Kenya's election tensions mean nervous times for bullish economy

Standing near a tidy field of squat, emerald-green tea bushes in Kenya's western Kericho county, Sammy Kirui says there will be no violence during elections in March, and no return to the killing and looting that brought east Africa's largest economy to the brink last time a leader was chosen. "People realise that it wasn't worth it. Everyone lost," says Kirui, a tea plantation manager.

Kirui is at one end of a spectrum of forecasts that encompasses predictions of a repeat, or worse, of the chaos that claimed 1,200 lives in 2007 and 2008, and assertions that things are different now. Many Kenyans lean one way or the other. The common denominator is uncertainty.

On 4 March, Kenyans will vote for a new president to replace Mwai Kibaki, who has served two terms. The frontrunners are Uhuru Kenyatta, the son of Kenya's first president, and Raila Odinga, the prime minister, whose defeat in 2007 amid charges of rigging turned tribe against tribe in a shocking explosion of violence.

Kenyatta, a member of the dominant Kikuyu tribe, is due to stand trial at the international criminal court (pdf) (ICC) in April for allegedly stoking the violence last time round. His running mate is William Ruto, a member of the Kalenjin tribe, who is also due to answer charges at the ICC. Opinion polls put Odinga ahead, but the margin varies – and many analysts agree that a tight race with a second-round runoff poses the biggest danger to the region's economic powerhouse. Politics are intimately linked to tribal identity, and many politicians appeal to tribal loyalties. Some even campaign on a clear "us versus them" platform.

"A too-close-to-call result, and one that the loser disputes, will add complexity and uncertainty," says Aly-Khan Satchu, chief executive of the east African financial portal Rich Management. However, he says markets remain positive, with foreign investors driving the stock market to new highs.

"Equity markets have been in a bull market since May last year, and remain so," he adds. "Bond markets have been very well behaved. The central bank stabilised the macro economy and inflation is at a record low … It is either the calm before the storm or markets are signalling a positive outcome around the elections."

Most analysts say the elections will be make or break for an economy built on agriculture, tea and coffee, and tourism. Scarred by their experiences last time, some businesspeople are planning to leave during the elections. If there is violence, tourists may stay away, businesses could be looted and roads blocked, leaving produce to rot on farms or stuck at Mombasa port. Perhaps most crucially, the world's perception of Kenya as a stable nation may be significantly damaged.

Kenya is a key regional ally for Britain and the US in their fight against global terrorism. Kenya sent soldiers into Somalia in October 2011 to fight the al-Qaida-linked militants of al-Shabaab.

Some analysts say Kenya is too big to fail: it is a transport and business hub; multinationals such as Google and Nokia have offices here; and the UN has a huge presence in Nairobi, where extreme poverty and ostentatious wealth coexist. The country is hoping to leap to the next economic level by exploiting potentially rich oil and gas discoveries.

The violence last time crippled the economy, with growth dropping from 7.1% in 2007 to 1.6% the following year. The World Bank is forecasting growth of 5% this year, up from an estimated 4.3% in 2012, if the elections are peaceful. Some analysts say the worst-case scenario would be Kenyatta winning and refusing to go to the ICC.

"Then it is predicted and predictable that Kenya will meet sanctions and, given our interconnectedness with the global economy, this would have a severe impact on the economy," says Satchu.

Kenyatta's campaign has sought to turn the election into a referendum on the ICC, portraying the case as foreign interference targeting specific tribes. His candidacy still faces an obstacle – a lobby group has brought a court case challenging his ability to stand under an integrity clause in the 2010 constitution. It is unclear when a ruling may be delivered.

This year's election has already cost lives. The UN says more than 450 people have been killed across Kenya since the beginning of last year, including scores in the Tana river delta, where political rivalries have inflamed conflicts over resources.

If the Kenyan economy suffers, it will deal a blow to a fragile region. "The risks [in the region] are high and it's on many different fronts: lots of global shocks, lots of environmental risks, lots of demographic, economic, political and social challenges and crises. This makes the region vulnerable," US economist Jeffrey Sachs has said.

Joel Barkan, a senior associate with the Center for Strategic and International Studies, describes Kenya as the "anchor state" of east Africa, and says a prolonged political and economic crisis would harm its neighbours. "Uganda, Rwanda, eastern Congo [DRC] and South Sudan are all landlocked areas that depend on Kenya for their external trade, especially for importing refined petroleum products and exporting goods through … Mombasa," he wrote this month in a report for the Council on Foreign Relations.