The political temperature is rising in Kenya ahead of the next parliamentary and presidential elections on August 9th. President Uhuru Kenyatta will step down after serving two terms, intense competition and electoral reforms will spawn new coalitions, and a tight race will elevate political tension. Allegations of election fraud are likely and the risk of damaging post-election dispute and violence could once again cast a shadow over Kenya. It remains to be seen if Kenya has learnt any lessons from the recent past and finds itself in a better position to achieve a peaceful and smooth transfer of power.

Who are the frontrunners?

The frontrunners for the top job as president are William Ruto, Mr Kenyatta’s estranged deputy, and Raila Odinga, the main opposition leader and the outgoing president’s preferred successor. An opinion poll in December showed Mr Odinga and Mr Ruto to be evenly matched, with one third of the vote each, pointing to a very close contest. Surpassing the 50% threshold for a first-round presidential victory will be difficult to achieve and a second round of voting (for the first time ever) is a distinct possibility. This scenario would benefit Mr Odinga – boosting his chances of capturing the presidency after four failed attempts – as the eliminated contenders would be more likely to endorse him than Mr Ruto. Our call, by a small margin, is a victory for Mr Odinga.

Key electoral reform provides election shake-up

In a key electoral reform on January 27th, Mr Kenyatta signed into law a string of amendments to the Political Parties Act, giving a much clearer framework for pre-election coalition building. In a major change, parties joining a coalition can now retain their separate identities, boosting the appeal of co-operation. The new laws are broadly beneficial, by allowing for more stable alliances, but they could still be frustrated by legal challenges. Mr Odinga will build a formal coalition under the Azimio la Umoja (Quest for Unity) banner, which is expected to unite Mr Odinga’s Orange Democratic Movement (ODM) and Mr Kenyatta’s wing of the ruling Jubilee Party. Mr Ruto and his new United Democratic Alliance (UDA), together with allies in the Jubilee Party, intend to establish a new-style coalition, Kenya Kwanza. This coalition will involve Musalia Mudavadi (Amani National Congress) and Moses Wetangula (Ford-Kenya), who switched their allegiance to Mr Ruto after ditching the One Kenya Alliance (OKA) they formed last year with Kalonzo Musyoka (Wiper) and Gideon Moi (Kanu). The OKA holdouts intend to build their own coalition and maintain their third-force status.

Election-related uncertainty will lead to slacker business activity

Election-related uncertainty is unavoidable and will peak from June-August, leading to slacker business activity and wavering confidence, including possible delays to projects and investment. The efficacy of the Independent Electoral and Boundaries Commission (IEBC) – reconstituted last year to give the agency more time to prepare and resolve disputes – to dial down pre- and post-election political tension could prove crucial. Provided the election is not tarnished by serious disputes and unrest, the economic hit will be minor and temporary. But disruption akin to that surrounding the previous election in 2017 would be much more damaging.

This year is dominated by a series of important elections. Uniquely positioned to intersect politics, policy and the economy, EIU Country Report’s should be vital reading when assessing how decisions at the ballot box will affect your business operations. All our reports are available to explore here.