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Investors, regional economies worried over recent violence in Kenya

Saturday September 15 2012
PIX

People converge at a mosque amid the smouldering houses at Kilelengwani village, Tana Delta District, after clashes. Photo/JOAN PERERUAN

The outbreak of violence in various regions in Kenya over the past few months, the latest in the Coastal region last week, has left the East African region worried over the risk of widespread instability which could hurt businesses.

Security experts blamed the violence—which has left over 100 dead—on years of marginalisation that is now being fuelled by the upcoming county governments as ethnic groups fight over boundaries, political positions and resources.

READ:(Editorial) Kenya must take security matters more seriously

The inter-ethnic violence is creating anxiety among other countries of Eastern African region, with fears that the violence experienced in Kenya following the 2007 elections— that crippled business in the entire region— is likely to be replicated.

Unlike 2008 when the post-election violence was unexpected, the region is watching keenly as inter-tribal violence breaks out in Tana River and North Eastern, while the coastal region is also threatened by the Mombasa Republican Council that is seeking to secede.

Analysts and business executives said violence, and divisive campaigns could shake the country’s political foundation and culminate in a possible downgrading of Kenya’s sovereign credit ratings.

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The Kenya Private Sector Alliance (Kepsa) said in a survey on Kenyan businesses that leaders are concerned about the violence because it has the the potential of eroding confidence in the Kenyan economy.

READ: Election-related insecurity erodes confidence in economy

“Compensation for Uganda businesses which fell victims of election violence is dragging on five years later. These things worry our importers as Kenya is going into another election cycle,” said Issa Sekitto, the spokesman of Uganda traders’ lobby Kampala City Traders Association adding that importers lost merchandise worth millions of dollars in 2007. Five years later, no compensation has come through.

“Kenyan politics worries Uganda because Kenya is our big trade partner and entry to sea port. Any development that makes Kenyan politics uncertain raises the antennas in Uganda, because it can put the country’s economy on its knees. We are all watching these developments,” said Mike Mukula, a Ugandan political big wig.

A rise in Kenya’s risk profile - a combination of economic and political risks — raises the cost of external borrowing making it difficult for the country to raise capital from the international markets including issuance of the planned sovereign bond.

A lower rating also poses the risk of discouraging foreign investors from putting their money into Kenya and raises the level of premiums that insurers will charge for political risk covers.

Fitch Ratings and Citigroup in their latest assessment on Kenya warned the economy faced several risks among them surging public debt and uncertainty over the March 2013 elections. In August, Fitch affirmed Kenya’s rating at B+, with a stable outlook.

The violence at the coast comes at a time Kenya is facing terrorist threats from Al Shabaab, which might increase as the election nears.

READ: Why wave of Muslim leaders’ killings in EA raises alarm

After the Wednesday suicide bomb attack in Mogadishu that targeted president-elect, Hassan Sheikh Mohamoud and Kenyan Foreign Minister, Prof Sam Ongeri, Al Shabaab spokesman Sheikh Ali Dhere, declared that killing Kenyans was their priority.

READ: Suicide bomber targets new Somali President's hotel in Mogadishu

Kenya’s development partners have already expressed concern, with the 20-member European Union-Kenya’s leading trade partner-noting that the clashes have demonstrated the importance of taking forward the reform agenda and in particular police reforms in order to ensure security and rule of law.

“It is important for the government to engage the MRC, which has threatened to boycott elections, and increase the tension further. As Kenya approaches the general election, the political environment is becoming increasingly charged and these tensions are compounded by the ICC proceedings,” said Lodewijk Briet, the head of EU Kenya Delegation.

According to Barisa Badiribu, an aspirant for the governor post in Tana River County, the violence in the county is due to years of marginalisation and high level of illiteracy where some residents have interpreted devolution as a means of ethic self-governance.

Insecurity

Located between Malindi and Garissa, Tana River is a semi-arid area with little road infrastructure and where locals hold more than 3,500 guns because of insecurity from the neighbouring Somalia.

The National Commission and Integration Commission (NCIC) had pointed out trouble spots and warned that election-related violence are likely to occur in Tana River, Wajir, Trans-Nzoia, Migori, Isiolo, certain parts of Rift Valley and many other areas where different communities are competing for leadership.

Kepsa chairman Patrick Obath said that he hoped the violence would not reach the levels of 2008 because the Kenyan elections have always experienced skirmishes.

He argued that investors had already slowed down waiting to act only after the elections. “What we have is a slowdown and not rejection of Kenya as an investment destination. The competitive index comprises many things but for the case of Kenya, it has always been the cost of energy and security topping the agenda,” he said.

The bone of contention being the upcoming county government in which cosmopolitan areas are competing for the seats of the governor and the senate.

Dr Mzalendo Kibunjia, the chairman of NCIC, is worried that the violence is happening only six months before the elections and it is likely to be replicated during elections.

He attributed the violence in Tana River to political incitement where some communities want to drive others away so that they don’t register for elections.

Dr Kibunjia observed that the new bill of rights has restricted security agencies, especially the police, who are careful not to act in a way that is likely to become human rights issue.

“The hopes of devolved government could turn out to be a nightmare. The competition for the posts of governor and senator based on ethnic considerations is downgrading the benefits of devolution,” said Dr Kibunjia.

While the violence in the previous elections was prompted by the competition for the presidency, it is now at the county level which is equally important.

The violence is mainly being experienced in the marginalised areas where residents have realised that they now have the power to shape their destiny after 50 years of marginalisation.

Additional Reporting by Julius Barigaba

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