve the bottom line.
Dampened investor sentiment due to political risk could also reverse the tremendous gains Kenya has made in attracting Foreign Direct Investment. FDIs in Kenya hit Sh190 billion in 2015, up from Sh115 billion a year earlier, according to the African Development Bank.
If foreign investors are spooked because of the prevailing “our turn to eat” style of politics, the level of FDIs could decelerate. This could have far reaching consequences not only for the economy, but also for the country’s image. This will essentially erase the tremendous work Kenya has done in toning up its image on the global stage, particularly the work done in economic diplomacy. In conclusion, politicians and Kenyans in general need to learn from past experiences that high political temperatures harm the economy and put breadwinners out of their jobs. A more measured and issued-based approach to politics will help Kenyans immeasurably. Perennial issues of inequality and development will finally be solved and the economy will maintain a healthy trajectory.
POLITICIANS AND KENYANS IN GENERAL NEED TO LEARN FROM PAST EXPERIENCES THAT HIGH POLITICAL TEMPERATURES HARM THE ECONOMY
COMMENT KIPRONO KITONNY Chairman of the Kenya National Chamber of Commerce and Industry