Kenya Elections, Democracy in Africa & Institutional Integrity

One of the primary reasons why Africa remains high risk in terms of the flow of capital on a long term basis to fund the development of capital projects very crucial to industrializing this continent, is the lack of integrity in the political system and the lack of institutions to govern processes and laws. Africa is seen as a continent where personalities are bigger than institutions like President Obama said at the Ghanian Parliament in his speech, on the 13th of July, 2009. From Angola to Republic of South Africa, to Nigeria & Egypt.

Kenya has being ruled since their independence in 1964 by two political dynasties, the Kenyatta’s and the Odinga’s. This political rivalry has being held for nearly 53 years. On the 1st of September 2017, the Kenyan Supreme Court under Chief Justice Maraga annulled the results of the August 8 elections in a 4-2 vote citing voter irregularities and widespread fraud in the system. The Nairobi Stock Exchange All share index took a hit as the largest company quoted on the bourse Safaricom (parents of the popular mobile money mpesa) dropped by 4.9% trading intraday.

Geoffrey Odundo the CEO of the Bourse was quote as saying “When there is a movement in the market beyond a certain limit, we have to stop trading to allow the market to process the information”. Recall that in 2015 elections, after the first Presidential elections were postponed due to security issues in the North Eastern part of Nigeria, the All share index dipped 0.4% same day. The decision by the NASA party led by the 72 year old Raila Odinga (The main political opposition) doesn’t inspire as much confidence in the financial markets, despite the closure of the Nairobi Stock Exchange for two days to allow the IEBC conduct the rerun slated for the 26th October 2017

The European Union has reduced its international observer presence for tomorrow’s poll as National Super Alliance accused them of overlooking the widespread irregularity in the August 8 poll that was annulled. International investors are worried that with the intimidation of the judiciary and opposition members of the parliament, a civil war like the one that was experienced after the 2007 elections in which Mr. Odinga lost, that led to the death of 1,200 people would not repeat itself. Foreign Direct Investments thrive in a predictable atmosphere where Investors can be sure of certain parameters, however, the events of the past few months is looking so much like a Deja Vu situation that is not inspiring a lot of confidence as it regards keeping or bringing in capital into East Africa’s largest economy with a GDP of $70.53bn.

Kelvin Emmanuel

About Kelvin Emmanuel

The Oil producing Angola in the Southern part of Africa faces what Nigeria faced 12months ago; a distortion in its exchange rate with a difference between the official markets and the parallel black markets. One dollar through the official window buys you 166 kwanza, while one dollar through the black market buys you 400 kwanza. Nigeria faced the same challenge 12months ago, when the distortion between the official and black markets was as much as the official markets trading at 306 with the parallel market ranging from 450 through to 510. The Central Bank Governor of Angola, Jose de Massano Junior announced in Luanda “We will stop having a fixed foreign exchange, we will adopt a floating regime of foreign exchange”. Angola faces exactly the same challenges and has been applying the exact same responses to an exchange rate crisis like using its foreign reserves that was sitting at $26bn to defend the currency kwanza, with no success so far, even though the external reserves has dropped to $14bn. Angola relies on Oil receipts for 80% of its government revenue, 90% of its inflow and 50% of its GDP. Angola is a $194bn economy that has been growing at an average of 10% on the back of rising oil prices since 2002 when its 27 year old civil war that started in 1975 ended. The state national oil company Sonangol reports that it produces up to 1.8m barrels of crude oil daily, however the government that until now has being led by the family dynasty Jose Eduardo dos Santos until recently when succession saw power transferred to Joao Lourenco, reports that the oil price rout in 2015/2016 that saw prices drop to as low as $28 per barrel caused ripples across the economic structures of the government, upsetting government revenues, its ability to fund its budget, capital project funding, foreign direct investments into the economy as a result of a currency crisis that was driven by the widening of gap between the official and street window of the kwanza, that until now has been pegged in a fixed exchange rate regime to the US Dollar.