Question

Future political risks, if any in Kenya

Answer 1

Yes their is the future political risk in Kenya to be discussed in the below paragraph.

With the fading effect of the political uncertainty and poor weather conditions that held it back in 2017, growth rebounded in 2018. In 2019, growth is expected to remain robust, supported in particular by public consumption and investment. Despite fiscal consolidation efforts, investment spending on infrastructure (transport, electricity) is expected to be buoyant. Projects to improve the road network, build a second container terminal at the port of Mombasa, and carry out work at the Malindi, Isiolo, and Lokichogio airports are all on the agenda in 2019. Private investment should be part of this momentum through PPP agreements, reforms to improve the business climate, and a gradual recovery in private sector credit. Exports are expected to be supported by increased agricultural production, particularly of cash crops (tea, horticulture), provided the country is spared weather-wise. Horticultural products could benefit from the start of direct flights to the United States. Conversely, stagnating coffee production and the fact that coffee prices are still relatively low may create some difficulties for the industry. Tourism revenues should also support the trade balance. Most service-related activities – with the notable exception of the banking sector, which will continue to be hurt by the interest rate cap – should get support from domestic consumption. However, consumption could be affected by increased inflationary pressures in 2019. In particular, inflation will be fuelled by higher energy prices, especially following the introduction of an 8% VAT on fuel, as well as by the dissipation of food price disinflation in 2018.

President Uhuru Kenyatta was re-elected in 2017 for a second term after a turbulent political period, during which the Supreme Court rejected the results of the first elections due to irregularities and called for fresh elections, which were then boycotted by the main opposition candidate Raila Odinga. However, in March 2018, a few months after the post-election turmoil, Mr Odinga – who had initially rejected Mr Kenyatta's victory and proclaimed himself “people’s president” – reached a reconciliation agreement with the President, which helped to ease the political tensions.

Despite the truce, the country's deep-seated political, social, and ethnic divisions remain unresolved and could be a source of instability once more in the future. In addition, given the country's military involvement in Somalia, Kenya remains a target for Islamist terrorism, particularly by the al-Shabab group. Meanwhile, recurrent trade disputes with Tanzania could affect the stability of the East African Community, in which Kenya plays a pivotal role.

The 19-place jump in the 2019 Doing Business ranking, putting Kenya 61st in the world (out of 190 countries) and third in sub-Saharan Africa, rewards the many reforms undertaken by the country to improve the business climate. These include measures to make it easier for debtors to continue doing business during insolvency proceedings, as well as steps to simplify tax payment procedures for companies.