The lavish spending by political aspirants in the party nominations have offered a peek into the amount of funds the General Election will gobble up.

This puts policy makers and regulators on the spot regarding what measures they will employ to ensure the excess cash does not disrupt the economy’s fundamentals.

With absence of regulations to limit what aspirants can spend, political parties have up to May 8 (tomorrow) to provide records of all their assets and liabilities with the Registrar of Political Parties to enable the office to monitor the finances.

Registrar of Political Parties Lucy Ndung’u told Sunday Standard that a number of parties are yet to do so.

“The reason why this is done is to make it easier for us to audit their expenses during the campaigns because even with the political campaign financing regulations being put on hold, we have enough structures to monitor expenditure,” she said.

“You know a party is like a corporate entity and all its finances have to be scrutinised. However, the candidates themselves have a separate account for the campaigns which should be a cause for concern,” said Ndung’u.

The concern by the registrar is that, if not monitored, the campaign could become an avenue for laundering money. “The Political Parties Act is clear on section 28 that use of money obtained from criminal sources is illegal and those who do it will be punished,” she said.

For economists, however, the concern is that the election season, like the previous ones, will expose the country to a lot of money that is not linked to any economic activity, therefore putting pressure on the shilling and hiking inflation.

Figures released by the Kenya National Bureau of Statistics last month indicated that inflation had shot up to a five-year high of 11.48 per cent.

“Between March and April 2017, Food and Non-Alcoholic Drinks’ Index increased by 3.55 per cent. This was mainly attributed to increase in prices of several food items including sukuma wiki, spinach, maize flour, milk, potatoes, cabbages, onions and maize grain,” said the agency.

Sudden increase

And while this may be partly blamed on the effects of the drought that has persisted since last year, experts say the sudden increase of money in the economy will push the inflation levels higher than they currently are and put the cost of living beyond the ceiling for most Kenyans.

“Whether this money is straight, I don’t know, but it will have an effect in consumption as demand for goods will go up,” Robert Shaw, a public policy and economic analyst, told Sunday Standard.

The effect of a sudden increase in money circulation during the nominations has even been highlighted by the Central Bank of Kenya (CBK) in its weekly newsletter.

“The money market was relatively liquid during the week ending April 26, 2017, with net liquidity injections through open market operations matched by net withdrawals,” said the regulator.

“Commercial banks’ excess reserves above 5.25 per cent average requirement increased to Sh 14.2 billion, from the previous week’s Sh8.8 billion,” it said.

Considering the disruptions in the money market and economy are just for one week, then Kenya is headed for tough times in the three months to the general elections.

In 2013, the major political coalitions, Jubilee and Cord, are believed to have spent at least Sh20 billion combined in the fight for the presidency.

Jubilee, which even hired London-based public relations firm BTP Advisors to ensure a win, had at its disposal four fixed-wing planes and six helicopters leased from ALS Limited at Wilson Airport. ALS charges about $1,700 (Sh170,000) per hour for its helicopters.

A study in 2013 by the Coalition for Accountable Political Financing (CAPF) estimated that ODM candidate Raila Odinga and retired President Mwai Kibaki spent at least Sh7.5 billion each in the contested 2007 elections.

Campaign expenditure tracking data estimates that in 2007, candidates could have spent between Sh2 million and Sh3 million on voter bribery. The highest spenders used Sh7 million to bribe voters in the form of cash handouts, which accounted for eight per cent of bribes used.

How much each coalition will spend this year in the fight for the presidency is not known, but sources say Odinga’s campaign team has a budget of conservatively Sh15 billion.

With both leading coalitions having named their presidential candidates and aspirants for other seats having been identified, the real race to the finish line has just started and in the coming weeks, aspirants will comb the country selling their agenda and spending tons of money in the process.

A lot of cash will be spent on advertising, campaign materials, advisors and party agents, pollsters, security, entertainers, travel, fundraising, youth and women groups, among other expenditure.

Unfortunately, this spending has its effects.

Since 1992, when the first multiparty elections were held, data reviewed by the Sunday Standard shows either a slowdown in economic growth, an increase in inflation, a weakening of the Shilling, or all three.

Economy suffered

Inflation shot up to 45 per cent in 1992 after CBK resorted to printing of notes to fund the elections, which took place at the height of the Goldenberg Scandal. In 1997, inflation rose to 11 per cent from an average of six per cent the previous year.

Then in 2002 - partly because of the hype surrounding the election in which the Kanu regime was removed from power - inflation averaged five per cent but spiked to 19 per cent in 2007.

Consequently, the economy suffered in all these elections - shrinking by 0.8 per cent in 1992 and only growing by a paltry 0.5 per cent in 1997 and 2002. In 2007, it only grew by 0.25 per cent and 5.7 per cent in 2013.

There have been attempts by the Independent Electoral and Boundaries Commission (IEB) and even CBK to control political spending and funding, but politicians fought back, and in some cases registered victories.

The latest attempt which failed was the law limiting campaign financing, gazetted by the IEBC on December 7 last year only to be suspended in January by the High Court after ODM challenged it. The rules would have forced political aspirants to submit their campaign finance and management information and limit the amount of money they were allowed to spend.

But Justice Roselyn Aburi said the party had raised valid constitutional issues. “The case by ODM through its lawyer Anthony Oluoch raises serious constitutional issues which need to be disposed of urgently,” the judge ruled, putting the law on hold until the case is heard and determined.

Had the law been implemented, political party donations for the upcoming elections would have been capped at Sh15.3 billion, with a single-source contribution limited to Sh3 billion.

Additionally, presidential candidate would have been limited to spend up to Sh5.25 billion while governors, senators and women reps could use up to Sh433 million. MPs and MCAs would have been allowed to spend up to Sh33.4 million and Sh10.3 million.

Difficult to achieve

Assuming each candidate spent the maximum set by the IEBC and there were just two candidates each for the three county seats, then it means Sh122 billion would have been injected into the economy by the aspirants.

Then, if each of the 290 constituencies had just two contestants and each stuck to the rules, a further Sh19.2 billion would have been spent by August 9.

Cumulatively, on the lower scale, the campaign expenditure would be a staggering Sh141 billion injected into the economy without corresponding economic activity. That money is enough to construct three roads on the scale of Thika highway or fund free primary school education for four years.

Experts say controlling political spending is difficult to achieve since parties in Kenya are owned by their leaders and financiers.

“You just need to look at the current presidential contest and see,” says Patrick Kamau, who teaches Diplomacy and International relations at the United States International University - Africa.

“Kenyatta is vying on a Jubilee ticket and Raila on Nasa while, in 2013, the two used TNA and Cord. This means parties in Kenya are still personal outfits and are yet to evolve to institutions owned by the people. When you own a company, you can do whatever you want with it as so long as it satisfies you,” he says.

In December, the IEBC also banned politicians from participating in harambees but from the just-concluded nominations, it appears the law is either being ignored or politicians have found a way to circumvent it.

In Nandi, a former Cabinet minister who was running for governor gave out Sh3 million to a girls secondary school with a pledge of an extra Sh1 million. Another who contested for the same seat gave out Sh1 million to a church in Kapsabet.

Last year, CBK Governor Patrick Njoroge found himself in trouble after MPs questioned his introduction of a law requiring anyone withdrawing or depositing more than Sh1 million to fill a special form indicating where the money was from, who was to be paid and for what purpose.

“We have a Governor of Central Bank who wakes up one morning and sends a memo to all the banks and says any Kenyan who wants to deposit Sh500,000 must fill a form as if you are appearing before the DPP or before the Director of CID,” said Leader of Majority Aden Duale.