The General Election slated for August 2017 could be one of the biggest risks to the country’s economy in the coming year even as Kenya aims at hitting a growth of six per cent.
Different analysts note that sectors key to the economy including tourism, agriculture, manufacturing, transport, retail and finance are at a risk of experiencing slow down in investments as investors wait for the high octane-charged elections season to pass.
There is, however, a level of optimism with many players, saying the economy will sustain growth momentum owing to investments in infrastructure by the Government.
The World Bank has projected the Kenyan economy to growth 5.9 per cent in 2016 and rise to 6 per cent in 2017. The growth will mostly be due to continued heavy investments in mega infrastructure projects by the Government.
It will be the highest growth rate that the economy has posted since 2011, have grown at 6.1 per cent in 2011.
According to data from the Kenya National of Bureau of Statistics (KNBS), the economic growth rate has been hovering in the 5 per cent region, posting a 5.6 per cent growth in 2015.
Leaders in different industries are, however, issuing cautionary statements noting that 2017 might be rough for their businesses, with the elections being a concern.
Kenya Power in its 2015/2017 Annual Report, which was up for discussion by shareholders during a late December Annual General Meeting , warned told the investors that the election period would have a toll on its business but said it has instituted mitigation measures to cushion against adverse effects.
“The economy may experience deferred investments in the short term due to perceived domestic risks that could influence growth prospects over the 2017 election period. However, we will continue to review measures aimed at mitigating inherent business risks and, at the same time, take advantage of emerging opportunities for sustainability of the business and growth in shareholders’ value,” said Kenneth Marende, the Kenya Power chairman, in a statement in the report.
KenGen has a similar message for its shareholders, noting that the election related challenge was two pronged with investors withholding financing until after elections and the Government diverting some of its spending on power projects to spend on election related expenditure.
“The forthcoming general elections could also see a slowdown in growth for two reasons, first is the risk that investors could defer investment decisions until after the elections; second, that election related expenditures could lead to a cut back in infrastructure spending,” said the electricity producer in its 2015/2016 report that was discussed at the company’s AGM in November.
Global Risk Insights, a think tank that looks into political risks around the world, advises multinationals with operations in Kenya to be cautious and be ready to protect their investments. It furthers warns investors looking at Kenya to wait until after the elections.
“Businesses that are operational in Kenya should monitor the emerging security and political situation, as well as develop business continuity plans to manage associated risks. For prospective investors seeking to enter the market, it may be wise to wait until after the 2017 elections so as to avoid unnecessary exposure to potentially complex instability which could warp the business environment and economy,” said Global Risk Insights in an analysis on the political risks in Kenya.
The 2017 elections are important for the Jubilee administration that is seeking to remain in power. As seen in previous elections where the incumbent is seeking re-election, intense campaigns usually have an impact on the economy, which in most instances posts a slower rate of growth.
“In the past, we have seen the economy slow or remain stagnant in terms of growth in 3 out of 5 of the election years, only expanding in the last election year, 2013,” said analysts from Cytonn Investments in a September outlook for 2017.
“ Slowing economic growth negates the economic outlook for 2017 as investors may pull out their funds to invest in faster growing economies in the region,”
“We expect investors to be cautious of investments during this period as they wait to see the outcome of the elections.”