Tough times ahead, warns KEPSA

January 7, 2012

, NAIROBI, Kenya, Jan 7 – The drop in the inflation rate and stabilizing exchange rate seen at the turn of the New Year may not be indicative of easier times for the business community if external factors persist.
Kenya Private Sector Alliance (Kepsa) Chairman Patrick Obath said the looming Eurozone crisis, US elections, energy costs and union wrangles are factors that will affect business in the year ahead.

“Being an election year in Kenya we’re going to have a lot of buffeting crosswinds in from all sorts of directions. The political class is going to try and influence what is going on in the country, obviously the external economies; inflows of financial assistance are going to be pegged onto the election. So as a country we need to tighten our belts seriously this year,” he said.

As less dollar inflows are expected with the volatile western markets, Obath noted that boosting the manufacturing sector by producing consumption goods locally will help alleviate pressure on the Shilling moving forward.

“If we were able to transform our consumption patterns so we’re not spending dollars for consumption goods to come in, but to spending dollars to strengthen out manufacturing sector then effectively we’re going to improve the balance of payments,” he said.

The business community is bracing for the elections this year with the launch of a campaign to engage political leaders and the public on issues surrounding the process in the next few months.
Obath said Kepsa has taken a proactive role to prevent the events of the 2008 post election violence from recurring through the initiative.
“The main thing that we consider could be driving the election is this widening gap between the haves and have-nots, where you have these financial tensions in the country. We think that is going to play out in elections this year. Not politics, but finance,” he revealed.
Kepsa was instrumental in rallying business leaders, politicians and foreign envoys together, during the unrest in 2008 that saw the business community lose up to $1 billion.
The speculation of hiked interest rates due to the funding of the election process, Obath said is unlikely, however a foreign investors holding their to their wallets is inevitable as seen in previous election seasons.
“The days of vote-buying are beginning to disappear; on that basis we don’t think you’re going to see a big financial impact on the point of interest rates from the election. What we’re going to see is a slowdown in investment because nobody knows who’s coming in.”

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