Kenya’s Upcoming Elections Suggest Troubling Times for the Economy

Nairobi, Kenya:

On January 12, the Kenyan high court issued a statement claiming Kenya's presidential and parliamentary elections ought to be delayed from August 2012 to March 2013. The court expressed concerns that the August election date would not allow enough time for the organisation of free and fair elections, and explained that, according to the constitution, the elections could only be held in 2012 if coalition partners agree to dissolve the coalition.

This ruling will come as a disappointment to many Kenyans. With 2010’s constitutional amendments in place, which weakened the possibility of political nepotism and patronage, Kenyans hoped that they could soon shed some of the country’s more corrupt politicians.

Furthermore, historical precedents suggest that Kenya’s economy does not perform well in the run-up to elections and this period has just been lengthened by seven months. Kenya has not been exempt from the economic problems which currently plague the global economy, and the country's economic performance has always been deeply tied to politics. If history has been any indicator, the year ahead may be even more rocky than 2011.

In a recent review of Kenya’s economy by the International Monetary Fund, "charged politics and high inflation" came top of the list of Kenya's key challenges as it prepares for elections.

“The main challenge in the election year", Ragnar Gudmundsson, Resident Representative of IMF Kenya explained, "will be to ensure that efforts to contain inflation and manage inflation expectations are pursued by bringing domestic demand under control".

Economic Woes

In October, the Kenyan shilling depreciated dramatically, dropping to 107 KES to the dollar for the first time ever. It then rebounded to 83 KES to the dollar just eight weeks later, strengthening by 23%, but continues to remain volatile. Although a weaker currency is good for exporters, most of the country’s agricultural inputs are imported. Fertiliser and chemicals, which are already expensive, will become increasingly dear. In addition, as Kenya’s growing middle class demands more imported products and domestic production declines, inflation and currency swings are taking a large chunk out of household incomes.

The drought, which struck Kenya in early 2011 and brought near-famine conditions to over 3 million citizens in Northern Kenya, drastically increased food prices and drove inflation. The rising prices of fuel, and other necessary imports, hit consumers and firms hard. Inflation soared from 4.5% in December 2010 to 14.4 % in June 2011, to 19.7% in November 2011.

According to a recent survey quoted at the “Kenya National Dialogue and Reconciliation: Building a Progressive Kenya” conference, hosted by the Kofi Annan Foundation, “76% of the population say cost of living is a major problem”. Corruption, by comparison, was only considered to be the most pressing problem by 10% of the Kenyans questioned.

This would not be a comforting statistic in any year, but given the political contest ahead, and the trends of past election years, the situation is even more precarious.

GDP growth rates have historically dropped 2-5% during election years - as in 1992, 1997, 2002, and 2007. In 2007, after post-election violence broke out, GDP growth rate plummeted from 7% to just over 1.8%, and is, to an extent, still recovering today.

Problems with campaign financing

Pinpointing the specific causes of economic chaos in the run-up to elections is difficult, but James Shikwati, the head of the Nairobi-based think tank Inter Region Economic Network, suggests that Kenya’s lack of regulation over election financing is crucial.

“There is no clear cut framework on how to finance our politics”, according Mr. Shikwati. As a result, politicians have utilised a growing list of tricks and mechanisms to raise capital.

Back in the years of President Daniel arap Moi, when the country was essentially a one-party system, the regime would simply print money to fund elections. Special 500 shilling notes, for example, led to soaring inflation during the first multi-party elections in the early-1990s.

Since then, Mr. Shikwati speculated, politicians have done everything from manipulating the currency markets by moving large amounts of cash, to collaborating with banks and taking advantage of food security issues in order to make money off inflated imports.

Additionally, foreign and domestic investors ease up and look for safer places to put their money around election times, reducing the productivity of Kenyan business.

Changes in Kenya's leadership and constitution

Looking forward, President Mwai Kibaki has hit his term limit. The imminent shift in leadership at the top has created a sense of optimism for some sort of change, as has the new constitution which creates a new electoral process and is aimed at devolving central power.

Former UN Secretary General Kofi Annan, who was instrumental in brokering the peace process after Kenya’s disputed elections of 2007, said that the passing of a new constitution in 2010 through a peaceful referendum marks a major positive milestone in Kenya’s history. By demolishing old institutions and creating new ones, Annan argued “it turned a new page in Kenya’s history,” instigating a “sound framework”.

“It is a means to sustainable peace, stability and justice in Kenya,” added Annan, noting that the constitutional changes enjoy wide-ranging popular support across the country. However, he warned, “it’s a means to an end, not the end itself, and without implementation and enforcement, it could be worth no more to the country than the paper it’s written on".

Prime Minister Raila Odinga seconded this idea, explaining, “Fifteen months later we know that the mere adoption of a new constitution will not solve all of Kenya’s problems. Unemployment remains high, and grinding poverty continues to be a savage presence in millions of homes”.

After the storm

The causes surrounding 2007’s post-election violence have also created a unique political climate. According to a recent Human Rights Watch's report, Kenya has "failed to adequately investigate and prosecute" post-election violence cases. The report drew attention to the failings of the Kenyan police and judicial system in addressing the violence, which led to over 1,133 deaths. The report indicates that those responsible for the crimes committed - which range from petty theft and small violence to the orchestration of violent clashes - have "have benefited from impunity".

"Kenyan officials have repeatedly promised to investigate and prosecute the post-election violence, but the handful of convictions demonstrates a lack of will to follow through", said Daniel Bekele, Africa director at Human Rights Watch.

For many Kenyans, the results of the report are unsurprising. Political corruption and impunity are sadly part of Kenya’s politics, and most fear this is not going away anytime soon. The political figures suspected of instigating the violence in 2007 are still in control of the country, and even though several are currently sitting in The Hague for the ICC proceedings, one of them, Finance Minister Uhuru Kenyatta, son of Kenya’s first President Jomo Kenyatta, is still in the race for this year’s elections.

Yet ultimately, it is the economy, as in most places around the world, that is the most pressing concern for Kenyans. Though it may not be the issue that drives people to vote, it will certainly be a cause of grievances and potential unrest. Deprivation and frustration with political stagnation led to the riots in 2007, and though the country certainly has learned a painful lesson, a weak economy could again put things on edge.

The article was amended shortly after publication to include an explanation of the constitutional basis for the court's decision, and changed "political figures who instigated the violence" to "political figures suspected of instigating the violence".

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