Kenya – strong economic growth likely to follow peace accord

We are pleased that the political turmoil and unrest in Kenya has been brought to an end with the recent agreement. The bloodshed and violence of the past two months have been well recorded and the subject of much debate. To focus on the positive:

• The problem of a flawed election has been addressed and notswept under the carpet
• The leaders in Kenya have been calling for calm and peace during the negotiation process, as opposed to inflaming the volatile situation
• The crisishas been resolvedby way of dialogue and negotiation, instead of violence

These factors, in our opinion, point to a progressive maturity in political interaction which in another Africa, that of twenty years ago, might have led to a full-scale civil war.

One could however be forgiven for thinking that these negotiations, tough as they were, might have been the easy part. Messrs Kibaki and Odinga have a history of not being able to work together. Theyserve the interests of different stakeholder groups: apart from the superficial tribal divide, this is also the story of the establishment versus the "have-nots". Only if there isunwavering determination, in the interest of all Kenyans,to make this pact work, will the two page peace accord be judged by history to be a watershed document.

And, after all is said and done - and it still needs to be done with little or no backsliding - Kenya's crisis has actually been the crucible for the creation of amore modern democratic African countryon an increasingly economically relevant Africancontinent. This settlement - if it holds - will light abeacon for every African nation.

From an investment point of view Kenya still remains the driving force in East Africa. We expectstrong economic growth post the peace accord. Company operations have in some cases been badly disrupted during January and February, and others will be negatively affected well beyond today, in particular companies involved in key sectors such as tourism, agriculture and transport.

We expect a short-term relief rally for Kenyan equities on the back of news of the political resolution. However, with the Kenyan shilling expected to appreciate back to its previous highs versus the dollar, international investors could get an extra bonus from currency strength. In the medium term, we expect Kenya, and the East African region, to go from strength to strength, and attract increasing international investor interest.

In conclusion, we are optimistic that the recovery will be a quick one, albeit dependent on a united commitment from the PNU and ODM towards the transitional government, electoral laws, and proposed constitutional reforms in the National Accord and Reconciliation Act.