Rising Insecurity Hurting Kenya’s Tourism Investments

Rising Insecurity Hurting Kenya’s Tourism Investments

A red carpet was rolled out and Nairobi’s Kenyatta International Conference Centre was sparkling clean as government officials ushered in international investors for a two day investment conference that was held between 19 and 20 November.

Investment opportunities in massive infrastructure projects were on offer, from ports, pipelines to railways, that need foreign funding and technical input.

Even the local private sector was not left behind with many of the guest speakers coming from some of the country’s largest firms. These included Chris Kirubi, a local business mogul with interests in media, real estate and manufacturing.

“This is a country where wealth is made. In the western world, you are shuffling money which is creating no wealth,” said Kirubi.

But two days, later Kenya was in the international news for something else rather than its good investments. Al Shabaab militiamen, an Al Qaeda linked terror group operating in Somalia, had hijacked a bus in the northern-eastern town of Mandera, along the border and massacred 28 passengers based on their non-Muslim beliefs.

The attack stoked national outrage and raises questions on if the Uhuru Kenyatta led government was in control of its security functions.

The Mandera bus attack is just but one incident among many since the Westgate Mall terror attack more than a year ago, that has send shivers down foreign investors, whose risk premium for nations that don’t protect life and property is very low.

One industry that has been severely hurt by rising insecurity in Kenya is tourism, an industry that generated some $1.04 billion in 2013 and is one of the key hard currency earner for the east Africa’s largest economy alongside tea and horticulture.

Hotel operators, travel agencies and others who make a living by servicing hotels such as fisherman are still feeling the effects of the Mpeketoni attacks that happened in June this year, which left more than 60 people dead.

Hoteliers say that these perennial attack by Al Shabaab militants has raised the level of insecurity in the country to a choking level for the tourism industry and has brought the cash cow to its knees with losses never seen before.

Some Soldiering Investors

“Things were even better during 2008 when we had the post-election violence,” Jane Kangai, marketer at Voi Wildlife Lodge Group, told AFKInsider.

She was referring to tribal clashes in after a disputed election in December 2008 that killed over 1,200 people in less than three-months and brought the Kenya’s and its neighboring Uganda and Rwanda economy’s to a grind after transport routes were disrupted.

Kangai said that all destinations have been affected but the Coastal area, which largely depends on tourists visiting its white sandy beaches, was bearing the greatest brunt from the rampant insecurity.

At a tourism industry players conference held in Mombasa on November 27, they said that they expect business will probably be back to normal in 2018. That means four years of possible losses for the sector.

But some industry pundits say that there are investors who are soldiering on, confident that while the insecurity threat is there, the returns outweigh the risk and Kenya is still better than other regions on the continent.

Dave Karanja, the founder and country leader of Crane Consulting House, a Nairobi-based company that advises foreign companies on how to position themselves for the local market, said that some foreign investors were still going ahead with their investment plans in the country.

Karanja said that at the moment there are far worse threats in other regions of the continent.

“[This] is because insecurity in Kenya is being overshadowed in western media by insecurity in Nigeria … and other African countries,” said Karanja. “In fact their biggest worry is Ebola,”

A Middle Ground

In June Frontier Services Group, a Washington-based, market intelligence group for emerging markets said that the strong consumer-driven growth and other fundamentals will override security concerns in Kenya.

“However, despite rising insecurity, Kenya’s positive economic drivers will outshine the challenges. Terrorist attacks will cause sporadic disruptions but the vibrant private sector, rising consumer spending and Kenya’s important role as a hub for East Africa are strong economic drivers which are unlikely to be derailed by insecurity,” the firm said on its blog.

The firm advised businesses that they could still operate in the Kenyan market if they guaranteed their employees with security, including accommodating them in international hotels which have high security standards.

Industries such as power and banking are still attracting large and well-oiled players JP Morgan reported that it wants to open a Nairobi office to serve the East African Market while the Nevada-based Ormat Power signed a deal to supply 35 megawatts of power through a geothermal power plant that is to be put up in Menengai.