Terror threat, pending elections big risks for Kenyan businesses

Terror and next year’s General Election are some of the biggest risks for Kenyan businesses this year, says a new report by global consulting firm Control Risks.

The consultancy, which has offices in Nairobi among other parts of the world, says businesses operating in Kenya also face corruption and an uncertain judiciary.

The report however added that the terrorism risk is not unique to Kenya as it is among major concerns for companies globally this year.

Control Risks says that the biggest threat to local firms will be on lost business, especially from foreign investors who may shelve investment plans.

“Terrorism is a risk that is not going away. The actual terror attacks aside, a major concern to businesses is the threat of these attacks which has the effect of deterring foreign investors from entry, investment or partnership with Kenya or Kenyan companies,” said Control Risks (East Africa) managing director Daniel Heal.

On the elections, Control Risks says there is a chance of highly-charged elections especially for gubernatorial seats which in turn could result in voter malpractices.

“In 2017, both national and local level elections will be highly contested and are likely to result in a recurrence of electoral malfeasance including the likelihood of recruitment of youth gangs and militias; heightened ethnic tensions; pressure on companies to meet local demands for benefits like employment and development,” said the report.

The general economy has traditionally tended to slow down in each year before the main elections.

Other reports say that the election season tends to be a double-edged sword, with the economy getting a bump from spending associated with campaigns and at the same time suffering as companies hold back on investments until the voting ends.

“Further, as we approach the General Elections, the private sector will likely cut back on spending as uncertainties surrounding elections generally derails investment decisions. However, pre-election campaign spending is expected bolster economic activity towards the close of 2016 and in 2017,” says the 2015 annual East African financial review by Burbidge Capital.

Graft is another area of concern to Kenyan firms since there are few prosecutions for those involved, says the report by Control Risks.

“While an anti-graft narrative continues to gain mileage from all sectors, with little to no redress of past and present incidences of graft, there is little expectation of a cultural shift or a decrease in the prevalence of corruption,” the report said.