In the streets of Nairobi, it appears to be business as usual as people return to work even after the Aug. 16 announcement by presidential candidate Raila Odinga that he will be moving to court to challenge William Ruto’s win. The macro economy tells a different story, though.
Following the election stalemate, local investors are now hesitant to lend to the new government, as the August treasury bond price fell below target. The investors want a return of 12.45% but the central bank can only offer 11.8%. Kenya’s trade deficit climbed to a record $6 billion in the past five months of this year.
Inflation hit 8.3% in July, and as Kenyans continue to suffer through rising food prices, a plunging currency, and mass unemployment, local and foreign investors are holding onto their funds as they await the outcome of the petition.
“In the coming days, foreign investors will be closely watching for any deterioration of the security situation, while seeking to better understand the potential impact of the proposed ‘bottom-up’ economic model,” Jay Truesdale, CEO of Veracity Worldwide, a global political risk consultancy told Quartz.
Kenya’s disputed election has investors wary
Ahead of the announcement of the winner, it had been a week of contracted business activity across many towns in the country. There was no road traffic in Nairobi on the day Independent Elections and Boundaries Commission (IEBC) chairperson Wafula Chebukati declared Ruto the winner. Businesses had closed as people remained indoors amid tension and uncertainty but a day later, Kenyans got back to work despite Odinga’s running mate Martha Karua’s proclamation that “it’s not over till it’s over,” signaling what will likely be a long tussle over the credibility of the polls in the supreme court.
It was Odinga’s fifth shot at the presidency and Ruto’s first ever attempt to clinch the top seat.
There was a deep rift within IEBC, as four commissioners cited lack of transparency in the tallying of the results, while an IEBC returning officer who disappeared in unknown circumstances on polling day was found dead this week. Foreign media was on the spot on social media for reporting that there were cases of post-election violence after the announcement of the result.
Though IEBC gazetted Ruto as the new president-elect, the court battle means it will take weeks for him to be sworn in as president. That makes the economic and political situation in the country unstable, and it could delay government spending on projects and prolong inactivity in the country’s macro-economy.
Ruto’s campaign focused on inclusive growth, support to farmers, and jobs for youth, but comparatively, Truesdale notes, little has been said about revenue generation or creating fiscal space to achieve spending objectives. “Ruto undoubtedly will receive encouragement from the international community to prioritize inter-communal relations, macroeconomic stability, as well as transparency in governance.”Much of Kenya’s tax revenues are tied to fixed costs such as salaries, pensions, and debt service, amid a huge public debt and the delay in the naming of a new cabinet means it will take longer to the kick-start the economy and stimulate growth. For now, the macroeconomy is running on auto-pilot thanks to a strong private sector.
“Corruption and patronage is why our economy perpetually records stagnant growth,” economics columnist Jaindi Kisero says.
Calling for fiscal consolidation to economic recovery from the shocks of the war in Ukraine, global financial crisis, and drought, the World Bank has projected that Kenya’s economic growth will slow down this year.
After the 1997, 2007, 2013, and 2017 elections, Odinga disputed election results, giving rise to protests that went on to paralyze business activity.
The general state of the country’s macroeconomy could be on a stand-still till next month, but according to Sila Obegi, CEO of Nairobi-based business incubator Meta Capital, Odinga’s rejection of the results has minimal effect on the microeconomy.
“Our minds are now focused on building and repairing the economy,” he told Quartz.