Economy unmoved after terrorist attack in Nairobi

The shilling has shrugged off the effects of the latest terror attack on an upmarket shopping complex.

Despite the attack on the dusitD2 hotel, the shilling held steady, trading at 101.7 against the dollar even as President Uhuru Kenyatta assured tourists of their safety. 

“I assure every Kenyan and foreign visitor that you are safe,” said the President in a televised address, noting that multiple security efforts were underway to deal with the terrorist group responsible for the attacks that left 14 people dead. 

Sporadic terrorist attacks in the country have in the past affected the tourism sector, with the US and the United Kingom - two big sources of Kenya’s tourists - issuing travel advisories to their citizens.

The capital market also remained unmoved yesterday, with the Nairobi Securities Exchange (NSE) 20 share index, the benchmark, going up by 32.31 points to close at 2,844.25. 

The business community was generally bullish, even as it condemned the attacks.

Karl Hala, the general manager of Ole Sereni hotel in Nairobi, said the terror attack would not blight investor confidence in the hospitality sector.

“What happened at Riverside is unfortunate, but the hospitality industry will prevail. Investor confidence in Nairobi is high and won’t be dampened by this attack.”

The Kenya Private Sector Alliance (Kepsa) said the attack had caused anxiety among Kenyans, including some of its members at the complex.

“The Kenya private sector, from giant firms to the corner kiosk, is the engine of Kenya’s economy and the foundation of our hopes and dreams for the future. In the context of the global economy, Kenya has made great strides, making us the envy of the many countries,” said Kepsa in a statement.

“We acknowledge efforts put in place by the authorities to ensure that business in the other parts of the country continues as usual and even for giving Kenyans the assurance that the situation is continued.”

Solidarity

The Kenya Association of Manufacturers (KAM) commended the solidarity displayed by Kenyans in the face of the calamity.  

“We offer our utmost gratitude and commend the swiftness and effectiveness with which our men and women in the security forces put the lives of Kenyans first,” said KAM in a statement.

According to the IMF, terrorist attacks are one of Kenya’s domestic risks in the medium-term, with the global lender in one of its reviews advising the country to reprioritise fiscal spending to accommodate security needs. 

President Uhuru said the swiftness with which the security forces dealt with the attack was a testament to the heavy investment the Government had put in security. 

“For the last few years, we have invested in building a strong security system. It showed to great credit yesterday, but we also learnt that we can never take anything for granted,” he said. 

The shilling has largely been supported by an unusual spark in dollar flows after Finance Cabinet Secretary Henry Rotich clarified that the tax amnesty on money stashed abroad which is repatriated still stands.

Diaspora remittances, Kenya’s leading foreign exchange earner, increased 42.4 per cent for 10 months to October to Sh227.28 billion from Sh159.53 billion over the same period in 2017.

 “Although we expect the global economy to decline, we do not see remittances being affected. Even if we look over the past 10 years during the 2008 crisis we still see significant inflows coming in,” said Jibran Qureishi, Stanbic Bank economist for East Africa.

In just three months, last year, wealthy Indian families brought back more than Sh5.9 billion from banks in India’s Gujarat state under the extended tax amnesty.

According to the Times of India, quarterly data compiled by State Level Bankers Committee in Gujarat showed that the billions were withdrawn between April and June 2018.

“Bank officials and tax experts believe that a staggering Sh13.9 billion (Rs 1,000 crore) in non-resident Gujarati deposits have been withdrawn from Kutch banks since December 2017,” the paper said.