Kenya Unrest Could Damper Investor Confidence

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By Catherine Sasman

WINDHOEK

William Alexander, an investment principal at Investec Asset Management Africa’s team, says protracted political unrest in Kenya could have an adverse effect on the performance of companies there and may lead to a reduction in investor interest in that country.

“Economic activity has slowed down since the outbreak of violence,” said Alexander, but he said it was too soon to predict what the long-term economic impact might be.

“We would like to see some talk between the parties of President Mwai Kibaki and opposition leader Raila Odinga, but we do not see an end to the uncertainty coming in the next week,” he said speaking to New Era from Cape Town yesterday. Investec, a specialist investment management service with a growing client base in Africa, said that its Africa Fund’s current exposure to the Kenyan market is limited due to the market’s relatively “lofty valuations”.

The company said it is disappointed in the post-election violence in Kenya, warning that it should be handled carefully by opposing parties lest it escalates and causes permanent damage to the social fabric and economy of that country.

It said Kibaki’s term of office has “disappointed” in a number of aspects, most notably his failure to deal decisively with corruption and widespread perceptions of favouritism towards his Kikuyu tribesmen. It stated that Odinga’s popularity could, in part, be attributed to resulting anti-Kikuyu sentiments.

The company said Kibaki seemed to have “won” a “flawed” presidential election, amid allegations of vote-rigging and neutral observers calling for an audit of the results.

“The presidential election was always going to be a close call, based on polls over the last few months,” the company stated. If, as expected, the violence and disruption are short-lived, we foresee a continuation of strong economic growth,” said Roelof Horne, Africa Fund’s Portfolio Manager at Investec Asset Management. He said with three sessions of trading since the election results, the stock market had remained fairly steady and was actually marginally firmer on Monday.

“We will be watching the situation carefully, but will not be making any rash investment decisions.

“Events in Kenya are perhaps a timely reminder that while attractive returns can be generated across the continent, political risk always needs to be taken into account when investing in Africa,” Horne said.

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