Aberdeen comment: Where now for Kenya?
Aberdeen – The fact that the result is being endorsed by the various international observers is a good thing. Many Kenyans wanted a fair election not just because it’s the right thing but also because there’s a good deal of national pride in their democracy.
Kenya authorities have clearly learnt from what has happened in the past. Checks and balances have been put in place to avoid a rerun of the controversy of 2007-2008 with big improvements to the election system.
The country’s finances are being managed much more prudently than they previously have been too. They’ve learnt the lessons of 2015 when the currency sold off heavily, rates rose to 22% and a series of banks failed. The root cause then was a host of concerns about the country’s finances. Some of the causes of the upheaval then, like whether the Fed would aggressively raise rates, were beyond Kenya’s control. But authorities have learnt that they could have done more to control some of the factors. For example, foreign exchange reserves dwindled to worrying levels and have since been built back up to what are near record levels. The economy is in much more resilient shape than it was back then.
President Uhuru Kenyatta has indicated that infrastructure will remain a priority along with reigning in the high fiscal deficit. These are worthy priorities. Improved infrastructure could make a massive difference to the economy. For instance, the new train line between Nairobi and the port at Mombasa should cut journey times for manufactured goods from two, or even three, days to four hours. The fiscal deficit has been steadily coming down over the last three years but more progress would be welcome. Speculation that the controversial interest rate cap will be removed now that the election is out of the way is also encouraging.
From a market standpoint, Kenyan Eurobonds have performed well this year with the 2024’s offering a yield just above 6%. Kenya is one of the more stable economies in Sub-Saharan Africa. Nairobi is the location for a number of multi-national companies. The country is not without its issues but it has a credible plan and it is working. (Aberdeen Asset Management/mc/ps)
