Markets; Kenya election rerun – what happens if next result is contested? Exotix Report

By Exotix Capital;

The 1 Sep verdict by the Supreme Court annulled the 8 Aug Presidential election results and ordered a rerun within 60 days. Four out of six judges found the IEBC (Independent Electoral and Boundaries Commission) had not adhered to procedures consistent with the Constitution and election laws (as opposed to vote tampering).

The precedent for a successful appeal by the opposition is structurally positive in terms of enforceability of the rule of law and the strengthening of political checks and balances (judicial independence and legal recourse as opposed to protests). The vindication of opposition NASA’s stance likely reinforces its unity (in direct contrast to how a defeat would have widened divisions). However, in other Frontier markets, e.g. most recently in Pakistan following the judicial disqualification of the PM, investors generally, in the short-term at least, penalise uncertainty rather than reward structural improvements in governance.

Two near-term risks: IEBC credibility, policy stasis.

(1) The credibility of the IEBC may have been damaged so much that the loser of the rerun will lodge another judicial appeal, further prolonging stasis in policy-making and new economic initiatives (infrastructure, rate cap law dilution/repeal) and the risk of protests. The IEBC leadership has indicated they are not going to resign. (In any event, replacements would require a vote in Parliament, where Jubilee enjoys a majority; Jubilee increased its majorities in the National Assembly from 48% to 50% (provisional, including Women’s results, pre-nominees), Senate (45% to 55%, provisional, pre-nominees) and County Governors (38% to 55%).

(2) Although Kenyatta continues to enjoy the benefits of incumbency and NASA need to see an improvement in the turnout of its supporters, the outcome of what is always a very close contest cannot be predicted. (The politics of Jubilee and NASA remain more accurately defined by competing, and closely balanced, ethnic representation as opposed to competing ideology on social or economic issues).

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