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William Ruto charts new economic course after Kenyan election victory

William Ruto’s victory in Kenya’s hotly contested presidential election – billed as a battle between ‘scammers’ and ‘dynasties’ – will herald a new dawn for East Africa‘s most stable democracy, assuming the result be upheld by the Kenyan courts.

In a contested election, Ruto, the current vice president, cast himself as an anti-establishment outsider and his opponent, veteran opposition leader and five-time candidate Raila Odinga, as a product of the dynasties that have dominated Kenya after independence. Politics. A wealthy businessman himself, Ruto said he would improve the lot of Kenya’s working class.

The strategy eventually paid off. Ruto won 50.5% while Odinga, who for the first time had establishment support, won 48.9% of the votes cast. Incumbent President Uhuru Kenyatta, who picked Ruto to succeed him before a U-turn saw him return Odinga, looks set to hand over to a man he branded a thief during the campaign. In an embarrassing development for the incumbent president, Kenyatta’s own Kikuyu supporters – the country’s largest ethnic group – voted overwhelmingly for Ruto.

Result of Odinga competitions

Shortly before the official announcement of the result on August 15, four of the seven election commissioners held a hastily organized press conference to distance themselves from the result, citing the “opaque” nature of the count, and there were chaotic scenes during the national election center, where chairs were thrown.

Odinga, who at 77 is unlikely to get another presidential stab, rejected the result and vowed to challenge it in court.

However, if the country’s Supreme Court – one of its most trusted institutions – upholds the election, Ruto, 55, who sold chickens to passers-by as a child and attended school barefoot, will take the control of the political, economic and diplomatic power of East Africa. . The implications for the Kenyan people, local and international investors and the wider region are immense.

The “Hustler Nation” slogan reflects a bottom-up business model

Ruto will have to unify a deeply divided country and provide stability amid protests in Odinga’s strongholds in Nairobi and western Kenya. In a magnanimous acceptance speech, Ruto pledged to govern for all Kenyans, fight corruption, enhance transparency and address the economic challenges facing the country. He had warm words for Odinga and his boss-turned-rival, President Kenyatta.

Ruto was born into a family of smallholder farmers in Kenya’s Rift Valley. After a stint as a teacher, he entered politics under Daniel arap Moi, Kenya’s ruthless second president, and rose quickly. His business empire today includes real estate, hotels, land and, fittingly, a chicken processing plant. His emergence from poverty informed his “hustler nation” campaign, launched after his public falling out with Kenyatta in 2018.

Promising a bottom-up economic model, Ruto said he would provide small loans and grants to Kenya’s army of casual workers, or hustlers, disrupting the economy – which many believe serves the wealthy.

He promised to publish government contracts with China signed during Kenyatta’s infrastructure building spree, which saw Kenya’s public debt as a share of GDP nearly double since 2013. It was red meat for his labor base.

While Odinga has promised to restructure Kenya’s debts, Ruto favors fiscal consolidation to repay them. He also promised to boost agricultural and manufacturing production and fight corruption. Ironically, in July a court ordered his running mate, Rigathi Gachagua, to repay nearly $2 million that he is deemed to be the product of corruption; Ruto and Gachagua claimed the decision was politically motivated and Gachagua is appealing against it.

William Ruto (left) and his running mate Rigathi Gachagua (right) campaign together in Nairobi on June 4. (Photo: Yasuyoshi CHIBA/AFP)

Relatively quiet markets

In the days following the result, markets adopted a wait-and-see strategy, which will likely last until Ruto is officially sworn in. Immediately after the result, the Kenyan shilling – battered recently by the coronavirus and economic headwinds – fell slightly but was largely unaffected. Some are even betting on the shilling strengthening because the mostly peaceful election defied the pessimists.

Indeed, some had raised fears that escalating rhetoric between Odinga and Ruto at the rallies, and an upsurge in misinformation online, would increase the chances of a repeat of 2007, when 1,200 people died in post-election violence. This butchery saw Ruto and Kenyatta questioned by the International Criminal Court, but the cases were eventually dropped.

The day after Election Day, which passed without incident, the Kenyan stock market reopened with a gain of Ksh31.8 billion ($266 million), pushing its valuation to Ksh2.26 billion ($19 billion), the highest since mid-May. Previous contested and violent elections, notably those of 2007 and 2017, have seen huge slippages. Kenyan government bonds fell after the chaos surrounding the results announcement on August 15, but recouped their losses the next day as calm slowly returned to the country.

Economic challenges

Ruto is expected to consolidate power in his office, but analysts expect him to maintain a coterie of experienced technocrats and assemble an ethnically diverse cabinet. His supporters say he has an extreme work ethic. Even as a child, he was celebrated for his sharp intellect.

“Now, as president, he will have to uphold the values ​​and principles of public service, and the eyes of the country and the world will be on him,” said Kenyan political analyst Javas Bigambo. “He has so much to prove.”

Kenya’s economy battered by Covid-19, which has hit the economically vital agricultural industry extremely hard, has been negatively affected by Russia’s invasion of Ukraine. The East African country is a net importer of fuel, wheat and fertiliser, so commodity prices have soared, leaving many Kenyans unable to afford them.

Meanwhile, a devastating drought in the north of the country has left 4 million Kenyans dependent on food aid. Kenya’s ballooning public debt is another major headache, with repayments looming.

The country’s population is young and enterprising, with 75% of Kenyans under the age of 30, a marker generally prized by international investors. However, nearly 40% of those under 35 are unemployed, despite having some of the highest levels of education on the continent.

While Odinga has pledged to pay KSh6,000 ($50) to poor and vulnerable households during his first 100 days in office, as well as provide free health care and education, Ruto will be judged on his ability to putting Kenya’s frustrated young people to work, with 800,000 young people entering the job market each year. He promised to start with an injection of KShs 200 billion ($1.7 billion) into the economy.

He will also have to come up with a credible financial stabilization program and continue good relations with the International Monetary Fund, experts say, even as he has promised to reign in borrowing. The fund agreed to a three-year, $2.3 billion package in April 2021 and recently noted that Kenya was on track to meet most of the program’s targets.

Ruto would also do well to maintain Kenyatta’s encouraging, if overly optimistic, Big 4 Agenda, a blueprint for 2030 that divides the country’s future development into four pillars: food security, affordable housing, manufacturing and affordable healthcare.

“On the external front, Kenya’s current account deficit is expected to widen to 6.3% of GDP this year due to fallout from the war in Ukraine and remain large in the years to come. Foreign exchange reserves, which stood at $8.8 billion in May, provide only a limited buffer,” says Virag Forizs, Africa economist at Capital Economics. “All told, the newly elected president will likely watch for low GDP growth rates over the next few years as the economy adjusts.”

Aerial view of central Nairobi with modern buildings and skyscrapers.
A view of the business district of Kenya’s capital, Nairobi. (Photo: Sopotnicki/Shutterstock)

Maintaining Kenya’s leadership position

However, if Ruto can take Kenya’s economic woes by the scruff of his neck, he has a wonderful opportunity to drive one of Africa’s most advanced economies forward.

Kenya is a business hub for East and Central Africa, with companies such as Visa, Microsoft, Google and Facebook operating out of Nairobi. It is also home to the African headquarters of the UN as well as a large British military training base. Its stocks, bonds and currencies are among the most traded by foreign investors on the continent. Kenya’s GDP is expected to grow by 5.5% this year, despite serious headwinds, according to the World Bank.

Kenya’s economic development made him a leader in other areas, with Kenyatta adopting the role of regional statesman, mediator in various disputes. His successor faces a complex regional perspective, with conflicts in the Democratic Republic of Congo, Somalia and Ethiopia, and largely declining democracy across the region. Stability in East Africa would help Kenya continue to grow.

Above all, businesses and investors love stability. So far, the election and its aftermath have been peaceful, except for small outbreaks in Odinga strongholds.

“While the absence of major election-related violence so far is encouraging, this could take a turn for the worse very quickly, depending on how Messrs. Odinga and Kenyatta react to the final results. The political environment will remain unstable in the coming days,” says Zaynab Mohamed, Kenyan analyst for Oxford Economics Africa.

In the Central Bank’s July market perception survey, three-quarters of all business leaders said they were optimistic, up from just one-third in the same survey five years ago, largely in because of confidence in the low potential for election violence this time. around.

If Ruto is to maintain Kenya’s reputation as an economic powerhouse and retain the big business that has made Nairobi their hub in East Africa, he will need to ease tensions where needed and be a firm hand on the closed off.