How to get through our ‘election economy’

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Every five years, we go to the polls to decide whom we think should lead our country. In the past, elections have been bad for the country, as they have led to economic slowdowns that have stayed for months afterwards. For example, in 2007-2008, the post-election violence saw the Kenya’s economic growth come to a crawl.

Often times, elections create uncertainty in the market, which is never a good condition for the economy. Markets hate nothing more than uncertainty as it causes investors to adopt a stance of “wait and see”. Not knowing what the elections will bring, investors tend to hold off until they are sure their investments will be safe.

For instance, in the case where the incumbent government is running for a second term, investors usually hold off, as whichever results will affect their investments in one way or the other. In our case, if the current government wins a second term, investors can make major decisions in a short while, as policies in hand may not change much. However, if the opposition wins, investors are more likely to wait and see if the new government comes with new policies or it continues with the old before making any decisions.

There is also the scenario whereby the country may plunge into chaos like in 2007, in which case investors will definitely stay away. If this happened, it would take even longer for an economic upturn. Consumers are also affected in the case of violence after elections, as commodities tend to be scarce – mostly due to hoarding – the implication of which is that, with demand increasing, the price of products usually increases. On the other hand, manufacturers are also affected, as they are not able to go back to production. Violence means personnel challenges, which in turn means production slowed production or clossure altogether. The losses for both companies and individuals are huge.

It is important to be prepared during the electioneering period. While asking people to stock up might be construed as warmongering, it is only prudent to ask that citizens, especially those who live in urban centres, to make sure they have a little extra. In any event, companies, including government departments, all over have provided lists of items their employees need to have to help them stick it out for an extended duration owing to the uncertainty that accompanies our kind of elections.

On the other hand, as an investor, there is need to ensure that you have all the information before making any major decision regarding your money. That said, it is important for every Kenyan to practice peace during and after the elections. We need our country intact after August 8.