Elections And Financial Markets: What Does Looking Back Indicate For Kenya Going Forward? 5

The Kenyan shilling has rebounded strongly since the country’s top court voided the August elections earlier this month. The rightmost part of the graph below, which shows a dip, displays the shilling strengthening against the US dollar.

Meanwhile, the annulled August election is set for a re-run on October 26, and it will be an expensive affair.

In an interview with The EastAfrican, Ezra Chiloba, the chief executive officer of the Independent Electoral and Boundaries Commission (IEBC) said that the re-run will cost an estimated 12 billion Kenyan shillings ($117 million). As a point of reference, the August 8 election had cost about $480 million.

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With a per capita income of less than $3,000 (adjusted for purchasing-power-parity) in 2016, according to World Bank data, the election will cost the equivalent of the annual income of 40,000 people. Unadjusted for PPP, this number is equal to the annual income of over 102,000 people.

Apart from pressure on government finances, investors have additional concerns, and some stem from history.

Historical precedent

Appeals against election results and related violence are not a new phenomenon in Kenya.

Uhuru Kenyatta and Raila Odinga had faced off for the presidency in 2013 as well with then President Mwai Kibaki being ineligible to contest as he had already served two terms. Kenyatta had won in the first round of voting itself and though Odinga had appealed against the result, the country’s Supreme Court had turned it down.

Looking back further, the 2007 elections were particularly violent with over 1,000 dead and over half a million displaced.

As the graph above shows, even after contested elections in 2013, the stock market broadly continued to rise. And as seen in the previous article, stocks seem to have already bounced back after the vote annulment in early September 2017.

What does this signal for the re-run in October?

Kenyatta versus Odinga: Round 2

Stock markets had cheered the results of the August election which had seen Kenyatta winning decisively. Further, after the Supreme Court annulled the election result on September 1, foreign investors were seen reducing their stock holdings.

This can be considered indicative of their faith in the incumbent President, and could signal further gains in the financial markets if the results of the August election are repeated in October.

As far as Odinga is concerned, he has seized many popular platforms in his campaign regarding fighting against poverty and corruption as well as supporting small businesses, manufacturers, and farmers. He also talked about amending the interest rate cap set via The Banking (Amendment) Law (2016).

But the biggest challenge with Odinga is that he’s untested in an official capacity. If he is victorious in the October election, it’ll take him some time to earn the trust of investors in the country.

One of the most significant post-election events being measured in Kenya has been the violence associated with the results. This is a major factor to be considered by international investors. Let’s look at this aspect more closely in the next article of this series.

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