Kenyans head to elections on Tuesday with business leaders upbeat about a peaceful political transition and no major disruptions to the economy, a departure from the fear of downturns associated with the country’s polls.
Business leaders in surveys conducted ahead of the high-stakes presidential election have expressed confidence in the economy in the aftermath of the vote which will usher in a new leader.
Deputy President William Ruto and veteran opposition chief Raila Odinga are the leading contenders to succeed President Uhuru Kenyatta.
An analysis of the growth outlook on Kenya from 18 leading banks, consultancies and think-tanks, including the World Bank Group and the Central Bank of Kenya (CBK), projects the economy will on average expand 5.39 percent this year.
If the forecasts come to pass, it will be the first time the economy will overcome the historical election angst to expand more than 5.0 percent following the reintroduction of multi-party democracy in 1991.
This is despite a high inflation environment, which in July climbed to a 61-month high of 8.3 percent, pointing to an erosion of the purchasing power of the consumers amid largely stagnant salaries.
“Leading economic indicators point to continued good performance even against the uncertainties related to the political calendar,” CBK Governor Patrick Njoroge said on July 28.
“Taken together and looking at various indicators, the economy is expected to remain resilient in 2022 at 5.4 percent.” Private sector credit growth in June climbed 12.3 percent, the highest since April 2016 at 13.5 percent, signalling increased investment activity.
The Nairobi Securities Exchange (NSE), on the other hand, added Sh65.30 billion in investor wealth over the last week through Monday, indicating elevated demand from retail investors who continue to snap up cheap stocks.
Ahead of the closely contested presidential election, insurers also said uptake of covers against political violence was largely muted, pointing to businesses assessing lower risk levels for physical damage to premises and looting in the aftermath of the presidential poll outcome.
“We’re not seeing influx on the basis that this is a political year,” Harold Mbati, executive director at Reinsurance Solutions Kenya Ltd — the local office of pan-African reinsurance broker Reinsurance Solutions International — told the Business Daily in June.
Kenya’s real gross economic product (GDP), a measure of economic output adjusted to inflation, has a history of slowing down during election years when firms put investment decisions on hold pending a return to normality on the political scene.
During the last election in 2017, the economic growth slowed to 3.82 percent from 4.21 percent the year before, while in 2013 it decelerated to 3.8 percent from 4.57 percent, according to GDP figures which have been revised following last year’s rebasing of the economy.
The aftermath of the deadly December 2007 presidential election dispute sank growth to 0.23 percent in 2008 from 6.85 percent, while in 2002 it slowed down to 0.5 percent from 3.78 percent the year before.
The same trend was witnessed in 1997 when growth dropped to 0.48 percent from 4.15 percent, and in 1992 when it contracted to negative 0.8 percent from 1.44 percent on the onset of multiparty elections.
Kenya Bankers Association (KBA), the banking industry lobby, has assessed lower risk levels associated with this year’s polls compared with previous ones.
“Something that we have noticed over the last few electoral cycles is that there’s a bit of disconnect between the business environment and the cycle where the anticipation of there being disturbances and disruption in the economic activity have become less and less,” KBA chief executive Habil Olaka said Tuesday last week.
“We saw in 2017 there was less of disruptions and this time we are seeing more of economic activity … picking up despite the fact that there is political excitement going on in the run-up to the elections.”
Dr Olaka, however, added it was difficult to delink this year’s growth outlook from the impact of an ongoing recovery from Covid-19 shocks, which had battered key sectors such as hospitality and transportation in 2020 and part of last year.
The findings of a market perception survey conducted by the CBK every two months suggested in July that 79 percent of business leaders in the banking industry were upbeat about the economic prospects in the next 12 months compared with 26 percent in 2017.
The confidence levels amongst respondents in non-bank sectors were 73 percent compared with 35 percent during the previous elections.
“This in effect shows with clear data how people are proceeding to make economic decisions. Last time  there was a lot of wait-and-see in terms of decisions, but you haven’t seen much of this wait-and-see [this year],” Dr Njoroge said.
“The economy is still going on despite what some had thought will be a problematic year. I think this [findings of the survey] is a phenomenal outcome.” The findings of the Stanbic Bank Kenya’s Purchasing Managers Index (PMI) survey suggested firms generally raised staffing levels in July for the first time in three months.
Increased employment was reported in key sectors like agriculture, construction and services, according to the survey based on feedback from 400 corporate leaders between July 12- 27.
Hiring activity, however, dropped marginally. Manufacturing, as well as wholesale and retail sectors, experienced marginal trimming of jobs month-on-month.