In a year when national elections threaten a reprise of ethnic violence that led the International Criminal Court this week to charge four politicians with committing crimes against humanity in 2008, business leaders in Kenya are bracing for economic fallout.
“The economy was bad last year and now with the election campaigns set to begin, a lot of people are afraid to invest,” Otiato Francis, a local welding business manager, said. “A lot is at stake this year.”
After the ICC's decision, which included the indictment of Kenya's finance minister, financial markets appeared to hold steady but analysts said the ruling could add to a general climate of uncertainty in a country engaged in a war in Somalia and reeling from soaring inflation rates and hikes in food and oil prices.
“The markets tend to be a very honest messenger and they have already been signaling a level of stress,” Aly-Khan Satchu, a Nairobi independent analyst and the proprietor of the online financial portal, Rich Management, said.
Economic growth slowed to 3.6 percent in the third quarter of 2011, down from 5.7 percent in the third quarter of 2010, Kenya's national bureau of statistics stated. The Kenyan shilling was also the world’s worst performing currency in 2011, data from the International Monetary Fund indicate.
The World Bank has projected that Kenya’s economy will grow 5 percent in 2012 and estimates that the country will cease being the region's largest economy in growth by 2013.
Mohamed Abdi, a trader of wholesale cosmetic goods in Nairobi's bustling Eastleigh business district, said his business has been hit hard by inflation and vacillating exchange rates. In the span of a few months, the price of cosmetics has almost doubled, leaving him stuck with goods that customers are unwilling to buy, he said.
“Everyone keeps pointing toward the exchange rate of the dollar to justify the current situation,” Abdi said. “Even when the exchange rate stabilized a little bit, the prices of goods were still very expensive.”
What many business owners say they fear, above all, is a repeat of the violence that led to the death or displacement of thousands of Kenyans following national elections in 2007. Kenyan President Mwai Kibaki has sought to assure the country that elections will be free and fair and that the transition will be smooth.
The transition, however, promises to be tricky given that the country is set to move, under its new constitution, from a centralized system of governance into a more devolved political and economic structure.
“The key challenge for 2012 will be managing the political transition well, to avoid a repeat of the post-election violence seen in 2008 and to ensure continued growth in investment and job creation,” Johannes Zutt, World Bank country director for Kenya, said in a statement in December.
The litmus test for the resilience of Kenya's economy will come in the next few months as the effects of the ICC ruling begin to reverberate throughout the political and economic systems.
“The ICC’s actions are now in effect an inescapable element of the political process as Kenya heads to elections,” the anti-conflict watchdog, International Crisis Group, said in a report released prior to the ICC’s verdict. “Even if an early confirmation of the charges may not legally prevent the suspects from running for office, the risk of conviction would affect supporters and allies. The timing and framing of proceedings and decisions can lower or increase volatile tensions.”
For now, business owners like Francis say they hope things in the country will move in the right direction.
“Politics goes along with economics,” Francis said. “My fear is that when politicians start campaigning, our work will be severely affected.”