Kenya at a Glance: 2002-03

COUNTRY REPORT Kenya Kenya at a glance: 2002-03 OVERVIEW Political stability in Kenya is not expected to improve during the forecast period because electoral pressures will intensify conflicts within the ruling Kenya African National Union (KANU) and the opposition parties. Inter- tribal violence is likely to increase as the elections, which must be held by end-2002, approach. Relations with the IMF will remain difficult, and the government’s hope for a resumption of donor support is unlikely to be fulfilled in 2001. Although economic reforms will continue to shape policy, divestment of state assets and retrenchment of the public sector will proceed slowly, if at all. Key changes from last month Political outlook • A major cabinet reshuffle will take place towards the end of this year in which the old guard, including the vice-president, George Saitoti, are likely to be casualties. Although the appointment of National Development Party members to government and the move towards a full merger between the two parties has fuelled speculation that President Moi does not intend to relinquish power when he completes his last constitutional term in office at the end of 2002, recent events suggest that Mr Moi will not seek to run as president. Mr Moi will, however, keep the leading contenders waiting as long as possible before engineering the succession within KANU. Economic policy outlook • The need to restore IMF support and other donor funding will continue to dominate the government’s economic policy in the coming months. Economic forecast • Real GDP is estimated to rise by 1.6% in 2001, owing to a recovery of both agriculture and manufacturing. The continued recovery of tourism in 2001 will also have a positive effect on economic growth. Provided that donor funding is resumed, the Kenyan economy is forecast to recover more strongly in the forecast period; real GDP is expected to grow by 2.5% in 2002 and by 3.3 % in 2003. October 2001 The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through our digital portfolio, where our latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 15 Regent St The Economist Building 60/F, Central Plaza London 111 West 57th Street 18 Harbour Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.20) 7830 1007 Tel: (1.212) 554 0600 Tel: (852) 2585 3888 Fax: (44.20) 7830 1023 Fax: (1.212) 586 0248 Fax: (852) 2802 7638 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] Website: www.eiu.com Electronic delivery This publication can be viewed by subscribing online at www.store.eiu.com Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, online databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office Copyright © 2001 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author's and the publisher's ability. However, the EIU does not accept responsibility for any loss arising from reliance on it. ISSN 0269-4239 Symbols for tables “n/a” means not available; “–” means not applicable Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK. Kenya 1 Outlook for 2002-03 Political outlook Domestic politics It is clear that the general election at the end of 2002 and the attendant succession battle will dominate President Daniel arap Moi’s agenda over most of the forecast period rather than the need for structural reform and economic recovery. The imminent merger between the ruling Kenya African National Union (KANU) and the National Development Party (NDP) has gained momentum following a decision by KANU’s National Executive Council, chaired by Mr Moi, to create nine new posts within the ruling party. The expansion of the structure of the ruling party—and its merger with the NDP— was agreed at a meeting of KANU and NDP national delegates in late August. It is clear that the next joint KANU-NDP national delegate meeting will both ratify and fill all the positions. With the exception of the post of national chairman, which is reserved for Mr Moi, the other positions will be hotly contested. The positions will not only be divided between the two parties, but are expected to reflect a realignment in which “young Turks” will succeed the old guard in a number of key positions. The coveted position of secretary- general is expected to change hands from Joseph Kamotho to Uhuru Kenyatta, the son of the late President Jomo Kenyatta. In a further move targeting the vast Kenneth Matiba constituency in Muranga and the Kikuyu diaspora, President Moi has appointed Raymond Matiba, the eldest son of his bitter political adversary, to head the Kenya Tourist Board—a position previously occupied by Uhuru Kenyatta. It is clear that both Mr Kenyatta and Mr Matiba junior have little substantive experience and achievement to show from their previous posts and are unlikely to inspire much confidence in the political arena. These changes are expected to be followed by a major cabinet reshuffle towards the end of 2001, in which the old guard, including the vice-president, George Saitoti, are likely to be casualties and the “young Turks” are likely to gain key leadership positions. Although the appointment of NDP members to government and the move towards a full merger between the two parties has fuelled speculation that President Moi does not intend to relinquish power when he completes his last constitutional term in office at the end of 2002, recent evidence suggests that Mr Moi will not seek to run as president in 2002. Mr Moi is likely to step down from the presidency in any of the three following scenarios. First, he may retire following the formalisation of the KANU-NDP merger, using the constitutional review process to push through constitutional amendments that will result in a considerably weakened presidency and the devolution of power from the central government. Second, he may step down after ensuring that the combined team at the helm—probably NDP members and the KANU “young Turks”—will accommodate and protect his interests after retirement. The third scenario is that Mr Moi will remain chairman of the new KANU, a position that will give him the power to continue determining the political agenda and the direction of the ruling party. However, there is no clear pattern emerging in the Moi succession saga although there are obvious EIU Country Report October 2001 © The Economist Intelligence Unit Limited 2001 2 Kenya competing interests. First, there are the key proponents of the KANU-NDP merger including Raila Odinga. Then there are the KANU “young Turks” including Musalia Mudavadi, Julius Sunkuli, Uhuru Kenyatta and Kalonzo Musyoka. Finally, there is the old-guard represented by the president himself, Mr Saitoti, Nicholas Biwott and Joseph Kamotho. The president will keep the leading contenders waiting as long as possible before engineering the succession within KANU. The KANU-NDP parliamentary partnership will also be closely involved in the constitutional review process. The constitution, to be produced by the Constitution of Kenya Review Commission, led by Professor Yash Pal Ghai, is therefore likely to be favourable to the KANU-NDP succession agenda. KANU- NDP are already putting forward proposals for constitutional amendments to create the positions of two vice-presidents and a prime minister. Although constitutional reform is expected to remain at the forefront of political debate in Kenya, progress is expected to be slow, and any moves towards political liberalisation will be minor and largely cosmetic. The government remains determined to retain tight political control even if the measures taken provoke international criticism. KANU hardliners within the government will block any constitutional reforms that might threaten their party’s dominant position at the next election. The opposition will remain weak and unable to pose a serious threat to KANU and President Moi, and the allegiance of the state institutions, such as the army, is not expected to change. Pre-election tension As the opposition will remain weak and unable to challenge the ruling party, there is a clear risk of street violence should Mr Moi try to stand again. Foreign businesses will not be directly targeted, but both staff and premises may come under threat. Before both the 1992 and 1997 elections there was an upsurge in inter-tribal violence. This is widely thought to have been an attempt by KANU to drive potential opposition voters out of marginal constituencies, but there are genuine ethnic tensions too—in September, for example, at least 18 people were killed in clashes between the Wardey and Pokomo communities in the east of the country. Further clashes are almost inevitable, and tension will increase as the elections, which must be held by end-2002, approach.

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