Building bridges politics could cripple economy, warn analysts

Friday, January 24th, 2020 00:00 |

Zachary Ochuodho @zachuodho

Kenya’s dwindling economic fortunes could be worsened if politics overshadow efforts to enhance development.

In a country whose economy dips after every election cycle, the 2017 election, which was overruled and later held in 2018, saw the economy suffer only to improve after the Handshake.

But the onslaught of the Building Bridges Initiative (BBI) sensitation has seen the business community raise concerns that the political grandstanding could affect sensitive sectors of the economy.

Since independence, Kenya’s economic growth always shrinks with political turbulence having a negative impact on the economy.

Since the last General-Election, the country has not had time to heal and the new energy towards the BBI is taking the country down a path akin to electioneering.

Investor confidence

Kenya Association of Manufacturers chief executive Phyllis Wakiaga says the ongoing political rhetoric witnessed around the BBI has been fueled by succession politics—which apparently fall within the most productive period (second and third year) of the economy within the five-year political governance cycle.

“The first one and a half years after elections experience slow economic growth and set the stage for a short-term take-off of another two years where the economy experiences faster growth, investors’ confidence is higher with a huge economic ripple effect,” she says.

Thereafter, the last one and a half years is marked by heightened political activities in preparation for the next elections.

However, this cycle has been disrupted by a highly charged post-election period in 2018 after which the BBI was introduced.

She says the referendum will not only affect investors’ confidence, but affect any efforts being made for economic recovery from a high fiscal deficit of about Sh700 billion, high debt repayment at around Sh850 billion per year, untamed recurrent expenditure which is exerting a lot of pressure on government expenditure and low liquidity in the market due to monetary pressures arising from government’s crowding out on private sectors’ lending sources.

Political uncertainty

But analysts explain that though electioneering affects the economic growth of countries, it is not the only factor and that not every election or referendum leads to slow down of economy.

“Overall, out of 13 general elections Kenya has had since independence, seven recorded lower GDP growth rate.

From the above analysis, it is observed that there are more election years recording lower GDP growth rates in the period during multipartyism than in the previous period (1963-1990),” shows a Kenya Institute for Public Policy Research and Analysis study.

Genghis chief executive Geoffrey Gangla concurs with the hypothesis saying that general elections often have a direct impact on economic growth.

Gangla says often, electioneering in the country tends to affect the economy.

“During electioneering, the economy suffers as many projects are delayed mainly due to political uncertainty.

Political rhetoric, tensions and lack of clarity over the incoming government’s economic policies contribute to the decline in growth,” he says.

He says following the past ugly incidences of elections, the rhetoric around the Building Bridges Initiatives (BBI) which has now characterised the Kieleweke andTanga Tanga groups could also follow the same suit thereby disrupting the economy.

Gangla said political sentiment, especially with the likely possibility of a referendum later in the year, which is being pushed by certain political quarters, could serve to suppress the investment environment.

Sterling Capital director John Kirimi says the proclaimed purpose of the BBI is beyond reproach adding that if it is implemented the “winner takes all”—which causes turbulence after every election—will be over thereby creating stability beyond the five-year election cycle.

“Absence of political wrangling after elections would leave the politicians both in government and opposition with energy and time to make more sober policies and to implement them for the good of the country,” he says.

Kirimi says the BBI is not an economic blueprint, but a political one and that its implementation will indirectly impact the economy positively by designing good policies and implementing them.

Failed policies

However, he cautions that unless politicians change their mindset and put Kenya first, the BBI will just be like the Session Paper of 1965, former president Mwai Kibaki’s Vision 2030 and now President Uhuru Kenyatta’s Big Four agenda.

Lee Karuri, the chairman of Kenya Private Sector Alliance Foundation, says although it is true the clamour for the referendum will affect economic growth, if it succeeds, it will put to an end to what causes decline after every five years of election cycles.

“The success of the BBI will cushion business entities from what usually affect their businesses every five years,” he says.

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