A political assessment for banks and borrowers ahead of the 2017 election

Opinion and Analysis

Officials of the electoral body IEBC at a past by-election. During election period, some loan applications are pushed to the ‘Pending’ in-tray. PHOTO | FILE 

By CAROL MUSYOKA

I recently dined with a European diplomat who asked the ubiquitous question that foreign residents in this country like to do: “What do you think will happen at the next Kenyan elections?”

Before I tell you what I answered, I have to state categorically and most unequivocally that I am neither a political analyst nor commentator. I do, however, occasionally comment on the confluence of politics and economics as often happens invariably.

That confluence is particularly necessary in the banking industry, where I spent many happy years, when analysing credit risk of a customer for a term loan of not less than five years.

Within the duration of that loan such a customer is bound to cross the Kenyan election cycle.

Depending on the nature of the customer’s business, the company is likely to have difficulties in loan repayments due to cash flow constraints occasioned by poor sales, deplorable debt collection or, heaven forbid, destruction of the company premises therefore impacting on the ability to produce the goods and services that are being procured.

My answer to the diplomat saw him imperceptibly swallow and he leaned forward in interest.

“There will be bloodshed in 2017 as the historical patterns demonstrate it.”

“What do you mean?” he whispered.

“In banking, we look at historical behaviour as a strong barometer of what future behaviour is likely to portend. To understand our history of political violence, you have to start in 1992 when the first multi-party elections were held,” I began.

“In that year, you had an incumbent who was running against a very strong and credible opposition. That was when Kenya endured the first of several bloody episodes of tribal clashes.”

I went on. “In 1997, the same incumbent was running for his second and last term as president. He had the benefit of the State machinery behind him, as well as a fragmented Opposition.

This time, the political waters were muddied in the Coast region, where the pre-election clashes were largely centred. The coastal tourism economy nearly collapsed and the hotel industry underwent massive bankruptcies.”

“Well what do you make of the peaceful election in December 2002?” the diplomat asked. “Doesn’t that destroy the pattern of electoral violence?”
“Actually, therein lies the pattern,” I responded.

“Every time an incumbent is stepping down, there has been a peaceful transition in Kenya. It happened in 2002 and in 2013. But whenever there’s been an incumbent fighting to maintain the status quo, there has been bloodshed; ergo 1992, 1997 and 2007. The 2017 elections are a status quo event. The pattern will be the same.”

My lunch partner mulled over this and promptly changed the subject.