E Africa weathers Kenya crisis
2008-03-11 19:05
Nairobi - The economies of Kenya's neighbours are beginning to return to normal, but some fallout from post-election violence will be felt throughout the year in a region also hit by high global commodity and energy prices.
In the aftermath of Kenya's disputed December 27 election, gangs burned crops and blockaded roads for weeks.
That disrupted supplies of fuel, food and manufactured goods to landlocked neighbours like Uganda, Rwanda and Burundi. The impact
was also felt in east Congo and south Sudan.
But an abatement of violence in February, then a peace deal later that month, enabled transit to resume through Kenya, which since independence in 1963 has grown into the economic gateway for east and central Africa.
"One sees some kind of double jeopardy for regional economies. International prices have gone up, and then the network from Kenya to the hinterland was disrupted," said Jasper Okelo, economics professor at the University of Nairobi.
Like Kenya, other nations say targets for annual growth - which has been healthy around the region in recent years - should not be affected by the brief lull in supplies because economic fundamentals remain in place.
Both Rwanda and Tanzania project more than 7%, while Uganda forecasts 6.9%.
"The last weeks of February and March are showing signs of recovery and soon the situation will return to normalcy," said Keith Muhakanizi of Uganda's finance ministry.
A bigger impact on future growth, economists say, will be high world commodity prices and oil costs, now hovering above $100 a barrel, which will drive inflation in the region.
Rwanda and Tanzania have both seen inflation jump since the end of 2007 on pump prices and food costs.
Illustrating the price hikes, the Eastern Africa Grain Council said the cost of maize was up everywhere, hitting consumers but benefiting net exporter Uganda.
"At this time Uganda's prices should have been less than $150 per tonne and now it's $184," said Anne Mbaabu, director of the council.
'Not business as usual'
Restoring long-term business confidence in the region may, players say, be harder than getting the roads re-opened.
"It just doesn't happen overnight. It will take a few more months of normality," said Arun Devani, chairperson of East Africa Business Council. "Once confidence is shattered, it's never business as usual."
During Kenya's turmoil, east Africa's economic bloc had warned that revenue flows to regional states had been damaged.
Burundi, for example, said it lost up to $3m per month in taxes due to higher import costs.
At the height of Kenya's violence, gangs set up roadblocks and in some cases looted cargo, hampering supplies and forcing some nations to turn from using Mombasa port to Tanzania's Dar es Salaam harbour, which is farther away for most.
Regional economies have shown reluctance to diversify to Tanzania due to higher transport costs, analysts say.
Rwanda's finance ministry said trucks from Tanzania's port to Kigali cost an average of $400 per ton while cargo from Kenya's Mombasa harbour hits only $244 per ton.
Politically, the Kenyan crisis may actually have drawn the region closer together since Tanzanian and Ugandan presidents played important roles in the mediation process.
Economists and businessmen stress that the economic impact could be short-lived if pre-crisis trade flows return soon.
"It depends on how quickly we can make sure the supplies that were disrupted get back to levels before the crisis," said John Ochola, programme officer for EconNews Africa.
There was still some backlog at Mombasa port, he said.
Nobody is under-estimating the ripple effects.
"It's not going to be very easy to correct this. It won't be entirely sorted out within this year," said Okelo at University of Nairobi.
- Reuters