1. OverviewKenya will be conducting its General Election on 4th March, 2013. Besides electing the President and the members of National Assembly, the new constitution will see power de- volved to 47 counties, each of which will elect a governor, county representative, women’s representative, senator and local assembly.
1.a The presidential candidates
A total of 8 candidates will be contesting for the presidential seat including Uhuru Kenyatta (Kenya’s 1st President Mzee Jomo Kenyatta’s son and current Deputy Prime Minister), Raila Odinga (Prime Minister), Musalia Mudavadi (Deputy Prime Minister), Peter Kenneth (Member of Parliament), Martha Karua (Former Minister of Justice and Member of Parlia- ment), James Ole Kiyapi (Former Education Permanent Secretary), Mohamed Abduoba Dida (Former High School teacher) and Paul Muite (Former MP).
1.b Possibility of a run-off
In the event that no presidential candidate obtains more than half the votes, or does not re- ceive 25.0% in at least 24 of 47 counties, a second round of elections will be held within 30 days of the first round of voting with President Mwai Kibaki remaining in office in the in- terim. The numerous opinion polls that have been conducted so far indicate that the race is a close call with Raila Odinga and Uhuru Kenyatta remaining neck-and-neck. This shows a strong likelihood of a run-off taking place. The Independent Electoral and Boundaries Com- mission (IEBC) estimates that a run-off will cost the government an extra KES 11.2bn (USD 128.7m), over and above the initial KES 24.9bn (USD 286.2m) cost of running the first round of elections. The government plans to borrow KES 30.7bn to plug a shortfall in the supplementary budget.
2. Voting scenario
As portrayed in the demarcations on the Kenyan map, a large number of Kenyans vote along tribal lines. It is however worth noting that the nature of the political parties and coalitions’ stronghold in the various provinces ranges, with a basic >50.0% guaranteed in order to be con- sidered “safe” votes by the alliances, and voter support may be as high as 75.0%. The 3 main parties endorsing the CORD alliance are Raila Odinga’s Orange Democratic Movement (ODM), Kalonzo Musyoka’s Wiper Democratic Movement (WDM) and Moses Wetangula’s FORD- Kenya. Jubilee alliance’s main party support on the other hand comes from Uhuru Kenyatta’s- The National Alliance (TNA), William Ruto’s United Republican Party (URP), Charity Ngilu’s National Rainbow Coalition (Narc) and Najib Balala’s Republican Congress Party (RCP).
Certain tribes may not have a presidential aspirant, but influential leaders vying for different po- sitions on different tickets will affect the voting stance of these tribes. This will result to parti- tioning of voting blocs in the areas of Rift Valley, Coastal region, Lower Eastern province, West- ern province and North Eastern province, albeit the nature of fragmentation will vary per prov- ince.
In Rift Valley, the existence of William Ruto’s URP and Gideon Moi’s KANU will see the Rift Valley vote split, with William Ruto securing a large portion of the votes, especially in North and Central Rift Valley. Lower Eastern province will face a similar situation from the Kamba community occupying lower Eastern province, with Kalonzo Musyoka appearing to have a significantly larger traction in the area. As for the Luhya Community, despite having a presi- dential candidate, they will not vote as a bloc with an approximate 33.3% sure backing for Musalia Mudavadi (Amani Coalition), especially amongst the Maragoli (second largest sub- tribe) of the Luhya, while the remaining 66.7% will be scrambled for between Amani, Jubilee and CORD alliances.
It is however worth mentioning that the FORD-Kenya support for CORD gives it a significant upper hand over Jubilee alliance in securing the balancing Luhya votes. With no presidential aspirant or running mate, the Kisii Community stands as a majorly neutral point, with some parti- ality noted towards the CORD alliance. A combination of the Turkana, Pokot, Samburu, Borana, Somali and Maasai communities that occupy northern Kenya create a significant bloc, which is currently declared as a swing vote area.
William Ruto has however gained popularity amongst these ethnic groups, thus giving Jubilee an upper hand in securing the votes which would make a significant increase to percentage votes of the safe votes already secured in the Eastern province (especially around the Mount Kenya re- gion from the Embu and Meru communities, approx. 918,946 registered voters). With both can- didates yet to secure safe vote majority of 51.0%, the probability of a run-off is very high. Should Kenya head to a run-off, it is highly likely that the determining factor of who wins the presidential elections will be based on who receives backing from the Amani Coalition.
3. Presidential debate
For the first time ever, two presidential debates were held on 11th and 25th February 2013, with all the candidates in attendance. This was an initiative of the Media Association of Kenya. The first debate focused on governance, education ,
health care, security and tribalism.
The ICC issue where Uhuru together with other suspects are facing charges on crimes against humanity at the Hague, was heavily debated. Uhuru said he was seeking an elective position and not an appointive one, and as such, Kenyans being well aware of the charges he was facing were free to exercise their democratic right and vote for their candidate of choice. Peter Kenneth said he wants to beat Uhuru in a fair contest and therefore supported his bid for presidency while Martha Karua said his vying for presidency was a sign of impunity. Kiyapi, Dida and Mudavadi warned of ramifications of Uhuru’s presidency while Raila re- mained doubtful about Uhuru’s ability to run the government from “Skype”.
On tribalism, Uhuru and Raila were accused of running campaigns that were exploiting tribal animosities. Uhuru is a member of Kenya’s dominant Kikuyu tribe, and his running mate Ruto, the second dominant tribe-Kalenjin while Raila hails from the Luo community. They both rejected claims that they were running ethnic campaigns. Martha Karua vowed to deal with ethnicity by equalizing development in all areas through deliberately giving more funds to underdeveloped areas.
On governance– the issue of Migingo Islands, the rocky little island in Lake Victoria whose ownership Kenyans and Ugandans have been arguing about was raised, with the candidates being asked to explain how they would resolve it. This was probably thrown in to bring out how the candidates would handle disagreements with other countries. Most of the candidates questioned why no action had been taken by both Uganda and Kenya to resolve the matter but Raila Odinga explained that the survey work commissioned earlier is still on going. Muite said he would deploy the Kenya Army to evict Ugandans from the island after estab- lishing Kenya’s rightful ownership.
On security, the candidates agreed that the clashes in Tana River ought not to be repeated, they suggested that police numbers should increase and that they should be provided with better equipment.
• On education, most candidates promised to provide free primary and secondary education as well as setting up more technical institutions. All candidates believed that more teachers would be required.
• Healthcare – Some candidates promised that they would provide free healthcare, others stated that they would focus on preventative healthcare.
Most candidates believed that they would finance their ambitious plans by making better use of public funds (they admitted that there was a lot of wastage of public funds). They didn’t go into the details on how they would implement their plans. Most Kenyans felt that the first debate was below their expectations as most of the issues discussed did not come out clearly, probably due to the large number of participants. Time was also poorly managed with the debate running for an extra 1.5hrs.
The second debate, despite still having all the 8 contestants, was very well moderated with the candidates providing clarity to most of the questions directed at them within the given time. The debate mainly focused on the minimum wage, corruption and land issues.
• Minimum wage– Candidates were asked what they thought the minimum wage should be. Uhuru argued out that one could not put a figure to it given that it is a factor of several meas- ures including general economic conditions such as inflation, labor supply and demand, and productivity growth amongst others. As such, the government needs to focus on growing the various sectors of the economy to ensure wages are substantial. Raila was of the opinion that a lot of care needs to be taken when deriving the minimum wage in order for Kenya not to out-price itself in terms of competitiveness.
• Corruption charges/allegations facing all candidates were addressed. It was evident that all the candidates, except Uhuru, had various unresolved corruption related cases which they vehemently denied. Raila’s case where he was accused of stealing land set aside for a molas- ses plants as well as Mudavadi’s cemetery land case was revisited. Peter Kenneth, during his tenure as CEO of Kenya Re (a listed insurance firm), apparently acquired a house belonging to the corporation illegally.
• Land– This was a very emotive issue with the spotlight mainly on Uhuru Kenyatta, who by virtue of being the first presidents' son, inherited many acres of land which led some candi- dates to stating that he owns “half of Kenya”, yet there are millions of squatters who have been denied the rightful ownership of their ancestral land. Uhuru defended himself by saying that all the land his family owns was legally acquired through a willing buyer-willing seller process and that no one has ever accused his family of grabbing land. He also stated that there is an independent National Lands Commission which should be left to handle the issue of land. Raila said that in as much as Uhuru is an innocent inheritor of land, one cannot al- low a “hyena to protect their goats” Most candidates stated that it is due to government’s failure that many of the displaced persons from the 2007-2008 post election violence haven't been relocated..
4. ICC Trials
Uhuru Kenyatta and his running mate William Ruto (Former Minister of Agriculture and Mem- ber of Parliament) under the Jubilee Coalition Party, together with two other Kenyans have been indicted by the International Criminal Court (ICC) on charges of crimes against humanity com- mitted during the 2008 post election violence (PEV). The trials were scheduled for 10th and 11th April 2013. However, Uhuru and Ruto filed a three-month delay application which the ICC prosecutor agreed to on 26th February. Should the ICC judges grant it, the trials will be moved to August 2013.
4.a Eligibility of the accused
Civil society groups in Kenya filed a suit at the High Court to bar Uhuru and Ruto from contest- ing the presidency on account of failing the integrity test given their impending Hague trials. However, the High Court ruled that it has no jurisdiction to deal with disputes on nomination and election of presidential candidates, and can only do so after they are elected to office.
When asked what he feels about vying for presidency whilst facing charges at the ICC during the presidential debate, Uhuru said he is basically exercising his democratic right and Kenyans have the right to vote for whoever they want. Both Uhuru Kenyatta and William Ruto have pledged to comply with the ICC, even if they win. Additionally, they might not need to be physically pre- sent during the trials and can instead take part via video conferencing thereby lessening the de- mands that compliance with the ICC would place on their time.
4.b Impact of the ICC on the elections
The ICC may serve to mitigate political violence especially at the national level. It is important to note that political violence in Kenya is mainly steered from the top. The risk/penalty that inter- national trials as well as the new judicial system places on anyone found guilty of spearheading violence is quite high. We have so far witnessed the presidential aspirants emphasizing on peace- ful campaigns and elections during their rallies, and believe that the losing party will concede defeat thus avoiding instigating violence. However, in the event of a closely contested election, minor violence might be witnessed driven by the losing presidential aspirant’s supporters.
The issue of the ICC trials brings about several concerns should Uhuru and Ruto emerge victori- ous in the up coming elections:
• Even with video conferencing, the strain that the trials would have on the two impacts on their ability to perform their duties exemplary should they win.
• There’s the risk that the two might try to derail the prosecution and even push for the case to be handled by the local judiciary. They have however continuously emphasized on their full co-operation with the ICC.
• International implications of a Uhuru/Ruto presidency in the event that they are found guilty could be serious especially if the two fail to comply with the Hague. Kenya would lose its diplomatic relations with several countries thereby possibly impacting socio-economic de- velopment.
5. Post Election Violence
5.a 2008 Post Election Violence (PEV)
The 2008 PEV erupted in Kenya after President Mwai Kibaki was declared the winner of the tightly contested Presidential Election held on 27th December 2007. Targeted ethnic violence and violent protests took place, leaving 1,133 dead and 650,000 internally displaced. The unrest came to an end as several mediators came in to the picture including John Kufuor (former President of Ghana), Kofi Annan (former Secretary of the UN), and Jakaya Kikwete (Tanzania President) and had advanced talks between the two political parties. This led to a power sharing agreement be- tween the two. Raila Odinga was sworn in as Prime Minister on 17th April 2008.
5.b Likelihood of a repeat of the 2008 PEV
The manner in which the 2013 elections are carried out will determine the perceptions of Kenya by the international community for the years to come. It will also have a great impact on Kenya’s economic growth. The World Bank maintains its 2013 growth projections at 5.0% if elections proceed peacefully and do not disrupt economic activity. Even though some incidents of violence have been witnessed during the nominations in January earlier this year, the intensified scrutiny on Kenya and increased security measures make it unlikely for violence to erupt.
The electoral commission is now more advanced and the security agencies have increased the preventive strategies. This alongside the measures taken to promote peace will go a long way to maintaining a calm environment during elections. The religious leaders are also keeping country- wide vigil for a peaceful election, the reformed judicial system has upheld its capacity to handle any clashes and this election’s political alliances appear to have tranquil ethnic tensions. There is also the public accountability, which tempers campaign moods, and will contain voters.
The World Bank predicts that growth will stagnate at 3.0%-4.0% in the worst-case scenario of violence and disturbance. Should election violence erupt, Kenya will not only lose it image as a maturing democracy but will also increase the distance between itself and other emerging mar- kets. The tourism sector will be heavily impacted as Kenya will be viewed as ‘unstable’ and in- vestors will take their business elsewhere. However, we believe that an outbreak of the 2008 magnitude is unlikely but there is a possibility of intra-community demonstrations that people may pursue upon announcement of results.
So far, the environment has been generally calm with peaceful campaigns taking place and ap- propriate measures placed for a credible poll.
6. Impact of the 2013 General Election on the economy
The 2013 General Election will be the first under the new constitution which has created new centers of power and a devolved government. The president will have less power which has in- stead been vested in the judiciary, legislature and local governments.
6.a New government structure and costs
The National Assembly which previously had 210 seats will now have 290 seats plus an addi- tional 47 seats reserved for women and 12 seats for special interest groups. There will also be 47 counties, each with its own elected governor, assembly and senator, responsible for allocating the national budget outside Nairobi. The counties will receive a minimum of 15.0% of the national budget, on top of local revenues.
The new government structure is expected to put immense pressure on the country’s wage bill which is currently at 30.0% of the KES 1.5tr budget and at 12.0% of GDP. However, the Salaries and Remuneration Commission has made proposals setting a limit in what the high ranking state officers will earn, which if implemented, will save the government a total of KES 500.0m (USD 5.7m) annually.
Additionally, all the proposed salaries including allowances will be taxed in full.
Amongst others, the President will earn a maximum of KES 1.7m (USD 19,540) per month, from the current KES 3.1m (USD 35,632), while the Members of the National Assembly will earn a maximum of KES 740,927 (USD 8,516) per month inclusive of allowances and the Cabinet Sec- retaries (a minimum of 14 and a maximum of 21) will take home approximately KES 1.1m (USD 12,643) per month.
The central government wage bill to GDP is quite high at 7.8% compared to Africa’s 6.5%, Asia’s 5.1% and European Union’s 5.2%. The total wage bill to revenue ratio currently stands at 43.0% compared to the targeted 40.0%.
Kenya’s budget deficit to GDP and debt to GDP ratios currently stand at 5.0% and 47.2% respec- tively. This position is expected to worsen once the new government structure is in place as we don't expect the revenue collection in the counties for the first few years to be substantial enough to cover expenditure. So far, it remains unclear how the government plans to finance the next financial year’s budget (2013/2014). However, we believe an increase in taxes (PAYE, VAT, Import Duty ) or introduction of new forms of taxation will be inevitable.
6.b CORD and JUBILEE manifestos
Both the CORD and JUBILEE manifestos seem to have borrowed heavily from the new constitu- tion and Vision 2030 and therefore are quite similar. This is not too surprising considering that the major players in the coalition were members of the previous government whose strategy is based on Vision 2030. The manifestos appear to be overly ambitious given the current level of government spending. No clear source of revenue has been outlined.
Below are some of the major beneficiaries of the manifestos:
Construction Sector
• Both CORD and Jubilee intend to ensure that the Lamu Port and Lamu-Southern Sudan- Ethiopia Transport Corridor (LAPSSET) projects are completed. The project involves the construction of a seaport, international airport in Isiolo, a railway line, pipeline and oil refin- ery. The project will open up several landlocked countries north of Kenya to increased re- gional trade. CORD plans on fast-tracking the Construction Authority Bill to allow for the creation of an authority to regulate the conduct of all stakeholders in the industry.
• Both parties plan on constructing more health centers, schools and technical institutes. The health centers will make health services more accessible to Kenyans. In sports, the Jubilee party hopes to build 5 new national sport stadiums and sports facilities for the youth as well as upgrade sports facilities at the county level.
• The two coalitions also plan on investing in the construction of new roads and maintaining existing roads. In order to reduce the cost of such projects, Jubilee has stated that it would seek concessional and public private partnerships, Build Operate Transfer and Toll and Maintenance arrangements.
• All these infrastructure projects would lead to increased demand for construction materials. Cement companies like Bamburi, ARM Africa and EA Portland would be major benefici- aries.
Information Technology
• The CORD and Jubilee manifestos have emphasized on the need for using ICT to enhance governance structures in the public sector. Implementation of ICT systems in government offices would aid in cubing corruption.
• To improve security, both CORD and Jubilee plan to use CCTV technology in major cities and bolus technology to prevent cattle rustling. Jubilee plans on using IT systems to track wildlife in the national parks in order to reduce poaching.
• Jubilee seeks to leverage off fibre optic and wireless networks to communicate with the vari- ous county governments. Service providers like Access Kenya and Safaricom would be major beneficiaries.
• Other IT initiatives would be to set up creative hubs for youth and promote e-health. Jubilee also mentioned that it will work with international partners to provide school students with solar powered laptops.
Importers, Exporters and Manufacturers
• Jubilee proposes the removal of barriers and tariffs. This will spur increased trade between Kenya and its trading partners. Kenya’s northern neighbors (South Sudan, Sudan, Somalia and Ethiopia) received a special mention. Jubilee believes that trade within the region will be the key to unlocking the next phase of economic growth in Kenya. Several local banks have set up operations in those countries. They include KCB Bank, Equity Bank and Co- op Bank.
• The CORD government plans on increasing the capacity of the Port of Mombasa, installing the equipment required for efficient operations and establishing a free trade area, as well as developing other minor satellite ports, such as Shimoni, Lake Turkana and Kisumu, through strategic partnership approaches. These will in turn speed up the process of clearing goods at the ports saving importers surcharge expenses incurred .
• Manufacturers would benefit from a better funded and more effective Anti counterfeit Agency. It would help deal with issues with counterfeit products such as illicit brews and illicit cigarettes. EA Breweries, BAT Kenya, EA Cables, would benefit significantly from this.
• Jubilee will seek to maintain a stable exchange rate. This will allow for increased trade and relatively stable terms.
Energy Sector
• Jubilee will endeavor to promote alternative energy sources while also creating a platform for Carbon credit trading. KenGen is already putting up a large geothermal plant. Due to its clean energy projects, it will be able to generate additional revenue from carbon credit trad- ing.
• In order to improve power supply, both CORD and Jubilee have promised to ensure the completion of the Mombasa Nairobi Transmission line. This would lead to more efficient distribution of power. Kenya Power, Kenya’s electricity distribution company, will benefit from this.
• Both parties would formulate fair revenue sharing agreements for minerals finds. Revenue would be split between the local community and the central government.
• The proposed energy projects of the LAPSSET project are echoed in both manifestos. They include the construction of an oil pipeline and oil refinery for the energy sector in Kenya.
Hotels and Tourism
• Jubilee hopes to host international sports events while also marketing Kenya as a business and holiday destination by encouraging investment in these areas. Hotels are likely to be the biggest beneficiaries of this. TPS Serena has hotel operations throughout East Africa and would stand to benefit from higher occupancy rates.
• CORD plans on building capacities of county governments to identify, develop and exploit the tourism potential in their respective jurisdictions as well as creating an overall tourism development strategy to improve co-ordination and give priority to strengthening public services that impact directly on tourism.
Financial Intermediation
• CORD and Jubilee have asserted in their manifestos that they will design policies that will ensure the reduction of the fiscal deficit and tame inflation.
• CORD aims at taking a longer-term perspective on macroeconomic stability via a compre- hensive approach to managing public finances while strengthening regulatory capacity and functions of the Central bank of Kenya to manage runaway interest rates. Further, the CORD government will put in place measures to favor a combination of high-profit taxes and low interest rates in order to promote investment over consumption. CORD’s policies on low interest rates might see them enforce interest rates caps which might be detrimental to bank- ing stocks including Barclays Bank, KCB Bank, Co-op Bank, Stanchart Bank, DTB Bank, NIC Bank and Equity Bank.
• The Jubilee government will ensure that microfinance finance institutions receive support from the government in their role in women empowerment and mortgage financing. SME’s such as Kenya Women Finance Trust (KWFT), Faulu Kenya amongst others would be major beneficiaries.
Job creation
• Jubilee hopes to hire more police, border control, game rangers and medical officers to deal with the increasing population. For existing public sector workers, it hopes to pay them more and increase their benefits. The result could lead to an increase in recurrent expenditure.
• CORD plans on reducing the number of licenses required for investments to globally com- petitive levels, such as by ensuring a one-stop-shop licensing mechanism.
• Additionally, the CORD manifesto states that CORD government will increase savings and investment rates by rejuvenating and streamlining the co-operative movement, with a view to mobilizing savings and expanding access to credit.
• Both CORD and Jubilee have vowed to pursue labor market policies that facilitate growth in employment by giving priority to development of the sectors that offer the major employ- ment opportunities, such as the retail trade, restaurants and hotels, and social and personal services. A boost in these sectors would positively impact Uchumi Supermarkets and TPS Serena.
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