Aug 6, 2017

On 8^th August, 2017, Kenyans will take to their registered voting stations to elect their Government, in what will be Kenya’s 6^th General Election since they adopted a multi-party system, and the 2^nd General Election under The Constitution of Kenya, 2010.

The Kenyan General Elections, 2017, is shaping to be a unique election for four main reasons:

• It has the highest number of contesting candidates at 16,259 compared to 12,400 in 2013,
• It is definitely the most hotly contested election in our history, so it raises the stakes, and from recent surveys, it is very closely contested, with the latest IPSOS polls placing Uhuru Kenyatta at 47% and Raila Odinga at 44%, and the latest Info track poll placing Uhuru Kenyatta at 48% and Raila Odinga at 48%,
• It is the most expensive election ever held with Kshs 49.9 bn expected to be expended by the electoral body, up from Kshs 35.0 bn in 2013, as per the Pre-Election Economic and Fiscal Report, and
• As a nation, we have never been more prepared in terms of electoral governance and oversight, with an independent judiciary, we have taken lessons from the last two elections, which have ended up being contested, and a lot of the electoral matters have been litigated upfront – we have had about 22 cases relating to electoral process, with 2 pending cases to be heard and determined this coming Monday, the eve of the election.

There has been a lot of discussion and anxiety about stability and business environment after the elections. Will we have post-election violence as we did after the 2007 elections? What should the business community expect after the elections?

In this note, Post-Election Business Environment, we take a look at election preparedness and try to assess whether we have the right foundations to run a free and fair election. Our view is that because of the significant institutional reforms that have taken place so far and the level of election preparedness, it is highly likely that we shall have a largely free, fair and credible election; and if that were to happen, we do not see post-election violence, contrary to popular sentiment.

To determine whether or not to expect post-election violence, we looked at five key indicators of a peaceful election, relative to the past two elections: integrity and independence of the electoral body, integrity and independence of the judiciary, election preparedness, international process and monitoring, and market sentiment;

Integrity and independence of the electoral body: The electoral body, being one of the bodies that carry the largest responsibility in any elections, need to be independent and impartial to any external influence or powers-that-be that may want to skew the process to their advantage. The previous body, The Electoral Commission of Kenya, was far from independent, as the members were appointed by the President. The Independent Electoral and Boundaries Commission (IEBC), constituted a year after the promulgation of The Constitution, 2010, is an independent body tasked with conducting elections of any elective body or office established by the Constitution, and any other elections as prescribed by an Act of Parliament. It’s scope of duties is prescribed by The Independent Electoral and Boundaries Commission Act, 2011, which provides for the appointment and effective operation of the IEBC. Compared to 2007, where we witnessed widespread violence, having an independent electoral body is a positive step to ensuring a credible electoral process.

Integrity and independence of the judiciary: The pre 2010 judicial approach to litigation led to the distrust in the court system, a major reason that has been cited as a cause for the 2007 post-election violence. Pre 2010, the Judiciary served as a formalistic, technical and rule bound body, but the Constitution of Kenya, 2010, transformed it to a more purpose driven body that would enable the judiciary dispense substantive justice. There is no better way that this is exemplified than the following reasons;

• There is increased litigation space with Kenyans, in their personal capacities, able to approach The High Court to seek redress and/or guidance on all matters pertaining to the election;
• The Court has increasingly acted independently exercising its power not only to interpret statute but also request for information where it deems it necessary in making a decision. This can be highlighted in the case of Raila Odinga vs IEBC & 3 Others (2013) where the main grievance was with regards to the irregularities involved in (i) the partial employment of the biometric system technology, before reverting to the manual process, (ii) the maintenance of a Voter Register, and (iii) the tallying of votes. The Supreme Court on its own motion ordered a scrutiny of all records (without being prompted by either side) used in the Counties 33,400 polling stations, to enable them rule that it was not evident, on the facts, that the candidate declared as the President-elect had not obtained the basic vote-threshold justifying his being declared as such.
• The bringing forth of issues that would likely dispute the validity of an election process, prior to the running of the process thus providing clarity before election and reducing the incidences of disputes that may occur after the carrying out of an election and the declaration of the results. Examples include:
  1. In the case of Maina Kiai, Khelef Khalifa and Tirop Kitur vs IEBC (2016), where they challenged the powers of IEBC to make any alterations to the results from the Constituency Level, it was ruled at both the High Court and the Court of Appeal that the results from the Returning Officers at the Constituency Level be deemed as final;
  2. In the case of IEBC vs NASA, Al Ghurair Printing & Others (2017) where the petition, argued up until the Court of Appeal, already addressed the question as to whether the tender for the printing of the ballot papers was awarded in line with the principles of the constitution; Matter dispensed with and a question as to whether the ballot papers were compromised at printing cannot arise after the election; and
  3. In the case of NASA vs IEBC & 2 Others (2017) where the petition was also dispensed with and confirmed that the use of the manual system in identifying and transmitting results was in order with the Law that required a complementary system that adds on and improves the previous one to address any possible failures of the electronic system.

Going into the elections it is clear that the judicial body has a high degree of independence and objectivity, and this has a positive impact towards the electoral process.

Election Preparedness: With only a few days left to the 2017 Kenya General elections, the IEBC shared its preparedness strategy in line with its readiness to handle the upcoming elections in a smooth, free and fair process. Previous elections have largely been plagued by the following issues:

• Delays and irregularities of procurement of the integrated elections management system, which led to several polling stations receiving the election materials late,
• Laws, especially those skewed towards integrity and leadership left unenforced by relevant authorities, and
• Technological and administrative problems with regard to voter registration, leaving some voters having not exercised their voting rights.

The IEBC’s 5-point strategy which involves (i) auditing electronic equipment, (ii) improving the ICT department, (iii) implementing electronic voting, (iv) earlier delivery of the devices to the polling stations, and (iv) having an election day plan, seeks to address this.

The main improvement has been the acquisition of a full proof system that shall identify voters biometrically reducing chances of human error - The Kenya Integrated Elections Management System (KIEMS) which serves to (i) identify and authenticate voters, (ii) monitor voter turnout (iv) transmit election results, and (v) stem election fraud.  The IEBC has also invested a lot in voter education with regard to the electoral process, to ensure that the process runs smoothly with little issues. With an approval rating of 72.4% as per The Africa Centre for Open Governance (AfriCOG) Report on Kenya’s preparedness to the 2017 General Elections, it indicates that the public is also confident in the IEBC delivering its mandate.

In addition to the aforementioned, IEBC has developed the Elections Results Management Framework which in turn clarifies the procedure of results management at each step and acts as a guide to managing elections results procedure. The level of preparedness towards the General Elections is a positive step, compared to the previous election years, in ensuring a free and fair election.

International presence and monitoring: The constant fear about violence every election year roughly translates into a one percent point drop in growth for Kenya’s economy owing to investors, both foreign and international, waiting to witness the perception of the results. In spite of this, “second tier” economies in Africa such as Kenya, Tanzania, Mozambique and Egypt are expected to sustain high growth rates according to the Africa Attractiveness Report 2017 by EY. There has also been significant international presence and investment in the country and this increases the international observance on the Election process, with international companies such as GE, IBM, Google, Volkswagen and The World Bank setting up shop.

Prior to the Election, Kenya hosted over 200 global and continental meetings and high profile conferences inclusive of the United Nations Conference on Trade and Development (UNCTAD) and the Tokyo International Conference on African Development (TICAD) cementing its place as a key investment hub in East Africa. Foreign investors look at Kenya as their entry point into the East and Central African region, and given their massive investment and commitments to the country, the level of international observance and presence has never been this high, a positive indicator, in that it is in the best interest of both investors and Kenyans that the elections are carried out in a free and fair manner,

Market Sentiments: As markets are always forward looking, we used the NSE as a proxy for market expectations and sentiment. So far, the equities market has rallied 21.0% since the beginning of the year, however, asset valuations remain increasingly low and attractive for investment, as we have highlighted below. It is expected that the markets will continue to rally, with asset valuations rising further, if the elections are conducted in a peaceful and credible manner.

Historically, market valuations have remained independent of the effect of a general election. In the months surrounding the March 2013 election, the NASI P/E ratio was on the rise, attributable to a general rise in stock prices during the period, where between January 2012 and December 2014, the NASI experienced attractive levels of growth, gaining 59.5%. This was on the back of gains of 29.0%, 19.2%, and 3.8% in 2012, 2013, and 2014, respectively. It indicates that the market’s confidence during this period was not swayed by the election.

With (i) the currency having held steady, only depreciating by 1.4% YTD against a globally strengthening dollar, and (ii) yields on the 5-year and 10-year Eurobonds, having declined by 0.3% and 1.4%, respectively, this highlights further the positive investor sentiment towards Kenya. Given that the market has rallied over 60.0% post 2007, it is clear that the market sentiment towards the Kenyan growth potential is high and independent of elections. This metric highlights a positive outlook towards the elections.

Conclusion

Indicator	Description	Conclusion
Integrity and independence of the electoral body	The formation of an independent electoral body, The Independent Electoral and Boundaries Commission (IEBC), replacing the flawed and compromised Electoral Commission of Kenya, is a step in the right direction in ensuring that the Kenyan Electoral Process is conducted in a free and fair manner	Positive
Integrity and independence of the judiciary	The pre 2010 judicial approach to litigation led to the distrust in the court system, a major reason that has been cited as a cause for the 2007 post-election violence. Pre 2010, the Judiciary served as a formalistic, technical and rule bound body, but the Constitution of Kenya, 2010, transformed it to a more purpose driven body that would enable the judiciary dispense substantive justice	Positive
Election preparedness	Following the release of IEBC's 5 point strategy to tackle the electoral process and curb the issues faced during the last elections, it is clear that they are more prepared to conduct the election in a free and fair manner	Positive
International presence and monitoring	Given the degree and level of international investment in the country highlights the level of observance towards the General elections. This highlights that it is in the best interest of both investors and Kenyans that the elections are carried out in a free and fair manner	Positive
Market Sentiments	Given that the market has continued to rally, defying the electioneering period, it is a clear indicator that the foreign sentiment towards Kenya remains high and there is high expectation of a peaceful election and smooth transition thereafter	Positive

 

From the above factors, with all having a positive outlook towards the elections, it is clear that Kenya is ready for an election from both a legal, operational and oversight perspective. With (i) the electoral and judicial processes having undergone major changes to ensure their independence and integrity, (ii) the IEBC having a clearly thought out process for the election and having invested heavily in voter education, and (iii) the magnitude of foreign investment and confidence in the country, Kenya has the right foundations to run a smooth, free and fair election.

What Kenyans want is a fair, peaceful and credible election; for elections to be free and fair they must be (i) run by way of secret ballot, (ii) conducted by an independent body, (iii) administered in a transparent, impartial and accountable manner, and (iv) free from intimidation, corruption, threats, violence and other improper influence. If this is delivered, Kenyans are likely to accept the outcome and we shall have a peaceful transition to a new Government, or a peaceful continuation of leadership for the incumbent. A peaceful transition through an election is essential for any country, especially a developing nation. For Kenya as a nation, observing the equities market as an example to assess foreign investor sentiment towards the upcoming elections, it is clear that foreign investors have already priced in a peaceful elections and are invested in the Kenyan growth story.