The deadliest attack by Islamist
militants in 15 years in Kenya is threatening tourism, the
nation’s second-biggest source of foreign income, as the
industry battles to rebound from a series of setbacks this year.
The four-day raid by militants linked to al-Qaeda at an
upmarket shopping complex in the capital, Nairobi, left at least
67 civilians and security personnel dead. Armed with automatic
machine guns, as many as 15 gunmen of the Somali Islamist group,
al-Shabaab, rushed into the mall on Sept. 21, spraying bullets
and lobbing grenades as they moved through the building.
“Some of the images that have come out of Kenya are really
harrowing and it’s going to affect the perceptions in quite a
negative way,” Shilan Shah, an economist at Capital Economics
in London, said in a phone interview yesterday. “The length of
time it went on, the live coverage, the severity of the attack;
it’s definitely affecting perceptions.”
Tourism is the biggest foreign-currency earner in East
Africa’s largest economy after tea exports, with visitors
flocking to Kenya’s wildlife reserves, such as the Masaai Mara
park where millions of wildebeest can be viewed in an annual
migration, and Indian Ocean beach resorts at Mombasa, the
country’s second-biggest city. The industry accounts for about
10 percent of gross domestic product, generating more than $1
billion a year and attracting about 1.8 million holidaymakers,
according to the government.
Hotel Chains
Favored by affluent Kenyans and foreigners working in
Nairobi, the Westgate Mall also drew many tourists, hosting a
weekly market offering African souvenirs and trendy coffee shops
with Internet access. Victims of the attack, which was the
deadliest since al-Qaeda bombed the U.S. embassy in Nairobi in
1998, included 57 Kenyans and citizens from France, Canada,
South Africa, China and Ghana, the government said.
The violence will probably reduce tourism revenue by $160
million this year, restricting economic growth in the $41
billion economy to 5 percent, compared with an earlier estimate
of 5.6 percent, Charles Robertson, global chief economist at
Renaissance Capital in London, said in an e-mailed report on
Oct. 2.
Shares of TPS Eastern Africa, the Kenyan holding company of
the Serena Hotel chain, have dropped 4 percent since the
violence to 46 shillings ($0.53) at yesterday’s close in
Nairobi.
The U.S. State Department on Sept. 28 reissued an earlier
advisory telling American tourists to be wary of the “threats
from terrorism” in Kenya. The move was “unnecessary and
unfriendly,” Kenyan Interior Secretary Joseph Ole Lenku said
two days later.
Tourism Target
Tourism has already been dented this year as visitors held
back on trips before elections in March and after a fire at the
country’s main airport in Nairobi in August gutted the
international arrivals hall. The number of tourists dropped 12
percent in the first half to 495,978, compared with a year
earlier, according to the government, which has delayed its
target to attract 3 million visitors to 2017 from 2015.
The attack occurred at a time when Kenya’s government is
seeking to accelerate investment in roads and railways to boost
economic growth. The International Monetary Fund hosted a
conference on Kenya’s rising economic prospects last month, in
which Treasury Secretary Henry Rotich forecast 5.6 percent
expansion this year, compared with 4.6 percent in 2012. The
target is to reach at least 10 percent annual growth by 2017.
‘Bounce Back’
While tourism may suffer, the economy is resilient and
investors taking a long-term view won’t be deterred, Shah said.
“The country has shown it has the capacity to bounce back
previously,” he said.
Clashes between ethnic groups after disputed elections in
December 2007 led to the deaths of more than 1,100 people and
displaced thousands, causing economic growth to slow to 1.5
percent in 2008. A year later, the economy expanded 2.6 percent,
while tourist arrivals surged 24 percent, according to the Kenya
National Bureau of Statistics.
The al-Shabaab attack won’t dissuade Marriott International
Inc. (MAR) from proceeding with the construction of two new hotels in
Nairobi, Alex Kyriakidis, the hotel chain’s president for Middle
East and Africa, said in an interview on Sept. 25. This was an
“isolated incident” and it’s unlikely to have a long-term
effect on Kenya’s tourism industry, he said.
The Kenyan shilling has strengthened 1.8 percent against
the dollar since the shopping mall attack and was trading as
high as 86.25 in Nairobi yesterday. The FTSE Kenya NSE 25 Index
has climbed 4 percent to 171.34 in the same period. That
compares with a 3.3 percent increase in the FTSE/JSE All Africa
Index of 30 companies on the continent, excluding South Africa,
monitored by the Johannesburg Stock Exchange.
Eurobond Sale
“We were immediately worried but we’re seeing now,
happily, that the impact may not be as big as we thought,”
Mohammed Hersi, chief executive officer of Nairobi-based
Heritage Hotels Kenya, a chain of seven hotels and safari
lodges, said in a phone interview yesterday.
The government is sticking to plans it made before the
shopping-mall attack to sell a debut Eurobond of at least $1.5
billion by December after several delays since since 2007.
Moody’s said on Sept. 26 the terrorist attack may curb
government revenue, mostly from tourism, and is negative for the
country’s B1 credit rating. That’s four levels below investment
grade and on par with Zambia and Cape Verde.
Oil Production
Nairobi, which accounts for about 60 percent of Kenya’s
economic output, is the regional headquarters for companies
including Google Inc. and Toyota Motor Corp. (7203) The nation is set
to start pumping its first oil next year and may export crude as
early as 2016.
Al-Shabaab had threatened attacks in Kenya after the
country sent troops to Somalia in October 2011 to oust the
militia group. Kenya deployed its army to the neighboring
country after blaming al-Shabaab for kidnapping at least four
foreigners and murdering a British tourist at a luxury coastal
resort.
“Terrorism is a very global problem and it’s not just
something that happens to Kenya or a developing country,” Hersi
said. “As long as high commissions and embassies haven’t told
their citizens specifically not to travel here, people will
come.”
To contact the reporter on this story:
Sarah McGregor in Nairobi at
smcgregor5@bloomberg.net
To contact the editor responsible for this story:
Nasreen Seria at
nseria@bloomberg.net
Kenyan Mall Siege
Kenyan Presidential Press Service via Getty Images
In this handout photo provided by the Kenyan Presidential Press Service, the remains of cars and other debris is seen from the rooftop of the parking lot outside the Westgate Mall in Nairobi, Kenya, on September 26, 2013.
In this handout photo provided by the Kenyan Presidential Press Service, the remains of cars and other debris is seen from the rooftop of the parking lot outside the Westgate Mall in Nairobi, Kenya, on September 26, 2013. Source: Kenyan Presidential Press Service via Getty Images
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Article source: http://www.bloomberg.com/news/2013-10-03/kenyan-tourism-industry-threatened-in-deadly-mall-attack.html