Ratio Magazine :: The Inside Track to East Africa’s Economies - Coalition Crisis in Kenya: More of the Same?

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Coalition Crisis in Kenya: More of the Same?

Friday, 19 February 2010

The exchange rate may have wobbled, but is the crisis really a crisis, and does business, local and international, have to be worried?

High Drama
Coalition drama has dominated the news on Kenya this week: Prime Minister Raila Odinga’s announced that he would suspend both Minister for Agriculture William Ruto and Minister for Education Sam Ongeri to make way for corruption investigations. President Mwai Kibaki promptly reversed the suspensions, kicking off a wild round of political posturing and a host of accusations from both coalition camps about acting ‘unconstitutionally’. Ministers from Odinga’s ODM party are now boycotting cabinet meetings and the prime minister has called for Kofi Annan to come to the country’s rescue, again.

Kenyans of course love a good political crisis, and there have been media speculations of all kinds. Prefaced by references to Cold War “mutually assured destruction” tactics, the Nation writes in its 16 February 2010 editorial: “We are witnessing what many have reason to fear could, if mismanaged, could be the beginning of the end for the Grand Coalition government.” International media - who often relish the African-state-on-the-brink-of-chaos grand narrative - have jumped on the bandwagon as well. Business outlets like Bloomberg have in turn picked up on the softening of the Kenyan shilling. And then there is the ‘international community’, doing the usual urging for reconciliation and productive co-operation.

So is Kenya on the brink again? Well, not quite, not yet.

Behind the Noise
For one, the recent ‘crisis’ appears a little orchestrated: It is unlikely that Odinga expected the president to go along with the suspension. Insiders say communication within the coalition has been particularly dismal over the last few months and that the PM had simply grown tired of being ignored. It is an open secret that Odinga is not often consulted on ministerial work that according the coalition agreement he is meant to be directing. With audit reports recently released on both the maize and primary education scandals, the opportunity for a public fight was ripe.

By pushing this issue publicly, Odinga has taken a gamble. If neither minister steps aside, then the PM will look weak. But he will also get to point a finger at Kibaki and his PNU party, putting them in a position of appearing reluctant to take action on clearly questionable dealings in government. This makes him look good to both donors and voters. Superficially, Odinga appears balanced by suspending both a PNU and an ODM minister – never mind that the latter has long defected from ODM and cosied up to PNU’s Uhuru Kenyatta, an unlikely ally given that both gentlemen had their constituents at each other’s throat in 2008, and not figuratively. If Ruto is forced to step aside, Odinga will have also succeeded in weakening – at least temporarily – one of his main challengers for the 2012 presidential seat.

According to documents leaked to the media, Odinga sent a letter dated 8 February 2010 to the African Union and Kofi Annan warning that “a complete paralysis of the government” was near. For whatever his particular motivations – breaking PNU’s dominance in the coalition despite their under-representation in parliament, positioning himself for the next elections in 2012, or, possibly, the intention to actually get some government work done –, Odinga has clearly attempted to get the international community’s attention. This could be an effort to counteract some recent PR moves by the PNU camp.

Government PR
The Kenyan government has been under pressure from key donors in recent months: On 26 January 2010, the US government announced that it would put on hold USD7m in education funding until the government took credible measures to sort out the missing funds in the primary education scandal. This followed a similar announcement from the UK in December 2009 that it would withhold USD16m in planned education funding. The US and UK have also both instituted travel bans against top Kenyan officials on corruption charges.

While the pressure has resulted in few concrete steps to tackle corruption, it has inspired some serious PR efforts. Vice President Kalonzo Musyoka embarked on a campaign trip to Washington DC the first week of February, yielding lots of smiling and handshaking and lauding of reform progress in Kenya. This was organized by the government’s new PR firm, CLS & Associates, a powerful Washington lobbying group hired in August 2009 for USD1.7m on a two-year contract by the Kenyan government to clean up its image in Washington.

Kalonzo reported back that the State Department was happy with progress on reforms in Kenya and had promised to fast track the country’s Millennium Challenge Corporation (MCC) application and provide more USAID funding, a claim that turned out to be a little liberal with the truth: The State Department later refuted Kalonzo’s claims, and said officials actually told the VP that the US would need to see further progress on the reform agenda to consider increasing aid.

Perspectives
The exchange rate reacted sensitively to the political noise, but will the crisis have a marked impact on the economy? Not for now: First of all, it has already calmed down and is showing signs of manageability, not the least because of its deliberate escalation. Kibaki and Odinga are scheduled to meet Sunday, 21 February, to hammer out a compromise – this may lead to no substantial changes, but that will then at least retain the admittedly dysfunctional status quo.

Business people will, in all likelihood, just shake their heads and get on with business . Of course this does not help to make Kenya more attractive for FDI, but anyone who is doing business in Kenya already, or is seriously considering it, is aware of what Kenyan politics are like: personality-based, vicious, highly volatile, with ever changing alliances. And political paralysis has been a function of the coalition since its formation.

For the tourism sector, one of Kenya’s key revenue earners, the global media message is not pretty, but few tourists are that aware of political squabbles. The downtown riots over the expulsion of radical cleric Abdullah al-Faisal, broadcast around the world, were probably more damaging.

What it does show, however, is that Kenya’s short and long-term political risk remains quite high. The coalition has not functioned, is not functioning, and probably will not ever function well. Reforms to this point have been nominal. Deep divisions and anger remain throughout the country. This will only change if land grievances can be addressed, a new publicly palatable constitution passed, and perpetrators of the post-election violence brought to some sort of justice to prevent it from reoccurring – none of which appears very likely at the current stage.

As for the next round of elections, this current tiff will probably not force them to be held early, not least because resolution appears to be on the horizon – and few politicians have had the time to raise the vital funds required for a new campaign. If Ruto is forced to step aside, isolated violence could break out in the Rift Valley. But on the national scene, political posturing will simply continue and government gridlock will grow over the next two years, and more violence is likely to crop up around the polls in 2012.

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