East Africa feels blows of Kenyan crisis

Economic and social repercussions affect entire region
From Africa Renewal: 
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One of more than 350,000 Kenyans displaced by the fighting One of more than 350,000 Kenyans displaced by the fighting that erupted after a disputed election in December. The crisis has inflicted a heavy toll both within the country and beyond its borders.
Photograph: Reuters / Zohra Bensemra

Kenya’s post-election violence, which claimed an estimated 1,000 lives and displaced 350,000 people, appears to have abated. An agreement at the end of February to share power between government and opposition leaders has raised hopes of a return to stability. Because of Kenya’s role as an economic powerhouse in the East African region, the seemingly brief crisis has already had significant economic and social repercussions well beyond the country’s borders, and many worry that a resumption of conflict could have truly devastating consequences.

Violence broke out in Kenya on 30 December after Mwai Kibaki, the incumbent, was declared winner of the presidential election over Raila Odinga, despite objections by the opposition and election observers that the vote tally was seriously flawed. In addition to attacks by armed groups from the two sides, protesters’ roadblocks along the main highways between Kenya and neighbouring countries curtailed trade and manufacturing in the region.

Such blockages, along with other economic disruptions, will likely slow economic growth throughout East Africa. Before the unrest, the five countries of the East African Community — Kenya, Tanzania, Rwanda, Burundi and Uganda — expected to see their combined gross domestic product grow by 6 per cent in 2008. Economic analysts now predict that the region’s growth rate will be at least 1.5 percentage points lower.

The ripples of the crisis have spread even wider. Blocked roads and vandalized rail lines have also hampered the transportation of humanitarian assistance to vulnerable groups in the eastern Democratic Republic of the Congo (DRC) and southern Sudan.

The power-sharing agreement, mediated on behalf of the African Union by Kofi Annan, a former UN Secretary-General, with support from a UN regional team, helped bring a halt to the violence. However, Donald Steinberg, deputy president of the International Crisis Group, a conflict monitoring think-tank headquartered in Brussels, notes that a resolution to Kenya’s underlying social and economic inequalities must also be found to prevent a recurrence of conflict. “Kenya,” he points out, “is the platform for relief operations in Somalia and Sudan, a regional entrepot for trade and investment and a key anchor for the long-term stabilization of Rwanda, Uganda and Burundi.”

Transportation hub

Briefing the UN Security Council in February, UN Under-Secretary-General for Humanitarian Affairs John Holmes noted the regional impact of Kenya’s crisis has been particularly significant because of the country’s long-standing role as East Africa’s main transportation hub.

More than 80 per cent of Uganda’s imports pass through the port of Mombasa, as do almost all of Rwanda’s exports. Commercial trade and humanitarian assistance to Burundi, the eastern DRC, parts of northern Tanzania and southern Sudan also rely on the port. These countries are therefore “at risk of being significantly affected by violence and disruption” in Kenya, Mr. Holmes said.

A truck set on fire by Kenyan protesters A truck set on fire by Kenyan protesters: The blockage of highways and rail lines during the crisis seriously disrupted trade with neighbouring countries.
Photograph: Panos / Sven Torfinn

For a region that has been working hard towards economic integration, the disruptions of trade and business have been severe. Most commodities going through the port also must travel along the Northern Corridor, a network of highways through Kenya to neighbouring countries. Each day some 4,000 light vehicles, 1,250 trucks and 400 buses carry more than 10 mn tonnes of cargo to Sudan, Uganda, Rwanda and Burundi along the network. However, in January and early February, an estimated 40 illegal roadblocks barred the way.

To open up the route, the Kenya army in February began providing security for vehicles travelling in convoy. But convoys are slow and costs multiplied. The UN’s Office for the Coordination of Humanitarian Affairs (OCHA) estimates that fuel costs in Uganda, eastern DRC and Burundi rose by up to 50 per cent. The price of petrol products in Kigali, Rwanda more than doubled, and severe shortages prompted the government to institute fuel rationing.

According to the Uganda Manufacturers Association, food prices went up about 15 per cent, and in January inflation rose to 6.5 per cent from 5.1 per cent the month before. By mid-February manufacturers had lost $43 mn because of delays, destruction of goods and slowed production. The Uganda Revenue Authority reported daily revenue collection losses of up to $600,000 due to the disruptions in trade.

Air traffic between Rwanda, Burundi and Kenya declined because of the high cost of aviation fuel. Kenya Airways, the largest carrier in the region, also suspended direct flights to Paris, affecting passengers from Burundi, Rwanda, DRC, Seychelles and Comoros who had to switch to longer and more expensive routes. Bus companies servicing the Nairobi-Kampala and Nairobi-Kigali routes also cut down on trips because of insecurity and the slowness of secure convoys.

Relief aid endangered

Another concern is the disruption in the flow of food aid and other humanitarian assistance to some 7 million refugees and displaced people in the region. The survival of many of them depends on direct support from the UN World Food Programme (WFP) and other relief groups. The WFP moves 1,000 tonnes of food out of Mombasa port every day of the year. According to Alistair Cook, a WFP logistics officer, long closures of the route threaten to leave refugees facing starvation. “It’s a very worrying problem,” WFP spokesperson Peter Smerdon told the UN Integrated Regional Information Network (IRIN).

The alternative route through Tanzania is 20 per cent more expensive and takes two weeks longer. The relief aid would first have to travel 1,000 km by road from Mombasa to Dar es Salaam, then another 980 km by rail to WFP’s storage and milling plants in Isaka, western Tanzania. From there it would have to cross Lake Victoria to Port Bell, Uganda, by boat, then go by truck to southern Sudan and the DRC.

Mr. Holmes told the Security Council that the Kenya events have prompted OCHA to look at such contingencies. But transport through a peaceful Kenya, he ad-ded, “remains by far the preferred option.”

Refugees are another concern. Currently only Uganda is hosting refugees from Kenya, about 12,000. Renewed conflict could create bigger flows of Kenyans to neighbouring countries, some of which are still politically unstable. The humanitarian consequences of new disruptions, said Mr. Holmes, “could dwarf anything we have seen so far.”

Kenya itself hosts about 90,000 refugees from southern Sudan and another 160,000 from Somalia. Further instability in Kenya could compromise food delivery and other services to these refugees.

Overdependence exposed

The crisis has exposed the rest of the region’s “overreliance” on Kenya’s transport infrastructure, especially Mombasa port, notes Abe Selassie, the International Monetary Fund representative in Uganda. Efforts to reduce this dependency have been planned for some years, but none has been completed. The Kenya pipeline, which currently carries fuel supplies to depots in western Kenya, was to be extended to Uganda to reduce costs and to avoid the need to transport fuel by road to Uganda, Rwanda, eastern DRC and Burundi. But the project is behind schedule.

Fuel and other imports to Uganda can be transported via Tanzania, but that road ends at Lake Victoria and the products then have to be shipped across the lake. Uganda has no ships in good operating order.

In January, Rwanda signed an agreement to obtain petroleum products from the main port of Dar es Salaam by rail. But the distances and poor state of Tanzanian roads and railways makes this expensive. Analysts argue that with improvements in its infrastructure, Tanzania could become a bigger player in the region’s economy.

Speaking at a February meeting of bankers from the East African Community (EAC), the regional body’s Secretary-General Juma Mwapachu said that the economic dislocation so far — and the threat of further disruptions if normality is not soon restored — is especially worrying to the community’s five member states. “We need to address the question of integrated infrastructure,” he said, so that “in future we avoid the after-effects of a crisis like the one now in Kenya.” Much of the meeting’s discussion revolved around how to strengthen alternative transport routes.

Investor confidence

There is a serious danger that the Kenyan crisis could lead investors to reexamine their earlier perceptions of the country’s stability, says Razia Khan, the head of Africa research for the UK’s Standard Chartered Bank. This could erode investor confidence not just in Kenya, “but more widely in Africa.”

Business is already paying a high price. Many of the processed and industrial goods bought in the region come from Kenyan factories run by local and international investors. Kenya Manufacturing Association Chairman Steven Smith estimates that industry lost 35 per cent of its business in January and anticipates a 20 per cent decline in production by April. Kenya’s economy, he says, could lose about 3 per cent of its growth in gross domestic product, due to loss of staff and business opportunities, dampening growth in the rest of the region as well.

The Kenyan political crisis, EAC Secretary-General Mwapachu told local media, “imposes a difficult and complex environment for the EAC, for investment promotion and for business players alike.” Regional trade flows have slowed, and tax and business revenues have declined, he noted. “We can only promote and attract investments sustainably, as well as assure effective intra-regional trade, if we have enduring peace and stability.”

Risks and opportunities

For some countries in the region, Kenya’s economic disruptions not only pose a risk, but may also offer potential opportunities. Until recently, Kenya was a leading producer of pyrethrum, an extract used to make some of the safest and most effective insecticides. In 1998, Kenya exported 13,000 tonnes, 90 per cent of world output. The flower from which pyrethrum is extracted is grown in the Rift Valley, the region most affected by the violence. This year planting has yet to take place. Rwanda and Tanzania also grow the product, and Rwanda’s pyrethrum processing company recently attracted foreign investment to help triple production.

However, meeting import regulations in Europe and the US takes time. If buyers do not get enough supplies quickly, the shortages could prompt them to switch to synthetic substitutes, and farmers throughout East Africa could lose out. “Our customers have to invest a lot of money in producing products that contain pyrethrum,” Manfred Pfersich of the Kenya Pyrethrum Information Centre in Austria told reporters. “If they’re not sure of the supply, they would rather invest in something else.”

Kenya is also the world’s leading exporter of black tea, but the crisis, along with drought, will reduce its crop by 7 per cent, estimates the Kenya Tea Board. Sri Lanka, the second-largest supplier, is already earning more because of the shortages and higher world prices. “Kenya’s political situation is to our advantage,” says Lalith Hettiarachchi, chairman of the Sri Lanka Tea Board.

Kenya also provides 36 per cent of Europe’s cut flowers, as well as fruits and vegetables. Forty percent of Kenya’s horticultural exports are grown on farms in the Rift Valley. Interruptions in those exports could prove a boon to farmers in Egypt, Morocco and some West African countries.

Tourism, Kenya’s main revenue earner, was initially forecast to bring in $1 bn in 2008. The Kenya Tourism Board expects the sector to recover quickly now that there appears to be a resolution to the crisis. But renewed violence could encourage a shift towards other countries in the region with similar climates and wildlife attractions. “There is no shortage of beach destinations to compete against our beaches in Mombasa,” acknowledged Fred Kaigwa, chief executive of Kenya Tour Operators. “Charter companies are unlikely to cancel and would most likely divert to countries such as Tanzania, Mauritius, Botswana and South Africa.”

Renewed violence in Kenya and its potential repercussions throughout the region prompted considerable donor pressure for a quick and meaningful resolution. With the signing of the power-sharing agreement, that seems to be the direction the country is heading. But analysts agree that much needs to be done to make sure the peace is sustained. “We can’t afford to fail,” says Mr. Annan. “This is not about the fortunes of political parties or individuals. This is about Kenya and the region.”

Kenyan livelihoods up in smoke

The UN Office for the Coordination of Humanitarian Affairs (OCHA) estimates that as of February up to 600,000 Kenyans were directly affected by the post-election violence and 250,000 remained in camps for displaced people. Although a power-sharing agreement was signed with the aim of resolving the crisis, thousands face the challenge of coping with the loss of homes, property and livelihoods.

Many small businesses — which employ 75 per cent of the work force — were looted, burned or closed as owners fled. In the Nairobi slum of Kibera, home to more than 1 million urban poor, 800 business stalls were razed, six schools destroyed, 900 houses torched and thousands displaced. In other Nairobi neighbourhoods gangs burned and looted the homes of 3,920 people and some 228 small business kiosks and stalls. Kisumu, in western Kenya, lost 80 per cent of its businesses. The Mumias, Kibos and Muhoroni sugar enterprises, which employ 40,000 directly (and indirectly support the livelihoods of another 450,000), curtailed production after cane fields and equipment were destroyed. On the Kenyan coast, some 20,000 tourism jobs disappeared.

In the Rift Valley, 80,000 houses were torched. Provincial officials estimate $1.8 mn will be needed to rebuild more than 28 destroyed schools. The UN Food and Agriculture Organization (FAO) estimates that 75 per cent of those displaced in the Rift Valley are destitute.

The Rift Valley is Kenya’s breadbasket, and the province’s commissioner, Hassan Noor Hassan, estimates that 3 mn bags of maize were destroyed in the violence. The FAO reported in January that the insecurity made it impossible for farmers to harvest nearly 20 per cent of the undestroyed cereal crop. Worse, notes a February OCHA report, “less than 10 per cent of land has been prepared for planting season,” although normally at least 80 per cent would have been planted by that time. In western Kenya, 40 per cent of displaced farmers had not yet returned to their farms by February.

Even with the political crisis seemingly resolved, warns OCHA, the loss of some 500,000 jobs means that banditry will continue to rise “as more people resort to crime in order to survive.” David Nalo, Kenya’s permanent secretary for trade and industry, acknowledges that until small businesses revive, “Kenya’s economy cannot substantially recover.”

Ethnic targeting prompted many people to flee occupations in the Rift Valley and central provinces. Two of seven public universities remained closed in February because of insecurity and lack of lecturers. Some 10,000 of the country’s 230,000 teachers had not reported to their classrooms at the end of January. Six hundred primary and 1,000 secondary and tertiary teachers asked for transfers back to their home provinces.

The flight of people back to their home provinces has raised concerns that employers may start hiring natives of each province for local operations to avoid future labour disruptions. Central Bank Governor Njuguna Ndungu worries that if the government does not intervene, hiring policies could become “based on preference of location and ethnic group rather than merit.”