Kenya's economy has suffered a substantial blow, with foreign investors withdrawing a significant Sh16 billion from the country's market between September and December 2024. This mass exodus of capital is attributed to the escalating political tensions that have plagued the country, leading to a dramatic increase in capital outflow.

The protests, which turned violent in June last year, significantly disrupted the country's political and economic stability, resulting in substantial consequences. The protesters demanded government action on pressing economic issues such as inflation, high unemployment, and corruption. The economic impact was severe, with the Nairobi Securities Exchange PLC (NSE) reporting a loss of about $600m in investor wealth in two weeks due to the protests, which had seen businesses looted by protesters.

According to the Capital Markets Authority (CMA), the equity market experienced a significant net outflow of Sh16.639 billion in the fourth quarter of 2024, a dramatic increase compared to the Sh628 million recorded in the third quarter of the same year. The CMA attributed the rise in capital outflow to the effects of political instability in the country during the second quarter of 2024, which likely caused foreign investors to pull out of the market.

Despite the outflows, there were positive developments in the market. The report noted that the market volatility for the three market indices, NSE20, NSE25, and NASI, remained low, below one per cent, and all indices increased compared to Q3. 2024. CMA Chief Executive Wycliffe Shamiah highlighted that the improved performance across the three indices is driven by heightened participation in the capital markets from both retail and institutional investors despite increased foreign capital outflow.

The proportion of foreign investors actively trading increased slightly, from 42.07% to 43.83%. This indicated that foreign investors maintained an active presence in the market, showing continued engagement despite the prevailing challenges. However, the overall impact of the political tensions on the economy cannot be ignored, and the Kenyan government must take steps to address the underlying issues driving investor uncertainty.

The situation highlights the delicate relationship between political stability and economic growth. As Kenya continues to grapple with escalating tensions, it is essential for the government to prioritize addressing the concerns of its citizens and restoring investor confidence to mitigate further economic losses.

In conclusion, the Sh16 billion loss suffered by Kenya's economy is a stark reminder of the devastating consequences of political instability on economic growth. As the country navigates this challenging period, it is crucial for policymakers to prioritize stability and take concrete steps to restore investor confidence and drive economic recovery.