Kenyan authorities act fast to restore confidence after latest terror attack

The move was followed on Saturday by Kenya’s Insurance Regulatory Auth-ority which issued a circular to all insurers and reinsurers operating in the country. They were ordered to cancel all policies with the 86 listed firms with imme-diate effect. At the same time, the government is ordering the clear out of some refugee camps in the north of the country, fearing they maybe fertile ground for the terror group. However, locally, people are reporting that it is too late for that because the terrorists already have papers to be in the country—Kenya has a large legitimate Somali community. There is also a fear that Al Shabaab has successfully been recruiting among Kenyans themselves.hideA few months ago, Nairobi was voted Africa’s most attractive city for Foreign Direct Investments (FDI) and ranked seventh among the continent’s top 20 cities of opportunity, according to a survey by PricewaterhouseCoopers. After the early April terrorist attack by the Somali-based Al Shabaab terrorist group on Garissa University where more than150 students died, will Nairobi still hold the lead? Some analysts say yes, although the immediate effects on the economy, especially cancellations by foreign tourists, have been felt. “The Garissa attack, as a standalone incident, is unlikely to pose a significant impact on FDI inflows going by precedents set,” said Konstantin Makarov, Managing Director of the Nairobi-based research firm StratLink-Africa Limited. He bases his answer on the following precedent; between 2012 and 2013, the year of the Westgate Siege, FDI inflows accelerated by 98.9% to US$514.4 million, which effectively doubled the previous inflows. Between 2001 and 2002, the year of the Kikambala terror attack at the Kenyan coast when there was a failed attempt to shoot an Israeli airliner and a successful attack on an Israeli-owned hotel in Mom-basa where 15 people died, FDI inflows grew near five-fold to $27.7 million. “It is also important to note that both 2002 and 2013 were election years that typically send jitters amongst investors and decelerate appetite towards the economy,” said Mr Makarov. “The Garissa incident is also likely to be eclipsed by the ranking of Kenya among the projected top 10 fastest growing economies in 2015 according to Bloomberg and the hosting of the Global Enterprise Summit which will be attended by the USA President Barrack Obama in July 2015. Having said that, the incident in Garissa highlights the security challenges facing Kenya which will have to be addressed by the government to ensure growth continues to accelerate,” he said. Kenyan global scholar Mwangi Kimenyi of Brookings Institution and advisory board member of the School of Economics, University of Nairobi said there will be an immediate effect on tourism cancellation and a long-term risk of negative perception of the country. “Kenya has borne the brunt of the group’s terror activities, which have had serious adverse consequences such as loss of life, negative perception about the country that has impacted tourism, and the general investment climate,” said Professor Kaimenyi. “I still believe that the international community continues to grossly underestimate Al Shabab’s capacity to export terror and thus maintains only a limited focus on the group than what is necessary to weaken it. In part, I think this is because the international community considers the group’s activities a local east African problem and unlikely to pose a serious threat to the interests of other nations including those of the west,” he said. Media reports suggest that tourist cancellations were affected in Mombasa and Masai Mara, Kenya’s tourism gems. Already, more than 30 hotels have been closed since last year because of terrorist attacks in the coastal region and the recent attacks will make the situation worse, hoteliers said. “These attacks in Garissa simply sealed our fate. The situation will become worse than we anticipated as we go into the tourism high season of July and August,” said Mohammed Hersi, the chairman of the Kenya Coast Tourism Association. “It seems we might have to go further and lay off staff, because we may not sustain even this reduced wage bill.” Investors will however have been assured by the improving response to terror attacks by the Kenyan authorities and the rising security awareness among Kenyans shocked by the growing scale of Al Shabaab’s attack fatalities. However, Calisto Ogaye, MD of Continental Re’s east African operations, said people in Kenya are nervous of where an attack may happen next. Government initiatives to try and boost domestic tourism to Mombasa to replace foreign visitors has not really worked, for example, he said. “Kenyans are choosing to go inland rather than to the coast and an initiative to give businesses tax incentives if they pay for their staff to take coastal holidays has not taken off.” Beyond that, as insurers, there is an extra alert for the moral hazard. “We have seen it before when tourism numbers are low, there is an added risk of fires at the hotels. It is a particular problem for the coastal properties because so many of them are thatched,” he explained.

Kenyan authorities act fast to restore confidence after latest terror attack

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