Why election years can be the worst time to start a business

Protesters gather to block a main road with burning barricades and urban debris during clashes at Saba Saba Day demonstrations in Nairobi on July 7, 2025.[AFP]

Starting a business right before an electioneering period can prove to be a costly gamble for investors, especially if misinformation and disinformation affect investor confidence. This forces investors to adopt a wait-and-see attitude, a move likely to stymie trade activities in most parts of the country.

For example, a few months before the general elections in 2022, a potential investor posted on a social media platform, inquiring about how much is needed to set up a petrol station business and the likely levies.

Most of the responses would discourage any investor who had interest in the fuel business. Some respondents claimed that the then President, Uhuru Kenyatta, had the petroleum sector under a tight grip. That he was allegedly a dominant fuel supplier in the country through an established energy company which he is said to have owned through proxies.

The revival of the Nairobi-Nanyuki metre gauge railway in a way amplified these claims.

There were also rumours being peddled that the said fuel company was on an acquisition spree of petrol stations, further cementing the narrative. This, as the “hustlers versus dynasties political undertones flared up in the political arena.

If that investor followed what was being hyped as true, then he may have missed out on an opportunity to set up a business before a new regime took over, which was likely to come in with its own set of administrative policies.

Likewise, in the present day, if you are an investor awaiting next year's general elections, the risk of investing in an area of interest abound just in case a new administration will be voted in, only to come with hard hitting policies.

For example, the current administration came to power when value-added tax (VAT) on specific goods was 8 per cent, but it was immediately pushed to 16 per cent. What if the next administration pushes it to 24 per cent?

What about new turnover tax, import duties and county business permits? Will the new administration scrap the current affordable housing levy or burden Kenyans with an enhanced model of it?

During the electioneering year, it’s not unusual to see Western embassies issuing travel advisories to their citizens and mapping the no-go zones in Kenya, or giving a red alert for the whole country based on security assessments.

Several places witness politically motivated demos, closure of roads by marauding goons, and in some instances, post-election-related skirmishes.

To any investor that may not be a good business environment because that closed road could be a key logistical convenience that your business depends on. Also, during the election period, the Port of Mombasa doesn't record many container movements as investors adopt a wait-and-see attitude. Long-distance haulage trucks aren't in large numbers on our highways.

Consumer spending slows

If that business model is going to depend on contracts from international corporates and other Non-Government Organisations, expect them to freeze new contracts around the electioneering period. They too will be watching which direction the country is heading.

They would also be asking themselves if it’s time to pull out their operations entirely and relocate. That would hit any business leveraging that value chain.

With little cash flow, businesses sustained by corporates or NGOs can't pay employees, and this translates to low consumer spending

Inflation and shilling fluctuations

The government of the day goes into a full campaign mode about six months before the General Election. The president has State largesse and resources.

Money, in the name of empowerment, is poured, same to the paid and mobilised crowds. The local economy will be flush with cash. More money chasing few goods could lead to inflation. If the shilling fluctuates against major currencies, prices of everything are likely to shoot up. If fuel prices go up, so will food. Bank loans are likely to become more expensive

 If you are to start that business around this time with a loan, expect to be saddled with an expensive one.

You're singled out over politics

As an investor who saw a business opportunity far away from your county, or one that expanded a branch of your existing business in such a volatile state, a lot of things follow.

You may have nothing to do with politics, and you may not be affiliated with any political camp of the day, but where that business is located, you're viewed differently, based on your tribe.

Say you're from the Mt Kenya region and that business is in a region perceived as hostile to people of that region. If you don't get customer boycott, in the likely state of political intolerance, your business could be looted as has happened in the past.

That is why it would pay to know the political mood of the day before daring to take that investment risk.

National and county governments "shutdown"

During campaign times, both national and devolved government units seem on a slow mode. That business model you just started depends on contracts from either of these government units. It’s at this time when projects stall, or tender payments aren't honoured on time.

You find contractors abandoning sites, citing non-payment. It is also likely that, should there be a change that ushers in a new government, chances are that the next administration will likely take long clearing pending bills left behind by the predecessors.

What if you'd taken a loan to deliver on that contract and the campaign period sees that government unit in a "shutdown" mode until after elections?