Politics is who gets what, when and how, as was defined by American political scientist Harold Lasswell. Politics is, therefore, central to an economy as it determines how resources are allocated.
In Kenya, there is a widely held perception that the leader one elects determines the resource allocation within one’s locality. Politics affects much more than one’s locality; it drives the economy. How is that so?
The government is the formal decision-making part of the state. Politics often takes place within the context of a government. The organisation of power within a state is what results in the formulation and enforcement of laws, protection against any threats and ensuring economic stability. Elections are an opportunity for the citizenry to make a choice on how they want to be governed.
Politics in Kenya, like in other developing countries, seems to have a ripple effect on the performance of the economy.
There is a predictable pattern of economic performance during general election years. In 1992 the economy shrank by 0.8 per cent and recorded growth of a paltry 0.5 per cent in 2002.
Understandably, the country’s GDP growth slipped from 7.1 per cent in 2007 to 1.7 per cent in 2008 owing to the post-2007 election violence.
August may be ranked as the worst month for businesses in the private sector, with decreased output and less money in circulation.
The Stanbic’s Purchasing Managers Index (PMI) well captures this reality by the noticeable drop from 48.1 in July to a low of 42 in August.
The period was also characterised by high inflation rate, and heightened political risk.
The banking industry experienced low level of activity as a result of the wait-and-see stance adopted by many investors.
This, in turn, affected loan disbursements to fund economic activities, borrowers’ ability to honour loan obligations and effectively, the profitability of banks. On a positive note, however, receipts from Kenyans in the diaspora do not appear to have been dampened by the political activity. Remittances rose by four per cent to Sh92 billion in June from Sh88.3 billion in June last year.
There is a need to re-calibrate the weight we attach to the political temperature vis-a-vis economic activity.
While elections are a necessity, there is need to reduce the effects of political activities on business and economic performance.
In doing so, we will not be re-inventing the wheel. Belgium, for example, had no government for 15 months in 2010-11, yet its economy managed to outperform those of the UK, Germany, France, Italy, Spain, the Netherlands, Finland, and Switzerland in the last quarter of 2011.
Whereas Belgian politics got stuck in a gridlock after elections where no single party received a definite mandate and efforts to form a coalition government failed; economic activity continued and the economy grew. Ireland went 63 days without a government and the economy expanded by five per cent in the first half of the year. So did Spain last year, Germany in 2005 and the US in 2013.
How can we ensure the business and commerce continue during and despite elections? How can we insulate our economy from the vagaries of the high temperatures that characterise our political campaigns?
We need to strengthen systems and structures to soften the effect of politics on commerce and the general operation of the economy. Non-political entities such as regulatory bodies, appointed executives and public servants as well as security agents need to remain well above the political shenanigans of the day. Security is paramount in order to reassure the citizenry and the international community of a conducive business environment.
As citizens, we must always bear in mind that elections will come and go, but Kenya needs to remain intact and be bequeathed to future generations.
Elections or not, money has to be made, roads have to be built, goods and resources must be distributed, and people have to feed and be educated, among other things, for our society to thrive. There is a need for proper systems and governance, which allow us to conduct business as usual even without a government to be entrenched as part of our national psyche and DNA.
We need to evolve to a point where we do not operate in uncertainty in election periods, but have a bullish attitude to spur this country to even greater growth. May God continue to shower our beautiful country with blessings at all times.
Dr Thuku is the managing director & CEO at Family Bank Limited. [email protected]