This violence, sparked by allegations of electoral fraud during the December elections, had been predicted by many observers. However, its extent and intensity was not. The violence displaced several hundred thousand people and left over 1,000 dead. Some parts of the country remain dangerous, especially for members of certain ethnic groups. The impact on the economy has been significant. Tourism, possibly Kenya's most important industry, has suffered a significant drop. The industry has seen a reduction in revenue of as much as 80% as many tourists have cancelled plans to visit a country seen to be struggling with widespread violence. Other sectors of the economy have been hit with shortages of basic goods and transport problems. Many small businesses have been directly affected by the violence. During the worst of the violence, shops and offices were attacked and burnt, and staff members did not arrive for work. Since then, prices on basic goods have risen sharply, and many poor families are struggling to afford necessities such as bread.

These are only a few of the problems facing the coalition government. The irony is that all of the presidential candidates promised to address poverty and improve economic growth. The actions of their various supporters in the aftermath of the elections appear to have made this task far harder. Under Kibaki's 2002 - 2007 presidency, Kenya enjoyed a respectable 6% economic growth rate, and this was expected to continue after the elections. However, following the recent violence and uncertainty, Kenya would be lucky to see a fraction of this economic growth during 2008.

Economic confidence in the form of an IPO

However, there are signs that the economic situation is improving alongside recent political events. Most businesses on the street have resumed normal activities, even though some difficulties remain. On the stockmarket, Safaricom - one of Kenya’s leading mobile telecommunications providers - will undertake an IPO on 28 March. This IPO had been delayed in December due to the election violence. This offering has been eagerly awaited, both by local and international investors, and it is seen as an opportunity to offer large numbers of small investors a chance to participate in Kenya’s stockmarket. A successful IPO would be a boost for the economy. The government (which owns 60% of Safaricom) would not only get an injection of cash, needed for rebuilding in the aftermath of the elections, but would be presented with an opportunity to gauge the mood among local investors towards the country’s political and economic climate.

Even though the politically-motivated violence has damaged business confidence in Kenya, this should recover relatively easily. The fundamentals of the economy are still in place, and the country's infrastructure has not been significantly damaged. The most severe damage has been to Kenya's image as a safe destination in a region known for its instability. Kenya's tourism industry, which has taken several knocks in recent years, will take some time to recuperate. The Kenyan economy will not fully recover until it can restore confidence among foreign tourists that it is a safe destination.

Tackling the long-term consequences - finding the root cause

In order for the new government to achieve any significant economic growth, and indeed to avoid negative growth, it will need to rapidly address the damage caused by the recent unrest, alongside the problems that the country faced prior to the elections. As mentioned in CAI's pre-election review, Kenya will need to improve its infrastructure, such as transport and telecommunications networks, and effectively address corruption in order to enjoy greater economic growth. Long-term economic growth depends on this. To do so, the country will need an effective government with a clear economic plan.

This is the crux of the problem. Although the power sharing agreement between Kibaki and Odinga may have resolved much of the unrest and political uncertainty in the country, it is very unclear whether this coalition will lead to an effective government. The distribution of authority in the new government is at best vague. Kibaki will remain as President, with Odinga taking the newly created post of Prime Minister. Both positions will have executive authority, with the understanding that there will be constant communication and consultation between the two. This, unfortunately, is unlikely to occur.

Kenya has struggled to maintain an effective and efficient government even with only one executive. This new coalition may only create confusion and lead to internal power struggles within the administration. It is unlikely that this government will survive the full five-year term.