Kenya’s econ­omy bear­ing brunt of po­lit­i­cal im­passe

In­vestor and busi­ness uncer­tainty in­crease un­til the power vacuum mat­ter is re­solved

African Independent - - NEWS - MARIA MACHARIA

THE Supreme Court’s land­mark de­ci­sion to an­nul the re­sults of the vi­o­lence-laden out­come of the Au­gust pres­i­den­tial is hailed in­ter­na­tion­ally as a step for­ward for democ­racy but is deal­ing a se­vere blow to one of East Africa’s big­gest economies.

More than 15 mil­lion Kenyans (a turnout of about 80%) went to polls in an at­mos­phere char­ac­terised by eth­ni­cally charged vi­o­lence and vote rig­ging claims, which cul­mi­nated in an out­come op­po­si­tion can­di­date Raila Odinga dis­puted. The re­sults in­di­cated that in­cum­bent Pres­i­dent Uhuru Keny­atta was re-elected with 54% of the vote ahead of Odinga, who gar­nered 44%.

Re­sul­tant clashes be­tween state se­cu­rity forces and sup­port­ers in op­po­si­tion strongholds left at least 20 peo­ple dead. On Septem­ber 1, the Supreme Court nul­li­fied Keny­atta’s elec­tion vic­tory and or­dered that new pres­i­den­tial elec­tion held within 60 days.

To­gether with the worst drought in decades, po­lit­i­cal uncer­tainty has emerged as the big­gest driver be­hind the gov­ern­ment’s down­ward revision of growth in the coun­try of over 48 mil­lion, whose chal­lenges in­clude poverty, in­equal­ity, un­em­ploy­ment of about 40% and cli­mate change.

The gov­ern­ment has re­vised growth pro­jec­tions down­ward to 5.5% for 2017 from 5.9%.

Poor rain­fall ear­lier this year is af­fect­ing agri­cul­ture, one of the largest con­tribut­ing sec­tors to gross do­mes­tic prod­uct.

Global mar­kets watcher, Rand Mer­chant Bank (RMB), pointed out the po­lit­i­cal en­vi­ron­ment had caused a wait-and-see ap­proach by most in­vestors.

Early this month, the lo­cal Shilling cur­rency fell by some 0.32% while trade at the Nairobi Se­cu­ri­ties Ex­change was tem­po­rar­ily halted of alarmed trans­ac­tions mostly by for­eign in­vestors after the Supreme Court rul­ing that an­nulled the pres­i­den­tial elec­tion.

The Au­gust read­ing of pri­vate sec­tor ac­tiv­ity (PMI) has slumped to an all-time low of 42.

Ac­cord­ing to ex­perts, a fig­ure above 50 in­di­cates growth, while a read­ing be­low 50 in­di­cates a con­trac­tion.

“The con­tin­ued signs of con­trac­tion are hardly sur­pris­ing given that mar­ket par­tic­i­pants were con­cerned about the tense pres­i­den­tial elec­tion (held on Au­gust 8) whose re­sults have been an­nulled,” RMB Africa an­a­lysts, Neville Mandimika and Ce­leste Fau­con­nier, said.

The an­a­lysts added “we are likely to see ac­tiv­ity grind even lower” as Kenya gears up for yet an­other hotly-con­tested pres­i­den­tial elec­tion. “As such, we ex­pect fairly soft third and fourth quar­ter eco­nomic growth read­ings given the wait-and-see at­ti­tude that a lot of the pri­vate sec­tor would have adopted.” The an­a­lysts noted also that rev­enue col­lec­tion was be­hind target while the an­nual in­fla­tion rate has risen to 8% in Au­gust from 7.5% in July.

“While we are fairly op­ti­mistic about the long-term eco­nomic growth prospects, we (like the gov­ern­ment) are in­creas­ingly con­cerned by the tri­fecta of head­winds brew­ing: ef­fects of the drought, de­cel­er­a­tion in credit growth and a ris­ing po­lit­i­cal risk pre­mium.”

In the lat­est twist to the ten­sions in the anx­ious coun­try, the In­de­pen­dent Elec­toral and Bound­aries Com­mis­sion (IEBC) post­poned the re­peat pres­i­den­tial elec­tion from Oc­to­ber 17 to Oc­to­ber 26, cit­ing the need to “meet the stan­dards set out by the Supreme Court in its judg­ment” that nul­li­fied the bal­lot.

By law, the new poll must be con­ducted by Novem­ber 1 at the lat­est. Among key is­sues head­ing into the new poll is the fi­nanc­ing of the ex­er­cise.

RMB said fi­nan­cially, the po­ten­tial $117 mil­lion cost of the re­run would place ad­di­tional strain on the fiscus, es­pe­cially on the back of the al­ready ex­pen­sive Au­gust polls, which cost the coun­try an es­ti­mated $480m.

An­a­lyst Ronak Gopal­das pointed out pop­ulist rhetoric, po­lar­i­sa­tion and in­creas­ing ten­sion were char­ac­ter­is­ing the build-up to the poll.

“From an eco­nomic per­spec­tive, pol­icy inertia will con­tinue un­til the pe­riod of limbo ends,” he said.

The an­a­lyst raised con­cern that de­pend­ing on the out­come, fresh elec­tions could raise new pe­ti­tions and the pos­si­bil­ity of run-offs, stretch­ing the elec­toral process into 2018.

There is also stand-off be­tween Keny­atta and the op­po­si­tion, led by Odinga, over the le­git­i­macy of the IEBC to con­duct a cred­i­ble pres­i­den­tial poll.

Gopal­das said due to the power vacuum in­tro­duced un­til Oc­to­ber 26, in­vestor and busi­ness uncer­tainty would in­crease th­ese mat­ters were re­solved.

“The econ­omy is likely to con­tinue on au­topi­lot while we wait for the elec­tion re­sults,” Gopal­das said.

Last week, Kenya Pri­vate Sec­tor Al­liance, Kenya As­so­ci­a­tion of Man­u­fac­tur­ers (Kam) and Kenya Na­tional Cham­ber of Com­merce and In­dus­try lamented that po­lit­i­cal anx­i­ety was desta­bil­is­ing the econ­omy.

A sur­vey by Kam in­di­cated about 60% of man­u­fac­tur­ers were pes­simistic of the pre­vail­ing at­mos­phere. – CAJ News

See Page 26

PIC­TURES: AFP

AN­OTHER VOTE: Sup­port­ers of Kenya’s op­po­si­tion leader Raila Odinga, of the op­po­si­tion Na­tional Su­per Al­liance party, lis­ten dur­ing his po­lit­i­cal rally in Kib­era slum in Nairobi on Septem­ber 12. Kenya will hold a new pres­i­den­tial vote on Oc­to­ber 17, after the coun­try’s Supreme Court over­turned the re­sult of last month’s poll won by Pres­i­dent Uhuru Keny­atta.

A sup­porter of Raila Odinga lis­tens dur­ing his po­lit­i­cal rally in Kib­era, in Nairobi.

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