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Bodhi Ganguli

Terrorist Acts Threaten Business Continuity in Kenya

by Bodhi Ganguli | Dun & Bradstreet Editor

April 22, 2015 | No Comments »

Terrorism_shutterstock_58274350_990pxA rising tide of Islamist terrorism poses a serious threat to business continuity in sub-Saharan Africa. Insurgent activity has intensified in recent months, particularly in Kenya, one of the largest and most important economies in the region.

The Harakat al-Shabaab al-Mujahedeen organization, widely known as al-Shabaab, had its roots in Somalia more than a decade ago. Kenya has become one of the main targets of al-Shabaab because Kenyan troops joined Ethiopian and Somali forces in 2009 to decimate al-Shabaab and pave the way for an elected Somali government. Since then, however, the group has gained strength, emerging as not only one of the biggest threats to the Somali government, but also a key force of disruption in Kenya and Uganda. The group’s ties with other Jihadist organizations are not strong, although al-Shabaab is part of the al-Qaida network. Its relation with “al-Qaida central” is mostly institutional, and there is very little operational interaction.

Security risks to the Kenyan economy have spiked in recent weeks and threaten its otherwise robust outlook. Terrorist attacks carried out by al-Shabaab have already prompted several Western countries to restrict their citizens from traveling to Kenya, thereby reducing tourism revenue significantly. Al-Shabaab militants took control of a university in the town of Garissa near the Somali border in early April and systematically isolated and gunned down nearly 150 Christian students in one of the worst terrorist attacks in history. The siege highlighted, once again, the lapses on the part of the government security forces.

The Kenyan shilling weakened immediately after the Garissa attack, as investors feared a broader impact on the macro economy. While that has yet to happen, tourism, one of the biggest drivers of the Kenyan economy, is already bearing the brunt of this latest attack. The British Foreign Office recently extended again its travel advisory, warning British residents to avoid visiting Kenya. Similar advisories are expected from other nations as well, including the US.

Anecdotal evidence from Kenyan hotel and resort owners shows that tourists from the UK, France, Germany, Australia, and Asia have canceled reservations in response to the Garissa attacks, although the town is far from the Kenyan game park reserves and coastal centers usually frequented by tourists. Unless the government is able to allay the fears of the international tourist community in the next few weeks, the July-October peak season will suffer,  hurting the country’s hospitality industry and stalling overall economic growth further.

The Garissa episode was the latest large-scale attack; terrorists from the group attacked the prestigious Westgate Shopping Mall in 2013. That ordeal ended after more than 70 of the shoppers and hostages were killed and nearly 175 people injured.

The Kenyan government needs to collaborate with its counterparts in Somalia and Uganda to seek a more permanent solution to the al-Shabaab problem. A prolonged threat to the country could eventually start to weigh on investor confidence and become an impediment to foreign investment.

The World Economic Forum’s Global Competitiveness Index 2014-2015 ranks Kenya a low 135 out of 144 countries in terms of the business costs of terrorism. Given recent attacks, this rank is likely to slide further in the forthcoming 2015-2016 version of the index.

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