“The slowdown in Kenya’s economic momentum is largely attributable to three drivers … Third, election-related uncertainty weakened private sector activity for a good part of 2017.” World Bank, 7 Dec, 2017
Kenya’s economy has certainly bounced back since the fractious elections of 2017, and with key elections having just occurred in Pakistan, and due to occur in coming months in both Nigeria and Bangladesh, it is useful to consider how elections impact GDP in Emerging & Frontier Markets.
The chart above would seem to indicate some correlation between election years (yellow stars) and Kenyan GDP, but the tectonic changes that the wider Kenyan political landscape has undergone in the last seven decades have no doubt had significant impacts too. The size of the House of Representatives/ National Assembly doubled, a Senate was introduced, direct election of the President came in, and Kenya was a one-party state from 1969 to 1992 when new parties sprung up and the Kenya African National Union’s (KANU) monopoly was challenged. 2002 saw the first defeat of the KANU when the National Rainbow Coalition (NARC) took power. The 2007 elections saw over 1000 Kenyans killed in widespread violence after Mwai Kibaki won the Presidency, but the majority of National Assembly seats were won by the opposition. In 2008, after legislated reconciliation, Raila Odinga, Kibaki’s opponent and former ally, was appointed as the country’s first Prime Minister since 1964. More recent elections in 2013 and 2017 have been no less fraught, and it seems that the burying-of-hatchets between Uhuru Kenyatta and Raila Odinga this year was key to the country recovering and moving forward. As this, and the chart seems to indicate, over time and perhaps more clearly in the last decade, Kenyan elections are having a more and more pronounced effect on GDP.
Look further East now - with Bangladesh’s 11th national elections due to occur in the third week of December 2018, campaigning by the various parties has been underway for some time. On 30th July voters in the cities of Sylhet, Rajshahi, and Barisal elected mayors, with the ruling Awami League (AL) taking Barisal and Rajshahi, and the Bangladesh Nationalist Party (BNP) winning Sylhet. This result means that the AL now holds four of the five major city corporations, whereas prior to the 2014 elections the BNP held all five; Barisal, Khulna, Sylhet, Rajshahi, and Gazipur. Even in these relatively minor elections there were complaints of violations of electoral law, with supporters of one side or another accused of preventing people from casting a vote for the opposition. Violence at polling centres in Sylhet and Barisal resulted in a magistrate and seven journalists being injured, along with a BSD candidate. In one somewhat comical incident Sylhet BNP candidate Ariful Haque Chowdery declared that he would reject the result regardless of the outcome … and then retracted this statement on discovering he was leading. After an AL petition, on 2nd Aug the Election Commission ordered a partial revote take place on 11th Aug at two of Sylhet’s polling centres where voting was suspended due to violence. The re-polling duly took place on 11th Aug and the BNP candidate, Ariful Haque Choudhury (re-)emerged the winner. If this, and prior elections, are an indication of how Bangladesh’s impending national elections will go, then we’d be wise to factor in its effects on productivity, and national and personal security.
Those of us from Western Europe and North America, where politics and politicians can often seem a mild distraction to daily life, can sometimes struggle to perceive why regular elections can have such an effect in Emerging & Frontier Markets. Having lived and worked in all of these nations what strikes us is that the complexity and passion that seems a regular feature of Kenyan and Bangladeshi elections, is similarly evident in other Emerging & Frontier Markets. Ordinary citizens desperately care which party or politician wins - so much so that violence pre- or post-election is not uncommon. Perhaps in the ‘West’ we see little difference between the manifestos and eventual impact of one party or another and so care less, but in these nations who wins matters to people’s lives and futures far more. For investors then, election years in Emerging & Frontier Markets merit specific attention, and the potential for falls in GDP are well-worth factoring into risk analyses.