Event
The choice facing voters at the next election in March 2013 has become clearer after the formation of two new alliances, each comprising two major parties and their leaders.
Analysis
To beat a December 4th deadline for registering political alliances, Uhuru Kenyatta (The National Alliance) and William Ruto (United Republican Party) agreed a joint ticket, whereby Mr Kenyatta will vie for the presidency while Mr Ruto will be his running mate. This brings together the political leaders of two of Kenya's most influential tribes-with Mr Kenyatta representing the Kikuyu and Mr Ruto the Kalenjin-making it a formidable electoral vehicle. However, both men face prosecution at the International Criminal Court next April for facilitating post-election violence after the last poll in December 2007, and still face a local court challenge seeking to bar them from standing based on the integrity provisions in the new constitution. The two men may hope that an election win would insulate them from the ICC but, in the event of victory, they would face a difficult choice. They could either refuse to attend the trial in The Hague, thereby paving the way for possible sanctions against Kenya, or else fight the case in their new roles as president and vice-president, which could damage the country's image and create considerable uncertainty.
Moreover, the Kenyatta-Ruto ticket will face stiff competition from an alternative alliance between the current prime minister, Raila Odinga (Orange Democratic Movement), and the current vice-president, Kalonzo Musyoka (Wiper Democratic Movement). Under the terms of the deal, Mr Musyoka will be Mr Odinga's running mate, thereby reviving a former partnership between the two men that fell apart in 2007 after the poll. Mr Musyoka's popularity among the Kamba and Mr Odinga's primacy among the Luo gives them a strong ethnic platform. The alliance also includes Moses Wetangula (Ford-Kenya), which brings part of the western region on board. Completing the alliance-building process, Musalia Mudavadi (United Democratic Front) is expected to formalise a partnership with several smaller parties.
December 05, 2012
Emilio Mwai Kibaki
The veteran president (aged 80) won a second term in the 2007 election by a narrow margin, representing the Party of National Unity (PNU), a grouping of several parties, but was forced to share power with the opposition after post-election unrest. Mr Kibaki, from the dominant Kikuyu tribe, must stand down at the next election in March 2013, according to the constitution. His "hands-off" leadership style has been blamed for exacerbating inter-ministerial feuding.
Raila Odinga
The leader of the Orange Democratic Movement (ODM), Mr Odinga (aged 67) narrowly lost to Mr Kibaki in the December 2007 election, by a 46:44 margin, but the belief that he was robbed of victory sparked civil unrest. He was appointed prime minister with executive powers (a long-cherished aim) under the power-sharing agreement with the PNU and enjoys strong support among the Luo tribe (in western Kenya). He will hope to win the presidency in 2013.
Musalia Mudavadi
Appointed deputy prime minister (and minister for local government) under the power-sharing deal, Mr Mudavadi (aged 51) decamped from the ODM in April 2012 to establish his own party, the United Democratic Forum, which is loosely allied with the PNU. From the Luhya tribe in the west, his prospects of becoming president would rise if Mr Kenyatta's and Mr Ruto's campaigns were derailed by their pending International Criminal Court prosecutions.
Kalonzo Musyoka
The vice-president and minister of home affairs, Mr Musyoka (aged 58), split from the ODM before the 2007 election, forming ODM-Kenya, and allied with Mr Kibaki and the PNU after the poll in return for the vice-presidency. This led to frequent disputes with Mr Odinga about who was the effective second-in-command of the coalition. From his support base among the Kamba tribe in the east, Mr Musyoka will seek to become the next president in 2013, although he may struggle to secure nationwide support.
Uhuru Kenyatta
Mr Kenyatta (aged 50)-a Kikuyu, like the president-backed Mr Kibaki's re-election bid in 2007 (as he realised that Mr Kibaki would be sure of the Kikuyu vote). The son of Kenya's first post-independence president, Mr Kenyatta is from the next generation of politicians. After becoming deputy prime minister in the grand coalition, he intends to seek the presidency in 2013 but may be obliged to stand aside because of an impending ICC prosecution, starting in April 2013, over his alleged role in post-election violence.
William Ruto
Suspended from cabinet in late 2010 because of graft allegations (that were later dropped), Mr Ruto (aged 45) is another next-generation politician and a Kalenjin-like the former president, Daniel arap Moi. Mr Ruto switched from the Kenya African National Union (KANU) to the ODM in 2007, but his opposition to the new constitution led to a split with Mr Odinga. Mr Ruto may form an alliance with Mr Kenyatta to fight the 2013 election, but similarly faces an ICC prosecution, which could compromise his chances.
Martha Karua
The leader of the National Rainbow Coalition-Kenya (Narc-Kenya), Mrs Karua (aged 54), a Kikuyu, resigned as minister of justice and constitutional affairs in April 2009 after complaining about the slow pace of reform, although her party remains allied to the PNU. She will make an independent bid for the presidency in 2013 on an anti-corruption and human rights ticket.
September 07, 2012
Official name
Republic of Kenya
Form of state
Unitary republic
Legal system
Based on English common law and the 1963 constitution; a new draft constitution was approved in a referendum in August 2010, but most aspects of it will not come into force until after the 2013 elections
National legislature
Unicameral National Assembly of 210 elected members plus 12 nominated members, the attorney-general and the speaker; a multiparty system was introduced in December 1991
National elections
December 2007; next presidential and legislative elections are to be held in March 2013
Head of state
President, directly elected: a candidate must cross the 50% threshold in a first round of voting (and secure at least 25% of the vote in more than half of the 47 counties) to secure victory, otherwise the two best-placed candidates must contest a second round
National government
The president and his cabinet, comprising a grand coalition between the Party of National Unity (PNU) and the Orange Democratic Movement (ODM), and allied parties
Political parties in parliament
Orange Democratic Movement (ODM), Party of National Unity (PNU), Wiper Democratic Movement (WDM), United Democratic Front (UDF), The National Alliance (TNA), Kenya African National Union (KANU), Safina, National Rainbow Coalition-Kenya (NARC-Kenya), National Rainbow Coalition (NARC), Democratic Party, Forum for the Restoration of Democracy-Kenya (Ford-Kenya), New Ford-Kenya, Ford-People, Ford-Asili, Sisi Kwa Sisi
National government
President & commander-in-chief: Emilio Mwai Kibaki (PNU)
Vice-president & home affairs: Kalonzo Musyoka (WDM)
Prime minister: Raila Odinga (ODM)
Deputy prime minister: Uhuru Kenyatta (TNA)
Deputy prime minister: Musalia Mudavadi (UDF)
Key ministers
Agriculture: Sally Kosgei (ODM)
Co-operative development: Joseph Nyaga (ODM)
Defence: Yusuf Mohamed Haji (PNU)
Education: Mutula Kilonzo (PNU)
Energy: Kiraitu Murungi (PNU)
Environment & mineral resources: Chirau Ali Mwakwere (PNU)
Finance: Njeru Githae (PNU)
Foreign affairs: Sam Ongeri (PNU)
Higher education, science & technology: Margaret Kamar (ODM)
Information & communication: Samuel Lesuron Poghisio (PNU)
Internal security: Katoo ole Metito (PNU)
Justice & constitutional affairs: Eugene Wamalwa (PNU)
Labour: John Munyes (PNU)
Land: James Orengo (ODM)
Medical services: Anyang Nyong'o (ODM)
Planning, national development & Vision 2030: Wycliffe Ambetsa Oparanya (ODM)
Roads: Franklin Bett (ODM)
Tourism: Danson Mwazo (ODM)
Trade: Moses Wetangula (PNU)
Transport: Amos Kimunya (PNU)
Water & irrigation: Charity Ngilu (ODM)
Central Bank governor
Njuguna Ndung'u
December 01, 2012
Outlook for 2013-17
Review
December 01, 2012
Fact sheet
| Annual data | 2011 | Historical averages (%) | 2007-11 |
| Population (m) | 41.6 | Population growth | 2.6 |
| GDP (US$ bn; market exchange rate) | 34.6 | Real GDP growth | 4.3 |
| GDP (US$ bn; purchasing power parity) | 71.2 | Real domestic demand growth | 5.4 |
| GDP per head (US$; market exchange rate) | 832 | Inflation | 10.6 |
| GDP per head (US$; purchasing power parity) | 1,711 | Current-account balance (% of GDP) | -6.8 |
| Exchange rate (av) KSh:US$ | 88.81 | FDI inflows (% of GDP) | 1.0 |
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Background: Kenya was a one-party state under the Kenya African National Union (KANU) until 1991, and voters remained loyal to KANU until 2002, when Mwai Kibaki and the National Rainbow Coalition (NARC) won a landslide victory. Mr Kibaki won a second term in December 2007, as head of the new Party of National Unity (PNU), by a narrow margin against Raila Odinga of the Orange Democratic Movement (ODM). However, allegations of vote-rigging sparked widespread intercommunal violence-the worst since independence. Following African-led mediation the two sides signed a power-sharing deal and formed a grand coalition government, with Mr Kibaki as president and Mr Odinga in the newly created post of prime minister. The coalition has remained intact despite tension and in-fighting.
Political structure: Kenya is a constitutional democracy with a unicameral parliament and an executive president directly elected by voters. Some presidential powers, namely the authority to "co-ordinate and supervise the execution of government functions", were assigned to Mr Odinga under the power-sharing agreement. Cabinet portfolios are shared between the PNU and the ODM, which have roughly equal representation in parliament. The new constitution, promulgated in August 2010 following a referendum, will retain a presidential system but with new checks and balances, including the devolution of some power to the county level and the creation of an upper house of parliament. The new dispensation will come into force after the 2013 election.
Policy issues: The coalition government intends to push ahead with economic reforms, including trade liberalisation, privatisation and deregulation, in order to improve the business environment, thereby boosting growth and cutting poverty. However, the focus on the new constitution and the 2013 elections will delay economic reforms in the near term. Progress will quicken after the ballot (provided that the election leads to a peaceful transition), helped by the absence of fundamental policy disagreements between the main parties. Kenya and the IMF agreed a new three-year programme in January 2011 that will focus on fiscal consolidation and structural reforms, but high-level corruption remains a key policy challenge that successive governments have failed to rectify.
Taxation: Kenya's rate of corporation tax is 30% for resident companies and 37.5% for non-resident companies, but the overall tax burden rises to about 50% of gross profits with the inclusion of labour and other taxes.
Foreign trade: Buoyant imports will maintain the current-account deficit at an estimated 9.6% of GDP in 2012. However, the deficit will narrow gradually in 2013-17 because of stronger export earnings, services inflows and remittances.
| Major exports 2011 | % of total | Major imports 2011 | % of total |
| Tea | 19.9 | Industrial supplies | 33.4 |
| Horticultural products | 16.2 | Transport equipment | 30.1 |
| Coffee | 3.8 | Machinery & other capital equipment | 17.1 |
| Fish & fish preparations | 1.0 | Food & beverages | 8.7 |
| Leading markets 2011 | % of total | Leading suppliers 2011 | % of total |
| Uganda | 9.7 | China | 14.7 |
| Tanzania | 9.5 | India | 14.0 |
| Netherlands | 8.3 | UAE | 10.1 |
| UK | 8.0 | South Africa | 7.7 |
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December 01, 2012
Data and charts: Annual trends charts
December 01, 2012
Kenya: Country outlook
FROM THE ECONOMIST INTELLIGENCE UNIT
POLITICAL STABILITY: Kenya's political environment will be dominated by the challenge of implementing the new constitution and holding elections in March 2013. The new constitution, approved in a 2010 referendum by a two-to-one margin, in a free and fair ballot untainted by violence, offers the hope of more consensual and accountable politics in the future. The next election may therefore prove to be less divisive than the bitterly disputed 2007 ballot and could herald a period of relative stability, although downside risks persist. The two main parties-the Party of National Unity (PNU) of the president, Mwai Kibaki, and the Orange Democratic Movement (ODM) of the prime minister, Raila Odinga-will continue to co-operate to implement the new constitution, although relations will remain tense and partisan in-fighting will increase in the run-up to the March 2013 ballot. Kenya will retain a presidential system under the new constitution, but with new "checks and balances" and a clearer separation of powers. The constitution also calls for a new anti-corruption agency and an independent land commission to tackle the thorny issue of land reform.
ELECTION WATCH: The High Court has ruled-and the Appeal Court has confirmed-that Kenya's next ballot must take place no later than March 15th 2013, while the election commission has provisionally named March 4th. The prospects for an earlier poll have now evaporated given the number of tasks (such as voter registration) that still need to be completed. The constitution had pointed to August elections, but this will not apply to the next poll. Mr Kibaki must stand down after serving two five-year terms, sparking bitter rivalry between those seeking to be the next president. Most of Mr Kibaki's allies will not use the PNU vehicle but will fight the ballot under different party banners; these likely candidates include Uhuru Kenyatta (The National Alliance), Kalonzo Musyoka (Wiper Democratic Movement), Musalia Mudavadi (United Democratic Forum) and William Ruto (United Republican Party). However, the situation will remain fluid, with alliances being formed and broken both before and after the poll. Moreover, Mr Kenyatta and Mr Ruto face ICC trials and may choose to focus on their court cases rather than on electioneering. In spite of divisions within the ODM (including breakaways by Mr Ruto and Mr Mudavadi), Mr Odinga-who is almost certain to be the ODM's presidential candidate-has a fair chance of victory, helped by his strong support for the new constitution. He could also benefit from the possible enforced absence of the ICC defendants. However, the contest will go to a second round if-as seems likely-no contender crosses the 50% threshold in the first round of voting. The formation of a new election commission, together with other reforms, will reduce the danger of election-related instability, but the closer the contest, the higher the risk. The new president will face a much-altered landscape because of the structural reforms envisaged by the new constitution.
INTERNATIONAL RELATIONS: Foreign policy will be driven by economic interests, especially the maintenance of close relations with key donors and the advancement of regional integration within the East African Community (EAC). Kenya will retain close ties with the US (including military co-operation) and key developing countries such as China, India and South Africa. The civil war in neighbouring, lawless Somalia will remain the primary source of security- and terrorism-related risk. Attention will focus on Kenya's armed incursion into southern Somalia in pursuit of Islamist rebels fighting under the banner of al-Shabab, whom the Kenyan government accuses of kidnapping and murdering tourists. Despite concerns about the Kenyan military's limited experience of crossborder conflict, the invasion (supported by friendly local militias) is proving relatively successful. One year after operations started, Kenya is now in control of Kismayo port, al-Shabab's main stronghold, and will seek to consolidate its hold in the subregion. However, al-Shabab is far from being eliminated and will revert increasingly to guerrilla tactics. In addition, the launch of further terrorist attacks on Kenyan soil remains a key risk, exacerbated by the large number of Somalis resident in Kenya. Most neighbouring states and regional bodies, as well as the US and European powers, support Kenya's intervention. Victory over al-Shabab would be a major prize that would enhance Kenya's standing and promote regional integration, although the goal has not yet been fully achieved and setbacks remain a possibility.
POLICY TRENDS: The main policy challenge in the medium term will be to alleviate structural constraints, such as weak infrastructure, which are impeding growth prospects. An ongoing fiscal stimulus and structural reforms such as deregulation and privatisation will promote economic activity, as will the recent relaxation in monetary policy, although the global slowdown will act as a constraint. Moreover, policymaking will remain vulnerable to exogenous shocks, including drought and volatile commodity prices, and to political infighting in the run-up to the next elections and beyond. Kenya's IMF-backed programme, supported by a US$760m extended credit facility, remains on track and will focus on fiscal reform, investment in infrastructure and the implementation of the new constitution. Although continued IMF backing will encourage support from other donors, corruption and weak governance will deter investment and continue to strain relations with external backers. The government aims to accelerate the pace of structural reform in 2013-17, including deregulation and trade liberalisation (especially within the EAC). However, plans for the disposal of full or partial stakes in up to 25 state enterprises, either by selling shares to strategic partners or via flotations on the Nairobi Securities Exchange, will be delayed by the focus on the new constitution and the 2013 elections.
ECONOMIC GROWTH: We expect real GDP growth, having reached an estimated 4.5% in 2012 (held back by high interest rates in the first half of the year and global fragility), to quicken slightly to 4.8% in 2013, before accelerating in 2014-17. Growth in 2013 will benefit from interest-rate cuts made in the second half of 2012, which will boost credit allocation to households and firms, and from lower inflation, which will facilitate consumer spending. However, weak global conditions-especially in Europe, a key trade, investment and tourism partner-will act as a constraint. Moreover, drought or election-related instability would pose downside risks to the forecast. Growth will gather momentum in 2014-17, helped by a rapid take-up of banking services (including telebanking), a continued boom in telecommunications, the expansion of the middle class, investment in infrastructure, increased regional trade and structural reforms. However, faster growth will exacerbate domestic structural deficiencies, especially in transport and power, despite new investment. Moreover, key reforms could fall victim to political in-fighting, while corruption, high taxes, overregulation and weak governance will continue to inhibit private investment. Nevertheless, growth will quicken towards the end of the forecast period, rising to 6% in 2017, as reforms and investment start to pay dividends. There is little prospect of Kenya eliminating infrastructural constraints or dependence on rain-fed agriculture during the forecast period, although the rate of expansion will remain relatively brisk, barring global and local shocks.
INFLATION: Year-on-year inflation dipped to 4.1% in October 2012 (a 23-month low), helped by a rebound in the exchange rate from year-earlier levels in response to tighter monetary policy. In addition, a satisfactory main rainy season in the second quarter will help to curtail food prices during the remainder of 2012. As a consequence, we have revised our inflation estimate for 2012 downwards slightly to 9.4% (from 9.5%). Although monetary loosening since July will put some pressure on the exchange rate and imported prices, we expect average annual inflation to be confined within a range of 4.8-6% in 2013-17, despite temporary breaches. Rising aggregate demand and electricity tariffs will underpin higher prices, although prudent monetary policy, more stable global commodity prices and efficiency gains arising from investment in infrastructure and regulatory reform will help to keep inflation within tolerable bounds. The weather-and, therefore, farm and hydroelectric production-will remain a key variable.
EXCHANGE RATES: Ongoing IMF support and a new commercial bank loan will help to support the currency, keeping the shilling close to the KSh85-86:US$1 mark in the short term, although the euro-zone debt crisis could spark a new emerging-market sell-off. Moreover, the shilling will weaken moderately in the next six months owing to looser monetary policy and election-related uncertainty. We currently forecast that the shilling will depreciate from an estimated average of KSh84.6:US$1 in 2012 to KSh90.7:US$1 in 2013 and KSh113:US$1 in 2017. Depreciation will be underpinned by current-account deficits and relatively high (albeit falling) inflation, and will be more rapid if political or economic confidence slips.
EXTERNAL SECTOR: The current-account deficit will shrink gradually over the forecast period, from an estimated 9.6% of GDP in 2012 to 8.2% of GDP in 2013 and 3.2% of GDP in 2017. Earnings from key exports, including tea and horticulture (and, later in the forecast period, minerals), will grow steadily, despite a slight slippage in world tea prices in the early part of the forecast period, helped by closer regional integration and stronger Asian demand. However, import demand for oil and both capital and consumer goods will be similarly robust, and the merchandise trade deficit will remain broadly stable in absolute terms in 2013-17. The decline in the current-account deficit will be underpinned by growth in invisible earnings, especially from tourism, remittances and servicing regional trade (although receipts from all three sources will be vulnerable to negative global developments). Official donor grants will offer additional support. However, the income deficit will remain large in 2014-16, owing to the repatriation of earnings by foreign investors and a rise in debt-service outlays. The current-account deficit, despite declining during the forecast period, will leave Kenya dependent on external inflows-either debt or investment-to fill the gap.
December 01, 2012
Country forecast overview: Highlights
December 01, 2012
Land area
569,259 sq km
Population
38.6m (2010 national census)
Main towns
Population in '000, 2010 census
Nairobi (capital): 3,100
Nakuru: 1,603
Kisumu: 968
Mombasa: 939
Climate
Tropical
Weather in Nairobi (altitude 1,820 metres)
Hottest month, February, 13-28°C; coldest month, July, 11-23°C; driest month, August, 24 mm average rainfall; wettest month, April, 266 mm average rainfall
Languages
English, Kiswahili and more than 40 local ethnic languages
Religion
Christian (80%), Muslim (10%), other (10%)
Measures
Metric system
Currency
Kenya shilling (KSh) = 100 cents
Fiscal year
July 1st-June 30th
Time
3 hours ahead of GMT
Public holidays
January 1st; Good Friday; Easter Monday; May 1st; June 1st; Eid ul Fitr; Christmas holiday, December 25th-26th
March 01, 2012