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Economy

Ocampo list casts a dark cloud over the economy

Uhuru Kenyatta
Uhuru Kenyatta 

Swift reactions followed Wednesday's naming of six suspected masterminds of the 2008 post-election violence, as analysts said the International Criminal Court process casts one of the darkest clouds ever over Kenya’s political and economic stability.

Trading at the Nairobi Stock Exchange was interrupted by a “technical hitch” for half an hour, as allies of politicians named by Luis Moreno-Ocampo, the International Criminal Court (ICC) prosecutor, sought to pour cold water on cases facing the suspects.

The ICC’s pre-trial chamber is expected to pass its verdict in March next year on whether evidence Mr Moreno-Ocampo has presented before it justifies full trial of the suspects.

Policy analysts and business leaders said investors will be keenly watching how Kenya deals with the Hague process – pointing to the possible impact it may have on the performance of key tourism industry and foreign investment flows.

“Peace and security is critical for economic stability. The government needs to manage the process and safeguard Kenya’s image,” said Dickson Khainga, the head of the macro-economics unit at the Kenya Institute of Public Policy Research and Analysis.

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Kenya’s economy is just emerging from the double shock of the 2008 violence and the global financial crisis, which reversed five years of sustained economic growth.

Recalling the business community’s assertion that Kenya’s economy was decoupled from politics in the lead up to the 2007 elections, Dr Khainga noted that the election stand-off had sent home the lesson that economic growth is firmly tied to political stability.

Chairman of the Kenya Private Sector Alliance, Patrick Obath, said though important, trials of the six will only heal part of the wounds inflicted by the post-election violence.

He said political and economic stability is pegged on completion of ongoing reform processes such as implementation of the new constitution, land reforms and poverty eradication.

Not complete

“The process of healing and reconciliation is not complete. There are still persons staying in displacement camps, and deep-rooted historical and institutional challenges that led to the crisis are yet to be tackled,” said Mr Obath.

Electoral related violence has plagued Kenya since the switch to a multi-party political system in 1992, affecting mostly the politically cosmopolitan Rift Valley province where land grievances has entrenched disharmony among different communities.

Mr Obath said the political tension which peaks every five years has heightened the political risk factor that international investors impose on Kenya.

He attributed recent demands for sovereign debt guarantees by investors in the energy sector to high political uncertainty, adding that if handled well resolution of the cases by ICC is likely to cut the political risks premium.

“If the governments shepherds the process well our political rating will improve,” said the Kepsa chairman.

Kepsa is the national apex body of the private sector in Kenya, with a membership in excess of 80,000 corporate organisations.

Former Trade minister Mukhisa Kituyi said the ICC prosecutions are likely to cause anxiety, but said the impact on foreign investment flows is likely to be minimal.

On Wednesday, President Kibaki termed calls for sacking of the five public officials in the list of suspects as “prejudicial,” indicating they are likely to hold office until they are formally charged early next year.

“The people who have been mentioned have not yet been fully investigated as the pre-trial process in the Hague has only began,” said President Kibaki in a statement. “Calls for action to be taken against them are therefore prejudicial, pre-emptive and against the rules of natural justice.”

Mr Moreno-Ocampo named head of public service Francis Muthaura, Finance minister Uhuru Kenyatta, Industrialisation minister Henry Kosgey, former police commissioner Hussein Ali, suspended Education minister William Ruto and head of operations at Kass FM Joshua Sang as the key individuals responsible for the violence which followed the 2007 elections.

President Kibaki said security chiefs had been put on high alert with a brief to quell any protests by supporters of the six suspects.

The 2008 political violence triggered foreign investor sell-offs at the Nairobi Stock Exchange, leading to deep erosion of investor wealth.

Trading at the bourse was yesterday interrupted for more than half an hour, causing closure of the exchange to be extended beyond the usual 3 p.m.

Donald Ouma, the head of marketing and product development at the NSE, said that the trading system was overwhelmed by orders for the ongoing power company KPLC rights issue, leading to the breakdown.

“The Automated Trading System experienced a technical hitch but has since been fixed,” said Mr Ouma, who said that the extended time was meant to compensate for the downtime.

Market capitalisation dropped by Sh5.6 billion to Sh1.2 trillion, while the NSE 20 Share Index went down 1.81 points to close at 4,382.43 points.

Dr Kituyi said any economic slowdown “will be a price worth paying” for long term political and economic stability.

“The ICC prosecutions are meant to punish impunity by bigwigs that Kenya does not have the judicial or political muscle to deal with locally. It is a necessary process for the country to move forward,” said Dr Kituyi.

He added that the ICC process will need to be complemented by local judicial processes.

“Ocampo will only deal with a tiny bit of the problem, The Hague cannot administer law in Kenya,” said Dr Kituyi.

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