Political risk persists in Kenya

The opposition and members of the civil society were preparing to start a series of nationwide protests over the menace, as calls for a social revolution increased among the youth through social media platforms. Approval ratings of president Uhuru Kenyatta fell from 59.8% in November 2014 to 33.7% in November 2015 according to an Infotrak poll, with 62% of Kenyans saying they are not happy with the leadership direction the country is taking. President Kenyatta had earlier in the year tabled an investigation report from the Ethics and Anti-Corruption Commission, which implicated several of his ministers and senior government officials, who were suspended pending investigations.hideBut it was a revelation of theft that followed, of more than $7m in the Ministry of Devolution’s National Youth Service programme, which rattled national politics. The minister in charge, Ann Waiguru, declined to step aside as her colleagues had done and the president refused to suspend her, raising political temperatures and allegations of special relations between her and the president, which he denied. But Ms Waiguru has since resigned, triggering a cabinet reorganisation which saw all of the five other ministers who had been suspended not making it back to the cabinet. The decision not to reappoint or reassign the tainted ministers has won the president some political reprieve, with Kenyans hoping his office and that of Director of Public Prosecutions will now give more attention to the war against corruption. While the public has welcomed new initiatives to fight corruption initiated by the president, there is an overwhelming belief that only successful prosecution of the culprits will help slow the vice. “Until we have convictions and the freezing and recovery of assets of all suspects, the powerful words that president Kenyatta uttered will be meaningless,” said Samuel Kimeu, Executive Director of Transparency International—Kenya. “Our public health, security and education services are not reaching Kenyans due to corruption.” It did not help that, as the debate on corruption was raging, the government has been facing a cash crunch that has affected delivery of social services. A labour dispute with teachers has seen their September salaries delayed. The cash crunch is partly blamed on higher spending in infrastructure projects and high interest payments on loans borrowed to develop infrastructure like the ongoing construction of the Standard Gauge Railway. Another issue has been the failure by the Kenya Revenue Authority (KRA) to meet its quarterly revenue targets. KRA Commissioner General John Njiraini has attributed poor performance to poor economic performance and tax evasion but the president has also ordered lifestyle audits of all KRA staff following suspicions of corruption. Adding to the political tensions were the ‘prayer rallies’ held by politicians for vice-president William Ruto and a local radio journalist facing charges of crimes against humanity at the International Criminal Court for their alleged roles in the 2008 post-election violence. “The ongoing case against Vice-president Ruto will continue to pose increased risk to political stability,” notes the AM Best Country Risk Report for 2015 on Kenya. The report notes terrorism also presents a prevailing risk for Kenya. The country has recorded more than 135 attacks for which Al-Shabaab has claimed responsibility since military operations in Somalia began in 2011. As a result, the tourism industry—once the country’s top foreign exchange earner—has suffered, generating less than half of its annual income. According to the report, Kenya’s financial system risk is also high: “The Kenyan financial sector is vulnerable to government influence and weak supervision; however steps are being taken to improve conditions. Government debt burdens remain high, with about half of total revenues going to finance the wage bill. Reductions in the wage bill and increased tax revenue are anticipated to lower the deficit.” Aon’s Political Risk Map 2015 in emerging markets notes Sub Saharan Africa continued to record the largest number of downgrades in 2015, as economic and political risks increased. However, the picture is mixed across the region with improvements in southern African countries offset by other weaknesses in parts of west Africa. The Ebola outbreak exacerbated an already challenging business environment in the most afflicted countries of Guinea, Liberia and Sierra Leone. Islamic extremism, largely represented through groups such as Boko Haram and Al-Shabaab, will continue to increase political risk in Nigeria and Somalia respectively as well as their neighbours Cameroon, Kenya and Uganda. As a result, political violence risk will remain high throughout 2015 in these countries, even if these attacks are not pervasive throughout the whole country. Investors in key regions will need to assess their risks directly. In general, lower commodity prices will see political risks remain high and economic risks increase in regional commodity-producing nations. In particular, Angola, Cameroon, Democratic Republic of Congo and Nigeria will have to adjust to much weaker revenue outlooks, which imply cuts to spending, especially public investment. This week Control Risks has published its Risk Map 2016 in which it highlights the continuing terror risk in Africa. Meanwhile on the maritime front, it says “Somali pirate activity will remain minimal in 2016, even though pirate groups retain some ability to launch offshore operations. But although much reduced, attacks will remain a threat: the onshore factors—including political instability in Somalia—that fostered the hijack-for-ransom model still exist. In West Africa, it said “Levels of offshore kidnapping in the Niger delta declined, while few hijacks of product tankers were reported in the wider Gulf of Guinea. Nonetheless, there are reasons for continued caution.”

Political risk persists in Kenya

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