Kenya: Election challenge leaves investors in limbo

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Kenya’s Supreme Court is constitutionally obliged to rule on Raila Odinga’s challenge within 14 days
Kenya’s Supreme Court is constitutionally obliged to rule on Raila Odinga’s challenge within 14 days

Defeated Raila Odinga’s legal challenge to last week’s election result is likely to dampen potential investors’ enthusiasm for investing in East Africa’s largest economy.

The largely peaceful poll had given many confidence that Kenya’s strong growth, with its rising consumer class and high bond yields can be sustained.

“There is a sigh of relief, (the election) is not the nightmare that everyone feared,” said Daniel Broby, chief investment officer of frontier fund manager Silk Invest, who holds Kenyan assets.

Uhuru Kenyatta won 50.3 percent of the more than 12.3 million votes cast, so avoiding the need for a second round.

“It was a pretty close shave, but at the end of the day, it’s nothing to get too worked up about — the fear was that there would not be a majority,” Broby added.

Kenya is one of only two African countries (with Nigeria) in the benchmark MSCI frontier stock market index. Kenya is the second-best performer in the index this year, outpacing most other markets and lagging behind only the United Arab Emirates.

Odinga’s Coalition for Reforms and Democracy plans to seek the nullification of the election result on grounds that Kenyatta’s votes had been increased illegally. The risk is of subsequent violence should Odinga lose the case, which may be heard in the Supreme Court in the next couple of weeks. That stirs memories of December 2007 when President Mwai Kibaki was declared the winner, but Odinga said the vote was rigged.

Riots in early 2008 plunged Kenya into weeks of tribal bloodshed, scaring off investment. Under a power-sharing deal brokered to end the violence, Odinga became prime minister.