Kenya Politics Undermining Economy

Kenya’s supreme court ruling that nullified President Uhuru Kenyatta’s re-election immediately hit headlines across the globe, with ripple effects on local and foreign investors.  

The decision has, however, come with a negative impact on businesses that were emerging from a slowdown that is usually related to Kenya’s election cycle.

The matatu (public transport) industry was the first to claim making a Sh75 million ($729,572) loss everyday nationwide. The National Chamber of Commerce and Industry said the country was losing billions daily due to the uncertainty, AllAfrica reported.

The Nairobi Securities Exchange reportedly plummeted Sh92 billion by close Friday as investors scampered to cover their positions. In comparison, the bourse lost Sh40 billion after violence erupted during the disputed 2007 general election.

On Thursday, though, investor wealth at the exchange rose above the Sh2.4 trillion mark for the first time in a week as the NSE continued to recover from last week’s slide on the back of political bickering.

 Bank Stocks

The gains were mainly on bank stocks, where eight of the 11 listed financiers recorded a share price gain, with Safaricom adding 50 cents to close at Sh25.25 apiece.

“All benchmark indices closed in the green as demand by local investors across major large caps continued,” said Standard Investment Bank in a market note.

In a review of the market reaction, Stanbic Bank regional economist Jibran Qureishi told the Sunday Nation that investors’ initial reaction to the news was a clear indication of their fretting over reemergence of election spending and what this would mean to fiscal consolidation highlighted in this year’s budget.

“On the other hand, the move by the court reflects a maturing democracy and strengthening independent institutions, and we should not discount this factor,” said Qureishi.

A number of business players have weighed in on the impact of renewed political duels between Nasa and Jubilee, which have heightened tension in the country.

“We have faced challenges but, by and large, we are building institutions to address them,” Kiprono Kittony, chairman of Kenya National Chamber of Commerce and Industry, said during a policy forum hosted by Strathmore Business School hours before the Supreme Court ruling on September 1.

“Elections in Kenya are important to these countries, such that every day of business lost is a huge loss to them,” said Kittony, explaining why he rallied the public to go back to work soon after the election.