Election-related insecurity erodes confidence in economy

Rising insecurity ahead of the next General Election has dampened prospects for higher economic growth over the next six months, a new survey on business leaders shows.

The survey conducted by Ipsos Synovate for the Kenya Private Sector Alliance (Kepsa) found that business leaders were concerned about the cases of insecurity, first in Mombasa and now in the Tana Delta, which the government appears unable to contain.

“Recent outbreaks of violence in Tana and North Eastern regions attributed to disagreements by communities over constituency boundaries and incitement by leaders may have sparked fears that the post-election violence that rocked the country in 2008 may not be behind us,” said the market research firm in a statement Tuesday.

More than 100 people have been killed in clashes between the Pokomo and Orma communities of the Tana Delta over the past one month.

Four people were killed in the skirmishes Tuesday, a day after President Mwai Kibaki ordered a dusk-to-dawn curfew in the area.

On Monday, 38 people, including nine policemen, were killed after a ragtag militia of 300 people attacked Kilelengwani Village in Chara Location.

Police Commissioner Eric Kiraithe said Tuesday that more law enforcement officers would be deployed to the area.

The clashes came just two weeks after riots in Mombasa, following the killing of radical Muslim preacher Sheikh Aboud Rogo.

“The tensions are growing. Tana River is a wake-up call for the country. We need to begin to manage what is likely to happen in other counties very quickly,” said Kepsa chairman Patrick Obath said.

The Business Leaders Confidence Index (BLCI) survey polled 145 firms between July and August with majority of the executives saying the economy was far much better than last year when high interest rates, a weak shilling and high inflation stymied growth.

However, the leaders were more downcast over the prospects for the next six months with slightly more than a third - 37 per cent - having a positive outlook compared to 40 per cent who believe the worst is yet to come.

Only a fifth - 22 per cent - of the respondents believe the economy will stay the same.

Ipsos Synovate said that the slow confidence has its roots on past experiences during election times and that historically the country has experienced an economic downturn every time there was an election.

“Whenever the election comes people hold back and want to see what will go on after the election,” Mr Obath said.

However, he said the survey indicated that Kenyan businesses were generally bullish about the economy and people believed that the country was the place to be.

According to the survey, 47 per cent of business leaders polled who included managing directors, chief executive officers and directors in private sector organisations, said that the economy had improved compared to six months ago.

Another 32 per cent said that the economy had deteriorated while another 22 per cent said that it has not changed.

This shows that although more business executives believe that the economy is on the right track following government policy intervention, the coming elections and recent clashes have begun to have an impact on perception.

“What you are seeing is some sort of lukewarm, hazy perception towards the economy and this is because we are heading into an election,” said Maggie Ireri, managing director of Ipsos Synovate.

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Kenya Manufacturers Association Chairman Jaswinder Bedi said that the clashes sent a negative signal particularly to international investors who may prefer to hold their money until after the elections.

The most optimistic industry, according to the survey, was finance, banking and insurance where 62 per cent of the business leaders said that the economy would perform better in the next six months.

In the manufacturing industry, 57 per cent of those surveyed said the economy would perform better.

Building and construction business executives were the most pessimistic with 67 per cent saying that the economy will be worse over the next six months followed by those in the wholesale and trade industry at 60 per cent.