Jan. 5, 2010 -
PRLog -- For the tourism industry in Kenya, 2008 can only be described as having been disastrous. It began with the unexpected violence following the disputed 2007 elections. While no tourist areas were involved and no tourists were injured, most governments posted negative travel advice and inbound tourism collapsed. While the industry was successfully working to re-establish itself the global financial crisis then intervened and the recession that followed added its own impact. Foreign exchange earnings for tourism are reported by the Central Bank of Kenya to have been down by 36% in 2008 as compared with 2007. The depth of the crisis in 2008 can be appreciated from the fact that despite the global economic downturn 2009, still appears as a year of at least partial recovery. Like many countries around the world, Kenya is promoting domestic tourism in an attempt to counter balance the fall in international arrivals. There are of course limitations to this strategy. Firstly, while international tourists are drawn to the inland game parks, domestic tourism (plus tourism from neighbouring African countries) is focused on the Indian Ocean beach areas centred on Mombasa. A local newspaper report in The National reported that the coastal areas were packed during a recent holiday weekend, but noted that the holidaymakers were almost all Kenyan. Secondly, internal holidaymakers do not spend at the same level as Western tourists and, of course, they do not generate foreign exchange earnings. Kenya had set itself the goal of attracting 3mn tourists to the country by 2012. In 2007, it achieved an important milestone when it received two million arrivals. However, this fell to just 1.1 million (mn) in 2008. Kenya Tourist Board Chairman Jake Grieves Cook has said that he expects the sector to record 10- 15% growth this year. 'A 113% increase over February 2008 and an overall rise of 54% over March 2008 were posted,' he said, adding that forward bookings from July onwards are also said to be positive and he feels the year should close with international arrivals of 1.4 to 1.6mn. If there is a silver lining, it might be an increased investment in infrastructure. In common with most countries, the Kenyan government is increasing spending in order to provide an economic stimulus. Planning Minister Wycliffe Oparanya remarked: 'More resources have to be earmarked for expansion and rehabilitation of the road, power, railways and ports.' Against this relatively optimistic scenario, we remain concerned over political risk in Kenya, following the failure to establish a local tribunal to try the alleged perpetrators of the post-election violence. Civil unrest could increase, although we do not expect a return to the early-2008 levels. Unemployment is already a pressing political problem in Kenya, and it is set to get worse over the course of 2009. Unemployment, especially among the young, can place pressure on social stability, potentially leading to public unrest. This threat is captured in our proprietary political risk ratings. In our short-term ratings, Kenya already receives a score of 1 out of 10 in the unemployment sub-category, indicating that joblessness is both high and rising. When combined with high inflation (headline inflation stood at 25.1% y-o-y in February 2009) and fairly frequent unrest, it delivers a score of just 35.0 out of 100.0 for social stability in Kenya, indicating that further protests are relatively likely to occur. The government's main initiative to tackle unemployment is a KES15bn (US$811mn) stimulus package, which was launched by President Mwai Kibaki in mid-March. The spending is in addition to the main budget, and is in line with the International Monetary Fund's recommendation that monetary and fiscal policy should be loosened, in order to help the economy weather the ongoing storm. The aim of the package is to create more than 300,000 jobs. As reflected in our political risk ratings, we believe a resurgence of civil unrest cannot be ruled out over the coming months. Kenya receives a score of 63.8 out of 100.0 in our short-term political risk ratings, dragged down by poor social stability. Owing to the aforementioned high inflation and unemployment, we see a distinct lack of social cohesion, as indicated by Kenya's score of just 35.0 in the 'social stability' component of the short-term rating. Indeed, the nation is only marginally above Côte d'Ivoire (30.0) and Madagascar (25.0) in our ratings.
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