Kenya’s investment outlook ahead of August 9 polls

By Steve Umidha

The next quarter of the year is indeed a busy period for Kenya, as we head into national polls slated for August 9, 2022.

Symptomatically, such periods as it is in most developing markets, are marked with economic slowdown which statistically shrinks by about 1.2-1.4 per cent.

The Independent Electoral and Boundaries Commission (IEBC) got an additional Sh8.8 billion to prepare for the August 9 General Election, following the signing into law of the Supplementary Appropriation Bill (Supplementary Budget) by President Uhuru Kenyatta at State House on April 4.

The newly-signed Supplementary Budget will unlock a total of Sh139.7 billion exchequer funds.

Typically, folks become cautious and adopt a wait-and-see attitude but as long as the political rhetoric stays below the radar.

Typically, folks become cautious and adopt a wait-and-see attitude but as long as the political rhetoric stays below the radar.

Mathematically, this shows there is a 60 per cent chance the economy will slow down this year given the aftershocks the business environment has been feeling following the prolonged Covid-19 period and the lingering Ukraine-Russia squabbling.

The latter for instance, is set to dramatically redefine the global order (or the Grand Chessboard, both economically and geopolitically.

In the near term, the trade and financial shocks from the conflict and associated sanctions are exacerbating global inflation pressures – Kenya and EAC region included.

The concurrent hit to growth and to overall confidence is likely to be meaningful, but its magnitude and duration are uncertain. Europe is the most exposed region, with at least a modest recession very likely.

While the US is relatively insulated for now, it is not immune either, particularly from the inflationary impacts of the war.

Energy and resource interdependencies are already shifting in what is certain to be a multi-year global adjustment, with implications across numerous asset classes.

But, the ongoing talks being spearheaded by the US and the larger NATO countries, offer optimism at a time the global economy is shaking off the Coronavirus pandemic jitters with a well-coordinated vaccination campaign.

Going forward, private credit can prove an effective hedge against inflation due to the floating rate coupons. It also offers a senior position in the capital structure and high levels of income with low volatility. Our focus now is on companies that can withstand further cash flow and margin pressure.

Until the COVID-19 pandemic, Kenya was one of the fastest growing economies in Africa, with an annual average growth of 5.9% between 2010 and 2018. With a GDP of $95 billion, Kenya recently reached lower-middle income status, and has successfully established a diverse and dynamic economy.

Corruption and weak governance, COVID-19 pandemic related economic slowdown, weakened consumer spending (leading to rising unemployment and poverty, lower public investment and fiscal austerity remain some of the key problems hurting Kenya’s economy.

All in all, the future ahead is bright!