allAfrica.com: East Africa: Kenya Crisis - Spectre of Economic Collapse Sends Shivers Through EA (Page 1 of 2)

East Africa: Kenya Crisis - Spectre of Economic Collapse Sends Shivers Through EA

Sooner or later, the economic destruction caused by the worsening violence in Kenya, which erupted in the wake of an election whose results have been pronounced flawed by European Union observers - was bound to take on a regional dimension.

As we went to press, the crisis was already threatening to plunge the landlocked economies of neighbouring Uganda, Rwanda, Burundi and the northern and eastern parts of the Democratic Republic of Congo into a spiral of macroeconomic instability spurred by shortages of essential consumer products and crippling inflation.

As of Wednesday last week, at least 100 trucks loaded with petroleum products destined for Uganda and Rwanda were stuck at various Kenya Pipeline Company (KPC) depots in the western Kenya towns of Nakuru, Eldoret and Kisumu - the main flashpoints of the post-election violence that has engulfed the country.

Uganda's oil distribution and marketing channels faced unprecedented paralysis due to the fact that the major oil depots supplying petroleum products to that country are located in two of these three towns.

The Kisumu KPC depot, via the route Kisumu and Busia, moves 60 per cent of all petroleum supplies reaching Uganda, with the Eldoret depot accounting for the remainder.

According to our sources at KPC, 46 oil tankers were stranded at the Kisumu oil depot as of Wednesday last week. Another 26 oil tankers were stranded in Eldoret, while 19 other oil tankers were stuck in the Rift Valley's central town, Nakuru.

As we went to press, the management of KPC, in a desperate attempt to coax oil transporters to resume business, had offered to provide security escorts for oil tankers operating between Kisumu and the Busia border post.

KPC sources told us that the owners of the oil tankers were still reluctant to release their vehicles.

The post-election violence in Kenya is also denying its landlocked neighbours access to Mombasa, the major seaport serving the region and the Great Lakes.

Within the region, Kenya is the economic linchpin. Because of its strategic location, its relatively developed infrastructure, educated working class and large middle class, Kenya has the ability to serve as either the locomotive of development or an agent of destabilisation of the region and farther afield.

In 2006, the country's share of exports to the East African Community accounted for 42.6 per cent of total exports to Africa.

Kenya also dominates the intra-Comesa export market with a 34 per cent market share, followed by Egypt with 17 per cent.

Last year, exports to Uganda amounted to Ksh42 billion ($656 million), 80 per cent of which was accounted for by re-exports of petroleum products. Exports to Rwanda amounted to Ksh7.2 billion ($112.5 million) and to Tanzania Ksh18 billion ($281.25 million). Kenya's potential to either lead regional development or drag the process down is enormous - all the more so because the East African region is characterised by permeable borders with ethnic groups overlapping national boundaries and extensive flows of people and goods - both legal and illegal - between the states.

If Kenya explodes in the current circumstances, it will badly effect the security environment of the region and cripple international peace efforts in the major conflict areas of Somalia, Burundi, Southern Sudan and Congo.

The crisis in Kenya has left Uganda and Rwanda in a quandary: Whether to just sit back and watch even as their economies are ravaged by the impact of post-election violence in Kenya, or deploy security forces in the 120-kilometre stretch between Kisumu and Busia in order to guarantee supply of petroleum products to their countries.

These touchy issues of sovereignty explain why nearly all Western governments were quick to call for mediation between the key protagonists - President Mwai Kibaki and his nemesis Raila Odinga.

Just how much influence the international community can exert to bring Kibaki and Raila Odinga to the negotiating table remains difficult to tell.

In the case of the United States, its interests in Kenya - economic and geostrategic - remain limited in comparison with other parts of the world. US companies do not have a major presence in Kenya's corporate sector, and while the US views Kenya as critical to the security of the East African region and a key ally in the "war on terror," the region itself is not critical to Washington's interests.

Thus, there is little chance the US will intervene strongly to force the protagonists to the negotiating table - unless there is a Rwanda-type disaster.

In contrast, the European Union has major interests in Kenya. European companies have invested heavily in the tourism, agribusiness and financial sectors.

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