Political tensions in Kenya have had a significant impact on the country’s economy, leading to a mass exodus of foreign investors. According to reports, between September and December 2024, foreign investors withdrew a substantial amount of money from the Kenyan economy, totaling around Sh16 billion. This move was primarily driven by the escalating political tensions in the country.
The tensions in Kenya have been fueled by mass protests, particularly led by the younger generation. These protests, which turned violent in June last year, disrupted the country’s political and economic stability, resulting in severe consequences. The protesters demanded government action on pressing economic issues such as inflation, high unemployment, and corruption.
The economic repercussions of these protests were felt deeply, with the Nairobi Securities Exchange PLC (NSE) reporting a loss of approximately $600 million in investor wealth in just two weeks. Businesses were looted by protesters, further exacerbating the economic turmoil. Investors suffered significant losses in paper wealth, and over 30 people were reportedly killed during the protests, adding to the instability.
Data released by the Capital Markets Authority (CMA) indicated that the stability of the Kenyan shilling towards the end of 2024 did little to reassure investors, as fears of political abductions spread. The equity market experienced a significant net outflow of Sh16.639 billion in the fourth quarter of 2024, a stark increase compared to the previous quarter.
Despite these challenges, there were some positive developments in the market. Market volatility for the three main indices, NSE20, NSE25, and NASI, remained low, below one percent. All indices showed an increase compared to the previous quarter, indicating some resilience in the market. Foreign investors also maintained an active presence, with the proportion of foreign investors actively trading increasing slightly.
Overall, the impact of political tensions on the Kenyan economy has been significant, leading to a mass exodus of foreign investors and disrupting the country’s economic stability. Despite these challenges, there are signs of resilience in the market, with both retail and institutional investors showing continued engagement.
