Kenya at a crossroads elections

Kenya is at a crossroads courtesy of the repeat elections slated for Thursday this week, with businesses hurting deeply.

It is an unprecedented situation which we would collectively have wished to avoid due to the unwanted implications on the economy and the costs of carrying out the elections.

Given that it was an outcome derived from our Constitution via a Supreme Court ruling, we must support the re-run despite the unfavourable consequences. I cannot estimate how much we have lost in the many months we have been preparing to have the polls, but it is obvious the range is in tens of billions.

All businesses, including the hawkers and mama mbogas, have taken a beating. Car sales, for instance, fell by a nearly quarter in the nine months to September compared to 2016, industry data indicates, which is a sure pointer to the slowdown.

Individuals and institutions are procrastinating their investments plans with the construction sector being heavily affected. Mabati manufacturers are reporting sharp drops in sales – by up to half in the run-up to the polls. With so much uncertainty in the market, it would be understandable if banks were unwilling to give loans. A direct consequence of sluggish is a first round of job cuts, specifically for casual workers who are called in during surges.

Unfortunately, this is already happening as we watch. Sustained politicking would only help to exacerbate an already precarious situation which sadly would be felt by every household, now or later. Respected economists have indicated, based on extensive research, how the political impasse had affected production and consumption. Output fell for the fifth month in succession, findings from a survey done by Stanbic Bank indicates, contributing to the deterioration in business conditions.

Moreover, the rate of contraction in September – following the ruling of the Supreme Court -- was the fastest recorded over nearly four years of data collection. Lead economist Jibran Qureishi linked the fall to limited money circulation and a lower customer turnout, according to the panelists his team had received responses from. Nationally, a slowdown in business means that the government revenue collections would be hampered – meaning the State might not afford the basics including salaries for its workers and disbursements to the counties.

MPs have projected revenues shortfall citing the current environment. This is a major concern that should worry every Kenyan despite their political affiliation.

Yet an even bigger concern that would have immediate implications is emerging. With the bulk of investors at the stock market being foreigners, withdrawal of their funds from Kenya would have dire implications. This is how it works. Foreign investors bring in their home currencies, mainly the US dollar, which are changed into the Kenyan Shilling before the money is spent to acquire assets. Central Bank of Kenya uses these foreign currency reserves to pay for imports,including fuel, machinery and various foodstuff.

Now imagine that the same investors have lost confidence and arrived at a decision to take their money elsewhere. After selling the assets, even at lower prices to cut losses, they will scramble to buy the foreign currencies available in the market. Two undesirable things happen here concurrently. One, the local currency become sharply devalued and second, the foreign currency reserves are depleted.

Imagine buying one US dollar at Sh150 (currently the exchange rate is about Sh103.50) and figure out how significantly the price of imported medicines would jump. It is mostly the poorer in our society who will bear the brunt of this calamity whose impact hits home immediately.

But with just four days to go, Kenyans can hold their breath that the election cycle would finally come to an end. It is my sincere desire that the polls would go on smoothly and without hitches that could precipitate further political standoff. We have been through worse times and emerged stronger, learnt our lessons and embarked on our lives and businesses afresh. Kenyans were more experimental in the previous election cycles, the worst coming in 2007. We could be excused for our ignorance as the country slid into violence, in any case we had never been there before. But a decade on, we are better informed and more aware of what is at stake.

In Nairobi, where I chair the chamber of commerce, we are most exposed because over 90 per cent of manufacturing happens here. Nairobi is the engine of the country, contributing over 60 per cent of the productivity. Conversations I have had with members of the Nairobi chapter indicate varied opinions, but all are in agreement that Kenyans are solely responsible for the fate their country. This gives me the confidence that the country and her people would still exist after the Thursday polls, well aware that there would be a winner.

KNCCI’s leadership specifically excited about the prospects of resumption of the short rains in the coming days which should help ease the cost of food and raise households’ disposable incomes. Lower inflation numbers are a major boost for the operations of our members – which are firms that employ millions of Kenyans.

- The writer is chairman of the KNCCI, Nairobi Chapter.