Estimates released last week by the Kenya National Chamber of Commerce claimed that the economy has shed a massive Sh23 billion due to uncertainty caused by the Supreme Court decision to nullify the August 8 presidential election result.
This is not small money. It is actually an equivalent of 0.3 per cent of Kenya’s Gross Domestic Product.
Whilst this is purely an estimate, last week saw a resounding message among the business community to the political class to “tone down” on political rhetoric which is curtailing investor perceptions.
On the other hand, a fraction of investors are seeing the prism from a different angle. John Ngumi, a career investment banker who helped to craft Kenya’s Eurobond sees the post poll election jitters as “short-term”.
His take is that the international community looks at current effects as a passing dark cloud.
“Foreign Direct Investors have a pretty long term perspective. Political disruptions happen in many countries, but unless it is prolonged, they will stay” Mr Ngumi said.
Speaking at a policy breakfast organised by the Strathmore Business School, his comments seemed to have startled journalists, myself included.
The rhetoric among the business community is a downward trend. Not to mention Moody’s downward rating of Kenya’s economy, perhaps pouring water on the country’s ability to attract more credit in the short term.
“By and large, investors tend to look at the political nature of these events as a given but it has an impact, what investors term as political risk premium. It means whereas I would accept five per cent return on investment in the US, maybe 10 per cent in other parts of Asia, I will ask for 25 per cent in Kenya and that has a direct bearing on investors and the impact it will have on the country. Invest more in capital intensive industries than human-skilled intensive industry,” Mr Ngumi said.
His statement may have come alive when the Africa Export and Import Bank (AFREXIM) announced that it is seeking to raise Sh100 billion in five years.
As part of its target to raise Africa’s manufacturing output, Afrexim estimates that it will raise between Sh10 billion and Sh30 billion in Kenya! Lots of zeros in those numbers, perhaps the reason why Afrexim tailored this to high net worth individuals in this finance road show.
So amid the noise and different readings of Kenya’s political temperatures, how do the analysts see this?
Out of 10 parameters that the World Bank measures in its Ease of Doing Business Report, more than five parameters relate to legal aspects.
Investment Analysts say the Supreme Court ruling has inspired confidence in Kenya’s legal and regulatory framework.
Well, as the countdown continues, Kenya’s growth output seems to be on a steady path, albeit with these short economic waves.
This is hoping that investors wet their appetite on things above and beyond political risk punctuated a peaceful and calm country.