The Promota Magazine

Terrorism, political uncertainty huge threats to Kenya businesses

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By Mark Kapchanga

It was a year like never before in Kenya as businesses came under the full strain of economic uncertainties that impacted negatively on their performance.

The year 2012 saw the Central Bank of Kenya come under massive criticism for its failure to manage the misbehaving shilling, which by June had fallen by 25 per cent against the US Dollar.

It brought into focus the bitter memories of 2011, when the local unit exchanged at 107 against the US Dollar, making it the world’s worst performing currency.

The oscillating exchange rates exposed Kenya to high import bills even as the flower sector reaped from the instability. The country’s main carrier, Kenya Airways, among other multinationals, registered dropped revenues as the pain of exchange rate losses deepened.

Erratic rains in the country were also one of the key challenges the business community faced as drought hit nearly half of the country. The ripple effects were fast as inflation started biting. The pressure threw the market into a further hitch as interest rates went up.

But probably the lasting one, and which seems not to fade anytime soon would be the incessant terrorism attacks the country is facing. The Al Qaeda-linked Al Shabaab militia group has in several cases targeted the country’s major towns such as Nairobi and Mombasa, impacting negatively on business operations.

“These threats and grenade attacks have had massive impact on commerce, not only in Kenya, but across East Africa. This is because Nairobi is the entry point to the region,” said Manz Denga, the Managing Director and Founder of AfriBusiness ExpertEase, an outfit that promotes Africa business abroad.

Despite the huge challenges the business community faced, the country also made huge strides in promoting investment climate, particularly touching on roads and energy.

In November, the region’s most-modern stretch, Thika Road, was opened. The 45-kilometer road linking Nairobi and industrial town Thika has eight lanes and was built by China and financed by the African Development Bank and the Kenya Government.

It is part of the grand road project the Tunis-based Bank has been pushing to have Cairo and Capetown linked to catalyse intra-Africa trade.

In addition, Kenya entered into an agreement with Southern Sudan over the construction of a 1,000 kilometer road from Eldoret to Juba. The road is critical in enhancing trade between the two countries and is estimated to cost $ 1 billion, which the World Bank has accepted to finance.
In a bid to spur foreign direct investments, the country moved a step further by commissioning one of Africa’s largest geothermal projects in Naivasha. The Olkaria Power Plant, with a potential production of 280 megawatts, seeks to bring to a stop the perennial costly and unreliable hydropower that the country heavily depends on.

Indeed, the manufacturing sector has been at the forefront in urging the government to invest in cheap energy alternatives to encourage growth of the sector. The campaigns seem to be bearing fruit as recently, a British firm discovered oil in the remote zones in Turkana. Tullow said the massive amounts of oil in the country would substantially help boost economic growth in Kenya that is heavily propelled by the agriculture sector.

The country also brought massive changes at the ever-congested Mombasa Port by investing in modern technology, 24-hour operations as well as the construction of the country’s second port in Lamu.

But even as the year draws to a close, the imminent danger ahead is the coming general elections in 2013. Indications are already high that the key ICC suspects will be joining hands in the fight for the country’s presidency. No doubt, Kenya will be thrown into confusion as confidence dips. Already, Uganda traders have cut a deal with Tanzania, a move that will see them use Dar ES Salaam Port. This is a big loss to Mombasa Port whose main revenues come from goods entering or leaving Uganda.
mkapchanga@gmail.com

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