Markets to remain calm after political storm over Gachagua's impeachment

For legal and governance scholars, a new field of study has emerged. As for this column, we will stay focused on examining the economic fallout and implications of this messy Kenya Kwanza political divorce.

The morning after Deputy President Rigathi Gachagua was impeached by the National Assembly, a business insider called to ask me what the impact of this would be on the economy. She needed to quickly prepare a market analysis report for her company, so they could make the right adjustments in response to potential market reactions. My immediate reply was, “Nothing!” There was a tense silence for about a minute before she finally said, “Oh, okay,” and the conversation ended there.

The Senate, serving as the trial chamber for the impeachment of either the president or deputy president, has now sealed Gachagua’s fate. However, I don’t share the illusion that the former deputy president will find relief through the justice system, mainly because this is a political process, not a judicial one.

Regardless of where one stands politically, the key question for investors and the business community is whether this political divorce will disrupt economic activity in the country. The short answer is no. Here’s why I take this firm position.

In June 2017, Craig Botham, writing for Schroders Global, examined the impact of presidential impeachments on markets, focusing on cases in the US and emerging markets like South Korea and Brazil. His findings showed weak, rather than compelling, evidence that presidential impeachments lead to significant market volatility.

Similarly, in January 2020, Jackie Greene in ITR Economics argued that impeachment proceedings are unlikely to cause long-term disruptions to the economy. She noted that, like presidential elections, the economy is too large to be fundamentally affected by a single individual.

While it’s normal for economies to experience short-term fluctuations during periods of political uncertainty, such as impeachments, the evidence suggests these events rarely have long-term effects on economic activity by themselves. Market uncertainty typically stems from the anticipation of potential policy changes if a president is successfully impeached. However, this uncertainty also depends on the prevailing economic conditions attributed to the impeached president.

For example, in the US, markets rallied with above-average growth following the failed impeachment of President Bill Clinton in February 1999. This market confidence reflected approval of Clinton’s economic policies. Despite the political turmoil surrounding his personal scandals, Clinton left behind one of the strongest economic growth records in US history.

Given this evidence, there are key differences in Gachagua’s impeachment. While it’s true that such an event is unprecedented in the country, it’s important to note that a deputy president is not the president or the head of government. The DP does not oversee government policies, meaning his removal has no real impact on the existing policy framework. The only likely change will be in tribal voting realignments as we approach the 2027 General Election.

In theory, and based on the US model—which our Constitution largely mirrors—a DP serves mainly as a backup to prevent a power vacuum if the presidency becomes unexpectedly vacant. The idea of a powerful DP is a myth born from our political bad manners of ethnic mobilisation to secure the presidential vote.

Despite the political turmoil, Gachagua’s impeachment may have unintentionally restored some political order for future coalitions on presidential elections. It also sets a precedent that could be applied to a president’s impeachment in the future. With this perspective, the parliamentary proceedings of the last two weeks could mark a major step forward in the evolution of our constitutional order.

More importantly, any discussion about the potential impacts of the Deputy President’s impeachment must be considered within the broader context of the economy. First, our economy remains underdeveloped and inefficient, making it difficult for new information to be absorbed by the markets. As a result, it would be challenging to trade on the outcome of the DP’s removal from office. Moreover, we are always politicking, so any uncertainty over the past two weeks is hardly new information for the markets.

In fact, no impartial analyst who understands our politics should have expected a different outcome from the impeachment proceedings—the result was evident from the start.

Ultimately, we must place our expectations on the resilience of the economy and people. Time and again, the economy has survived, and the people have overcome crises that might have crippled other nations. Despite our turbulent political culture, we often manage to unite when circumstances demand it. Sometimes, I wonder if our economy is somehow built to thrive in chaos—or if we have simply become so accustomed to it that it has become our lived reality.

For now, we say pole to the truthful man. We pray for his restoration to full health and wish him strength and the grace to navigate the political storm he is facing.