Kenya is a country that has been hard hit by a history of post-election violence most notably in 1992, 1997, and post-2007. This trend has caused a lot of investors to shun investing in the country during the electioneering seasons. The message of peace is being spread all over but one question still stands, what next after August 9th? A study conducted on the country’s economic data shows a trend in hyperinflation during elections. During such times, economic growth dwindles affecting the livelihoods of millions. Evidence of this observation is the inflation rates in the following pre-election times; 2012 inflation was at 9.38%, 2016 at 6.32%, 2021 at 6.11%, and currently the inflation rate is at 7.21%.
The heated political season is typically accompanied by a rapid slowdown in economic activities. Sectors that have traditionally suffered the most damage are those that heavily rely on government patronage. Agriculture, infrastructure, and the manufacturing industry are top in this list. On the other hand, the sectors that benefit the most are the sectors that are not highly dependent on political goodwill such as the service sector with an exception of banking. Kenya’s current high voltage politics has disrupted commercial activities leading to a reduction in revenues for many businesses. Additionally, with politicians pushing for water-tight regulations and higher taxes, it becomes harder for companies to operate legally and effectively. In some cases, this can lead to widespread corruption and dishonesty within business circles and criminal activity such as money laundering.
Political campaigns in Kenya are run on heavy financial budgets leading to the circulation of money from politicians to fund political activities. For instance, in the financial year 2014-2015, The National Alliance (TNA) Party received USD$866,679, the Orange Democratic Movement (ODM) Party USD$848,239, and the United Republican Party (URP) USD$273,688 based on their numbers in parliament. The presidential candidates can use up to 5 billion Kenyan shillings in political campaigns and in addition, they are not restricted from holding fundraisers to get more cash for the campaigns. This usually comes in at a time when there is an increased level of inflation and in my opinion, some of this money could be re-invested in creating job opportunities for the youth and unemployed. Nonetheless, one way to mitigate the effects of a heated political season is to diversify investments into sectors that are less polarized by politics.