Lately there has been contradictory media statements on whether the ongoing violance in Kenya would benefit or harm her neighbouring economies.

However, most pundits agree that in the short-term, Kenya’s neighbours have the opportunity to rake in economic benefits from the Kenyan upheavals. The extent of this gain certainly depends on the duration of the crisis — it could prove substantial if the situation does not return to normal soon. Kenya’s economy is known for its resilience and will most likely bounce back fast to its pre-election levels if situation is contained soon. Early last month, Kenya’s Finance Minister Amos Kimunya was quoted as saying that the “post-election violence may cost the economy up to $1 billion but it could be recovered within a year”. A month later, this statement still holds water.

Uganda’s Finance Minister, Dr. Ezra Suruma, also expressed caution, saying “Uganda’s growth projections are within reach if the disruption is contained. But if the situation worsens, that would raise a question of the impact it would have on the economy.” Uganda’s economy was expected to grow at 6.9% this year. In both Tanzania and Uganda, production chains have been interrupted due to unavailability of raw materials, packaging materials and other inputs in the production processes of goods. This has underscored the importance of Kenya as a regional economic powerhouse. 

The short-term gains to Kenya’s neighbours would also depend on how fast they remove drawbacks that restrict their ability to take full advantage of the growing opportunities. For instance, it is reported that Dar es Salaam port is “unable to cope with the sudden demand for services” and it “needs to perfect its clearance system” in order to make the port of Mombasa irrelevant. Also, the Tanzania Ports Authority and the Tanzania Railways need to improve very fast the handling of cargo destined to landlocked countries .

Delays at Mombasa port led to diversions to Tanzanian ports as alternative routes to the landlocked countries of Rwanda, Burundi, Uganda and eastern DR Congo. According to Kenya Transportation Association (KTA), transportation movement in Kenya has gone down “to less than 50%” and its taking longer to deliver goods to the Great Lakes region. Nairobi’s “Business Daily” reported this week that “The illegal roadblocks set up by mobs in the Rift Valley and Western Kenya…had affected the turnaround times and significantly increased operational costs….the number of trucks crossing from Kenya to Kampala had gone down to less than 200 vehicles from 745 vehicles that crossed there daily…”

Two weeks ago, a section of the Kenya-Uganda railway was vandalized, suspending shipment of fuel and cargo to Uganda, its primary gateway. The repairs were expected to take at least one week to complete.

A major drop in tourist arrivals in Kenya has also been reported due to violence and travel advisories issued by western countries, and there are fears of wide reaching hotel closures and industry job layoffs. One tour operator reported up to 85 percent loses in clients for the year because of cancellations, with Kenyan guests opting instead for a Tanzania safari, Uganda safari or even Zanzibar where they can still enjoy other East Africa’s superb attractions.

In the midst of all the bad news from Kenya, Rwanda went ahead and launched their first stock exchange market this week, called the Rwanda Over-The-Counter Market (ROTCM). In other good news, Rwanda and Tanzania finalized plans to commence the construction of rail link extending central railway line from Isaka in western Tanzania to Kigali (expected to be completed by year 2013). Skipping Kenya, George W. Bush is also expected to arrive in the region next week to promote his AIDS initiatives, Millennium Challenge Corporation activities as well as foreign direct investments.

east africa rail links