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September 24, 2018

Yes businesses are suffering, but let’s do things right

Fried potatoes, many people engages on small businesses since the living standards has gone up./ELKANA JACOB
Fried potatoes, many people engages on small businesses since the living standards has gone up./ELKANA JACOB

This is a worry I have heard from several sides. From people running small businesses, from an SME private equity fund, on social media, and it the regular media, too: That the rerun of the presidential election is poison for business because this prolongs the already painful standstill in the economy that happens before an election.

The Kenya National Chamber of Commerce and Industry (KNCCI) also just weighed in: KNCCI chairman Kiprono Kitonny said the private sector has lost about 0.3 per cent of Kenya’s gross domestic product (GDP) in earnings since the announcement. (…) “As a result, the country has witnessed a fall in exports, low money circulation, weaker purchasing power among traders and low employment rates,” he said in Nairobi on Thursday. “We have also witnessed a wait-and-see attitude on the part of foreign investors as well as capital flight at the Nairobi Securities Exchange.”

Stock markets are highly volatile and this looks like a panic reaction by some people, and more follow suit – for no good reason. The underlying fundamentals have not changed, so, in fact, this would be a good time to buy if you have some spare cash. I expect that this will correct itself soon.

And for the economic slowdown? It’s obviously not helped by the interest rate cap that basically collapsed private sector lending (and anyone freaking out about a hysterically demonised Odinga presidency should be reminded that this was Kenyatta-signed legislation). It is an enormous concern, however, and immediately painful for a lot of people. But I cannot see a way around it, certainly not if this is used as an argument why the election should not be run again.

And this is also very short-term thinking that ignores the reasons why elections create such a standstill: Precisely because they had been so shoddily run in the past. It was the 2007 election rigging that triggered the widespread violence: The attacks on Kikuyus in the Rift Valley, and the subsequent deployment of an ethnic militia (instead of sending the police in to protect people). Doing more of the same will not fix this issue. People will take to the streets if they are denied formal avenues of participation. But if elections are held (and, importantly, counted!) transparently and fairly, and if the system responds to their grievances adequately, then they do not need to look for alternative channels. In the short term, I feel business owners’ pain. In the medium to long term, doing things properly is the way to avoid such pain, however.

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