What jitters? Kenya's economy rolls on amid elections uncertainty

Beatrice Atieno displays her fish at Migori Marindi market on February 18, 2022. [Caleb Kingwara, Standard]

Numbed by the vagaries of Covid-19 and the ever-rising cost of living, many Kenyans appear to be unbothered by the jitters associated with an election year.

Many businesses appear to be pressing on with their activities three weeks to the elections, a period that in the past has been marked by tension and underinvestment.

Travel into the country also appears to be defying the lull that has traditionally characterised the electioneering period, with the aviation and tourism industries reporting continued bookings for August and September.

Despite the calm and seeming business-as-usual attitude in some sectors, some have adopted the usual wait-and-see approach. Indications of industries and Kenyans, in general, giving little caution to the upcoming polls could be seen in energy consumption.

Over the last few months of this year, the consumption of diesel, which is used heavily by transport and manufacturing industries, has been on the rise.

This is unlike in other election years, where in the months leading up to general elections, the consumption of petroleum products usually dips.

It is the same case for electricity, which according to data by the Energy and Petroleum Regulatory Authority (Epra), has been on the rise, with peak demands registering new highs every few weeks.

The national electricity demand hit a new peak demand of 2,056 megawatts (MW) in mid-June. This is way above the 1,926MW that was recorded as peak demand before the outbreak of Covid-19 in 2020.

The pandemic saw peak demand decline to 1,765MW in March 2020 but the country appears to have recovered and even surpassed the pre-pandemic demand.

“In the last four months, we have witnessed a new peak demand almost every two weeks. We saw peak demand coming down following Covid-19. But after, what we have seen is resilience and now have seen stable growth in demand,” said Epra Director for Economic Regulation Dr John Mutua.

“Recovery has been caused by an increased recovery in all sectors and a general increase in demand for electricity in 2021 after the Covid-19 pandemic.”

He was speaking at a recent forum on electricity. The high energy consumption is seen in economic recovery early this year. The economy grew by 6.8 per cent in the first three months of the year, the highest in 22 years, recent data from the Kenya National Bureau of Statistics (KNBS) shows.

The expansion of the gross domestic product (GDP) compared to the same period last year has been attributed to increased economic activities after the country rolled back the containment measures aimed at curbing the spread of Covid.

The local tourism and travel industry are also bullish. So far, the campaigns may have only left minor dents as opposed to previous years where the entire sector goes quiet months before the election date. National carrier Kenya Airways (KQ) said it had not seen any slump in its forward bookings as has been the case over other election years.

KQ Chairman Michael Joseph told shareholders during the airline’s recent annual general meeting that it is not only seeing more tourists coming in from different markets, including Europe and America - the country’s traditional tourism source markets - but also among those that are always jittery during electioneering periods.

“The election period is always a dicey one for us, but we have not seen disruptions in terms of forward bookings. Our bookings for the summer are looking good,” said Mr Joseph.

The summer season in Europe and North America is usually characterised by an increased travel period and has over the years corresponded with the country’s high tourism season, which goes on until around September and October, with the highlight being the Wildebeest Migration in the Maasai Mara National Reserve.

“Business is okay. We have seen steady bookings, but people are avoiding the election week. We do not expect the election to affect business unless there are problems,” said Kenya Association of Hotelkeepers and Caterers (KAHC) Chief Executive Mike Macharia.

Major improvement

The accommodation sector grew 56.2 per cent over the first quarter of last year, according to KNBS data, a major improvement compared to a contraction of 33 per cent in the first quarter of 2022.

Visitor arrivals through the Jomo Kenyatta International Airport (JKIA) and Mombasa’s Moi International Airport grew 85 per cent to 225,321 visitors in the first quarter of this year.

While there is a push to keep going among many Kenyans who may not have options but to keep their businesses open, there is also a degree of cautiousness, with many also adopting a wait-and-see approach.

Investors may have slowed down as a precautionary measure but are also well aware of the chaos that was witnessed in the country after the 2007 elections. Kenya also had the second most uncertain environment in the run-up to the 2017 polls.

And in the fourth quarter of 2002, Kenya had the most uncertain business environment in the world as Kenyans went to the polls to vote for a change of regime after 24 years of the late President Daniel Arap Moi’s rule.

The Purchasing Manager’s Index by Stanbic Bank also showed a decline in economic activity in the country in June, registering a drop for the third consecutive month.

While the PMI attributed the decline to election jitters, it also noted that there were multiple other factors at play, including high inflation that affected demand by customers and output by industries and weaker cash flows.