Ideas & Debate

For economy’s sake, let the election season end

nasa

A guard pulls down security grilles at a Nairobi restaurant following confrontations between opposition Nasa supporters and those of the ruling Jubilee Party on September 9. PHOTO | KANYIRI WAHITO

Kenya has always rebounded from challenging economic times and this is a quality that will see the nation rise again from the challenges of the current economic volatility occasioned by the prolonged electioneering period.

We have overcome the devastation of 2007/2008 post-election period, the impact of the frequent Al-Shabaab terrorist attacks in 2013 and 2014, and the recurring impact of drought on the agricultural sector and the arid and semi-arid parts of the country. Even with all these challenges, our young economy is adapting well to these shocks and stresses.

The current political situation has created uncertainty as investors adopt a wait-and-see attitude and prefer to hold back investment decisions.

This has impacted all the key sectors of the economy, consequently leading to a shrink in the local economic growth that come with a new intensity.

The prevailing political situation has seen some major events planned to be held in Kenya cancelled or postponed, including UNAids Global Prevention Coalition meeting scheduled for October, and this year’s Safari Sevens rugby tourney that had been planned for November, drawing participation from across the world. These are forgone business opportunities especially for the hospitality industry.

The declining growth of the economy has been attributed to a number of factors including: the slow credit uptake by the private sector due to interest rate capping; the growing fiscal deficit risk accessioning risk of debt sustainability and private sector crowding out; disruption of business activities in a few areas of the country occasioned by civic demonstrations following the August General Election; vulnerability of the economy to the prolonged drought which started in the last quarter of 2016 until April 2017.

The drought is by far the most significant factor bearing in mind that agriculture is the backbone of the economy and a key driver of growth.

The manufacturing sector has also recorded reduced growth rate of 3.2 per cent on year-to-year comparison. Decline in the production of cement, assembly of motor vehicles, and manufacture of galvanised sheets as business activities in these areas slowed down due to uncertainties over the elections and low credit access. Growth in construction has also declined, at 7.5 per cent in the second quarter of 2017.

READ: Poll uncertainty clouding Kenya growth, say analysts

Electricity supply has recorded a reduced growth rate due to reduction in production of hydro-electric power following the prolonged droughts and increase of thermal electricity.

At the micro-economic level, the Matatu Owners Association has also reported losses in revenue of up to Sh700 million in the week following the August elections, and daily losses of up to Sh75 million (which is 25 per cent of the Sh300 million revenue generated daily by the sector) since September 1, 2017.

Tourism sector has also taken a beating in spite of the increase in tourist arrivals. It remains unclear when tourism may regain pre-election momentum.

Kenya’s growth prospects remain hostage to the current political environment, and the economy is increasingly growing less immune to a potential recession if the current uncertainty is not addressed. The prolonged political uncertainty is likely to affect the economy for the rest of the year.

The wholesale and retail sector is bearing the brunt of the political demonstrations with looting and destruction of property witnessed during the anti-IEBC demonstrations and counter demonstrations. Most businesses have to remain closed for the better part of the day the demos are held.

The 2016 Micro, Small and Medium Enterprises (MSME) survey established that 60 per cent of all the 7.4 million MSMEs in Kenya are engaged in wholesale and retail trade.

This means that the effect of a harsh political environment has serious implications considering MSMEs employ about 85 per cent of Kenya’s labour force.

The education sector has also been affected as there was disruption to the school calendar and the national exams may be affected if the political situation is not properly managed. So far, we have seen the University of Nairobi close in circumstances related to the elections.

Kenya’s political anxiety is affecting other parts of East Africa, especially landlocked countries which depend on us for essential imports.

Neighbouring Uganda, Rwanda, Burundi and even South Sudan and Congo largely rely on Kenyan network for supply of key economic stimuli such oil.

As the most industrialised country in the region, it also provides many countries with basic household goods such as cooking oil, salt and flour. Regional partners continue to face uncertainties over security of their cargo in freight.

In terms of geo-political factors, Kenya’s stability is of strategic importance to the entire Horn of Africa, but most importantly to ensuring stability in Somalia, as well as in ending ceasefire in South Sudan. 

READ: New vehicle sales fall 18.7pc on credit crunch, poll doubts

Kenya’s role cannot be underscored, as it is home to a number of international organisations supporting regional stability, as well as development partners.

The Kenyan economy has strong fundamentals and as we have seen with the Kenya Revenue Authority defying the political uncertainties to post an increase in tax collection during the month of September; let us keep working and building the nation.

Let this prolonged election season come to an end to give confidence to both local and foreign investors. We believe the economy will rebound and grow fast again.

The Kenya Private Sector Alliance and other stakeholders are also working on addressing the long-term issues related to elections.

Ms Kariuki is CEO, Kenya Private Sector Alliance (Kepsa)