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Post-crisis Kenya seeks to affirm its status as East Africa's powerhouse

Post-crisis Kenya seeks to affirm its status as East Africa's powerhouse
 
Kenya's President Uhuru Kenyatta (L) greets opposition leader Raila Odinga of the National Super Alliance (NASA) coalition after addressing a news conference at the Harambee house office in Nairobi, Kenya March 9, 2018. REUTERS/Thomas Mukoya

After months of uncertainty, Kenyan President Uhuru Kenyatta and his rival Raila Odinga agreed to put aside their differences on 9th of March, for the good of the country, but also the economy. Their dispute has cost Kenya around €800,000 and seen some of its trade re-routed to Tanzania.

"When Kenya sneezes, East Africa catches a cold." The saying, which is widely known in the region and was often quoted by commentators at the height of Kenya's 2007-08 violence to explain the impact of the fallout for Nairobi's neighbours.

Fast forward ten years later and Kenya's latest crisis has instead sparked feverish activity in countries like Tanzania.

"There’s talk of a railway connecting Rwanda with Tanzania, and President [John] Magufuli for all that people criticize him for, pried away the prized Total oil pipeline away from us that should have been coming through Kenya," Aly Khan Satchu, a financial and political analyst in Nairobi said.

He is a very potent adversary Satchu said, in reference to Magafuli's ability to spot the opportunity created by Kenya's political crisis. "I think we’ve been caught napping," he said.

The political crisis rattled investors and Kenya's business community, with the KEPSA Private Sector alliance warning that trade from Uganda and Rwanda was being diverted towards Tanzania.

"That’s been damaging for Kenya," acknowledges Piers Dawson, a consultant with the London-based risk firm Africa Matters Limited, told RFI.

Nontheless he said it is too soon for Dar Es Salam to overtake Nairobi as the economic capital of East Africa.

"You can’t get away from the fact that it is easier for Rwanda and Uganda to export goods via Kenya and Mombasa, and there is better infrastructure in place for them to do this," he said.

Coupled with that, is Kenya's new Standard Gauge Railway connecting the port city of Mombasa to Nairobi, which is only going to increase Mombasa’s preeminence as the main port for the exportation of goods in East Africa, Dawson says.

Titan with feet of clay

Kenya, however, has flaws to overcome: first and foremost being debt.

"Kenya’s GDP has been climbing quite dramatically," explains Satchu, arguing that projects like the Standard Gauge Railway have further entrenched the country in debt," he says.

"I think the government cannot now undertake a project like the railway again. They’ve got to make sure that these projects they’ve undertaken make money and are sustainable.

Kenya's debt crisis is so bad that it has had to slash about around 12 billion euros for the budget of some counties, affecting doctors and county workers' salaries.

On Tuesday 13th of March, Nairobi was given a six-month extension by the International Monetary Fund (IMF) to a €1.2 billion standby facility on the condition it brings spending under control.

The worry is that this will tie up Kenya's economy further with half of its GDP used to pay back loansk;  Denis Owino, a political analyst with the Nairobi-based think tank Kenya Insights, says.

Worse still, a recent auditor general report indicated that about €32 billion could not be accounted for and pointed the finger at corruption.

All of this means, that beyond the veneer of reconciliation, Kenya's challenges may only just be beginning.


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