The Cost of Terrorism on the EAC Economy

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I can vividly remember where I was sitting at the World Cup finals in South Africa when news of the bombings in Uganda began filtering in.  And as much as I wanted to keep enjoying the game, the thought of the probability of the same happening in Soccer City crossed my mind and made me wary.

Days later, we know much more about the attacks and East Africans are gratified -that the third bomb did not detonate.  It has – been confirmed that a suicide bomber was responsible for the blast that went off at the Ethiopian restaurant in Kabalagala and a terrorist organisation has accepted responsibility. Clearly, this knowledge is empowering because it enables us, both as business people and as individual countries, to plan for such imminent threats.  Still, terror is something that most business people would rather not have to deal with at all.  But we cannot bury our heads in the sand.  The devastation experienced previously by Kenyans and Tanzanians and now, by Ugandans at the hands of terrorists is an issue that requires us to employ innovative counter-terrorism measures. 

Presently, global statistics show that less than 70 percent of new business enterprises make it beyond the first year.  In subsequent years, the survival rate deteriorates to about half.

In Kenya, the SME sector accounts for about half of all new jobs within any given year and is a vital lifeline to our economy.  Sadly, only about three out of five new ventures survive beyond the first year due to insufficient capital, poor management, bad locations, or unforeseen changes. 

If it is already testing for new business enterprises to survive, how much more difficult will it be when they have to cater for exposure to such costly risks?

Take for example the average Kenyan, who after many years of saving and visualising being self-employed, decides he wants to establish an up-market eatery that can be frequented by all nationalities. Apart from the usual fixed overhead costs, he now has to contend with additional insurance costs to cover terrorism and the re-building of his business in the event of such a catastrophe.  He is obviously going to think harder and longer before starting up any such venture which puts at risk his whole livelihood. 

Generally, the most challenging consequence of terrorism is that it destabilises trade within a country and its region.

The senseless loss of life, damage to property, a dented public image results in the immediate term, in loss of business confidence and consequently, in diminished productivity.  

In the longer term, it results in increased costs of doing business, loss of investor confidence, less foreign direct investment and generally slows down the growth of an economy.  As a country, we can attest to these effects because we experienced them firsthand post electoral violence. 

However, the East Africa region does not operate in isolation and as a result of our international linkages, the effects of such terrorist activities are felt by our global trade partners. 

In essence, what this tells us is that we must deal with these threats not only within our country but also on a global scale.  The EAC community may be able to put in place tough counter-terrorism measures, but without the support of foreign countries in combating such powerful threats, our resources may soon dwindle leaving the issue unresolved.  This could result in possible escalation of these challenges in the future. 

Today as we speak, Kenya is shouldering the burden of trying pirates who operate in international waters.  By nature, this action makes our country possible collateral, yet the benefactors of safe seas include foreign countries.  

What I am saying, is that while Kenya must do all it can to curb this menace; terrorism is a global problem which requires large scale cooperation by all affected parties. 

Mark my words; the world can no longer afford to ignore the stability of our neighbouring countries, some of which are evidently conduits for terrorist activities abroad.

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