Business leaders warn post-election bloodshed is devastating Kenyan economy

Published Wednesday, February 06, 2008

By Agencies

Weeks of postelection bloodshed have devastated Kenya’s once-impressive economy, decimating its vital tourism industry and prompting foreign companies to consider pulling out, business leaders warned, as talks to end the violence resumed.

With confidence in Kenya sinking, the US Peace Corps said Tuesday it was temporarily pulling its remaining 58 volunteers out of the country, after sending 86 home in January.

There were fears that other organizations - aid groups and businesses alike - could follow the Peace Corps’ lead if there is not a quick end to the violence that has engulfed Kenya since a December 27 election that local and foreign observers say was rigged in favor of President Mwai Kibaki.

“There are questions already being asked, why are you there? What gives you the advantage to stay in Kenya?” said Steven Smith, the managing director of US battery maker Eveready’s Kenya operations.

Major foreign companies and aid groups have long used Kenya as a base for their Africa operations, helping make the country a regional economic powerhouse. But “let’s face it, many firms don’t have to manufacture here,” he said.

More than 1,000 people have been killed and 300,000 forced from their homes in violence that has repeatedly degenerated into ethnic clashes. Much of the anger has been aimed at Kibaki’s Kikuyu tribe, long resented for dominating politics and the economy.

Smith was among the business leaders who met Tuesday with former UN Secretary-General Kofi Annan, who is mediating peace talks between Kibaki and his chief rival, Raila Odinga.

They urged the politicians to end the violence, as the business community has done repeatedly since the outset of the crisis.

But with many of the major Kikuyu business leaders lying low, how much sway such appeals will have remains an open question.

Fighting continued to rage Tuesday in parts of western Kenya, the epicenter of the violence, and thousands more people fled their homes in the region, leaving behind burned houses and rubble. At least seven people were killed.

Negotiators at the talks mediated by Annan last week agreed to take immediate action to end such violence. On Tuesday, they began discussing the deeper political issues, talks they aim to complete within 15 days.

Annan said that addressing the political issues would be tough, but that progress was possible - “there are no hard-liners in the talks,” he told reporters.

The talks have the backing of the international community, although US Ambassador Michael Ranneberger, in an interview published Tuesday, expressed reservations about how much could be accomplished.

“There is serious concern whether leaders can come together to work out a solution acceptable to Kenyans,” he was quoted as telling The Standard daily. “The postelection (situation) revealed deep underlying problems that must be addressed as well.”

He reiterated that the US would deny visas to politicians seen to have fomented violence or who worked against peace.

Separately, Britain announced it would double aid to Kenya, providing $2.4 million for humanitarian relief.

Apart from the climbing death toll, the crisis “has significantly damaged the domestic economy,” said Global Insight, a US consulting company, in a report released Tuesday, downgrading its prediction for growth in 2008 to 4 per cent from 6.1 per cent.

Nearly every industry has been hit: farms that had made Kenya a leading exporter of cut flowers have been trashed, factories that rely on Kenya’s deep water port have been cut off and, perhaps most alarmingly, the $1 billion a year tourism industry has been wiped out, at least for the time being.

“There used to be 34,000 people a week at the coast,” a main destination for tourists, said Smith, who spoke to reporters after he and other business leaders briefed Annan on the economic situation. “Last week, we had 1,900.”

Already, the job losses have begun.

Wendy Wanjalla, a single mother in the port city of Mombasa, was laid off from her job as a cook at the African Safari Club two weeks ago when it became apparent there were would be no new guests any time soon.

The Kenya shillings 250 ($3.50) she earned a day “wasn’t really enough,” said Wanjalla, a 28-year-old who is raising a daughter on her own. But “it was money.”

The Kenya Private Sector Alliance estimates that over the next six months up to 400,000 Kenyans are likely join Wangle in the ranks of the unemployed. It also projects that businesses will lose up to $3.6 billion over the next six months, even if the crisis is resolved immediately. (AP)

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