Kenya economy survives election storm, investments to improve

Kenya’s economy has weathered the election storm better than it did a decade ago, a Reuters poll of economists suggested, and they expect investment to pick up next year if calm returns to the country soon.

On Monday, President Uhuru Kenyatta was declared winner of a repeat election after the result from two months ago was disputed, handing a second term to the son of the country’s founding father, the late Jomo Kenyatta.

“The drawn out polls have dampened economic activity and would likely weigh on fourth-quarter GDP growth,” said Rafiq Raji, chief economist at Macroafricaintel in Lagos.

Eight of 10 analysts surveyed in the past two days said the elections would only have a slightly negative impact on growth this year and next. Just two thought it would take a severe hit, and none said it would be neutral, positive or very positive.

A Reuters poll last month suggested Kenya’s economy would expand 5.0 per cent this year and 5.8 per cent next year.

Economists were not ready to quantifying the impact of the latest elections yet, after Opposition leader Raila Odinga on Tuesday called for pickets and petitions, but they said they expected investors to return soon.

Around 1,200 people were killed after elections in 2007 led to political protests and ethnic clashes. The latest elections in East Africa’s richest economy have ignited some fears of dejavu.

The violence a decade ago was followed by economic growth plummeting to 0.2 per cent in 2008 from 6.9 per cent the year before.

This year’s vote has seen much less violence, although about 70 people have been killed since August. Elections in 2013 passed relatively smoothly.

“Market participants are likely to remain cautious until the resolution of pending issues related to the elections. So investor confidence may only improve significantly by second quarter of next year,” Raji said.

But Gaimin Nonyane, head of macro research at Ecobank, said the impact from elections has not been as significant as earlier expected, especially on the shilling.

She noted the increased volatility saying “the currency continues to trade around the 103.4-103.8/$ range reflecting continued strong official foreign exchange intervention.”

Most economists said investor confidence in Kenya would improve significantly within six months.

South Africa’s Shoprite told Reuters on Tuesday it was hoping to open its own stores in Kenya.

Raji said Shoprite’s news as well as Botswana’s Choppies saying on Tuesday it plans to treble its stores in Kenya over the next three years suggested the elections were unlikely to weigh on long-term investor sentiment.

Retail is a red hot sector in Africa thanks to a consumer base of 1 billion people who are gaining spending power thanks to robust economic growth.

Services, and especially the key tourism sector and other activities linked to it, suffered most ahead and after the elections, the survey showed.

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