BY ANTONY MUTUNGA
Before the August 8 elections, the Kenyan economy was already experiencing a slowdown. Even though most global institutions were predicting the economy would grow, the story was much different on the streets. Kenyans were not experiencing the positive change in the economy as predicted. On the contrary, they felt things were only becoming worse.
High cost of living, an increase in job layoffs and, worse off, the collapse of several firms around the country left many doubts on whether the economy was truly growing as publicised. It is true that the government launched several infrastructural projects including the Standard Gauge Railway (SGR), which have helped the economy in one way or another. However, their contribution to the economy has not reached those that really matter, the masses who still have to deal with the ever-rising cost of living.
When the country finally went to the polls on August 8, things seemed to have gotten worse as the economy came to a standstill. With everyone scared of a repeat of the 2007 post-election violence that left more than 1,100 people dead and more than 600,000 others displaced, the streets were clear and businesses came to a stop as people waited for the results. In addition, the economy was getting a double bashing if history was anything to go by. As in the recent past, statistics show that the economy always slowed down whenever elections were around. This in conjunction with fear of violence made businesses lose a lot as things took a while to get back to normal.
As things were starting to get back to normal, the Supreme Court then made a decision that no one expected. The Court nullified the August 8 presidential election and ordered new election. This dealt a blow to the Kenyan economy once more, causing investors in the NSE to make a loss of Sh92 billion on the same day the Supreme Court made its ruling.
This was just the beginning of woes for Kenyans as the period of uncertainty that usually comes with election extended even further, causing businesses to reduce their transactions as they awaited to see what would happen next. With the new elections scheduled for October 26, the economy was put to the test on whether it would be able to withstand the many activities that would eventually take place as the day came closer.
Unfortunately, the Kenyan economy continued to suffer as first demonstrations took place all over the country, causing businesses to shut down in major cities including Nairobi, Kisumu and Mombasa. According to one Daniel Maki, a business owner in Nairobi, the demonstrations had caused him to close up his shop in a move to ensure that hooligans do not vandalize it. Daniel is not alone as a lot of people were forced into a similar situation, causing them to incur losses that would have been otherwise avoided.
Just as almost every investor takes a ‘wait and see attitude’, businesses have also been forced to reduce their expenditures until the electioneering period is over. This has seen many businesses either reduce their production because consumers are not purchasing as much or minimize their costs by laying off workers and delaying payments to their creditors. This has also seen organizations hold off on hiring new employees in the recent months, which has seen the unemployed suffer more as jobs get scarcer.
Apart from this, the different sectors in the country have also been hit by the prolonged electioneering period especially the real estate and tourism sector. In the real estate, investors are holding on decisions until the uncertainty is over. In doing so, constructions have been really affected and with the addition of imported materials in the country having also slowed down, it has caused the work in the sector to get delayed.
The opening of the Sh800 million Kiambu Shopping Mall, for instance, has had to be postponed from August to December because of the uncertainty. Peter Burugu, Chairman of Mugaa Investment Developers, who are in charge of the construction of the mall, said, “Political uncertainty in the country has slowed down shipment of construction materials so we have decided to push the opening date forward.”
On the other hand, the tourism sector, which is one of Kenya’s largest foreign exchange earner, is also being affected by the electioneering period. For starters the original august 8 elections had many tourists avoid the country at a time that records one of the highest number of tourists in the country. After the elections, the norm was expected to return but with the ruling of the Supreme Court, the number of tourists has reduced. The U.S, for instance issued travel alerts to its citizens on the country causing a large number of tourists to avoid coming to Kenya.
However, being major disturbances to the economy, the stock market remains the most hit by the period. Uncertainty, as they say, is the natural enemy of the markets. This can be proved in the case of Kenya during this prolonged electioneering period. From investors making major losses on the day of the Supreme Court ruling, the stock market continued to get worse as Kenya’s benchmark index slumped to a point it was regarded as the worst performer in Africa.
The Nairobi Stock Exchange saw volumes traded reduce from 285 million shares in June to less than 46 million shares in the week ending October 6. This highlighted how investors were holding off any major decisions and steering clear. Alistair Gould, CEO of Nairobi-based African Alliance said, “Many foreign investors are steering clear of the market as they await the resolution around our fragile and unfolding political situation.”
Other than holding off, investors seemed to be also leaving the market as according the Capital market authority (CMA) records, outflows from the market in September were the highest recorded ever since the institution started recording as they amounted to Sh5.8 billion shillings. With the uncertainty not showing any signs of going away only the worse can be expected in the coming days.