There is no bad politics in Kenya, our economy will stand

[Photo: Courtesy]

The biggest news in the financial markets this past month was that the Nairobi Securities Exchange as an institution reported a profit increase of 7.5 per cent for the year 2017. This comes as a surprise to many given the high voltage political year that was 2017.

This looks good on the surface, and in deed, when one delves deeper; the activity of the Nairobi Securities Exchange reveals a very resilient economic indicator that is investor confidence.

Other than the profitability of the NSE as an institution, The NSE All Share Index, which measures the performance of all the listed stocks, gained 27.2 percent while the NSE 20-Share Index, which tracks blue chip firms, went up 16.5 percent in the same period.

This is despite the fact that in 2017, two in every three NSE-listed companies were reported to be going through tough times, which lazy managers and political opportunists wanted to blame on politics.

While it is true that there is a direct correlation between poor economic performance and increased political activity, investor confidence in Kenya has proven to be resilient to high political activity.

It is true that over 60 per cent of listed companies in the NSE experienced rough times in 2017, most of them issuing profit warnings way before the third quarter of 2017.

While high political activity played a part in this, there was also a myriad of other reasons, including the age old agency problem.

Good prospects

Perhaps the most indicative of this is Kenya Airways, whose books have been in the red since the rights issue of 2012 and the aborted fleet expansion programme.

It is worthwhile to note that in 2017, despite still being in the red with Sh6 billion loss, its operating profit was in the green at Sh1.3 billion.

This is indicative of improved governance after a bold overhaul of almost the entire C-suite. I am sure better days for KQ lay ahead.

Perhaps it is the nontraditional indicators of economic resilience that would tell the story of the foundation of economy.

More specifically, Safaricom’s mobile money transfer service, Mpesa reported transactions worth over Sh6 trillion compared to Sh5.2trillion in the similar period in 2016 – the highest deal value since March 2007 when it handled Sh10.3million.

I can only predict a very good business environment over the next five years, given the new twist of political direction in the country.

Some analyst have decried that without a loud opposition to check the government, corruption will soar to new levels.

I would like to dismiss this as indolent pessimism. Corruption, in the sense that we allude to as Kenyans, has never inhibited economic growth and development anywhere in the world.

At the very worst, it has only slowed down or postponed development.

I am not in any way suggesting that the recent camaraderie between Jubilee and main opposition ODM should brood corruption in the sense of “if you can’t beat them join them,” rather, we should celebrate the return of relative calm and the benefits that come with it.

Nature of politics

Our young history as a nation tells us that at independence, the divisive Kanu/Kadu politics nearly destroyed our infant nation.

But the wisdom of the founding fathers prevailed and that is why Kenya registered almost double digit growth figures in the 60’s and 70’s.

This happened while the likes of Congo and the bigger parts of Francophone west Africa were burning in the heat of divisive politics and serial coup d’etats.

We also know that it is during the Grand Coalition government times that Kenya registered calm waters that allowed many multinationals to set up shop in Kenya, creating numerous employment opportunities.

I therefore hypothesize that politics is never that serious, and rarely stops people from conducting their business.

However, politics can be harnessed for the better of the country.

Having demonstrated that in actual sense politics doesn’t deter the confidence of the local investor; managers should carry their own cross as to why they give shareholders poor returns, and stop blaming politics.

On the other hand, low voltage politics is good, and managers should take advantage of the relative calm to grow their business and even make a better turn for their investors.

It is then fair to conclude that in Kenya there is no bad politics, only good politics.

 

 

 Mr Karugu is a strategy and analytics consultant based in Nairobi. [email protected]