Attacks increase risks of ethnic violence

Violent attacks on civilians in and around Mpeketoni between 15 and 17 June 2014 have underscored a further deterioration in Kenya’s security environment. Heavily armed gunmen killed over 60 people in the attacks, making them the most deadly since the September 2013 assault on Nairobi’s Westgate shopping mall by Somali Islamist militant group al-Shabaab. According to data from Maplecroft’s Terrorism Dashboard, 120 people have been killed and 232 injured by terrorist incidents since January 2014, most of which have been attributed to al-Shabaab.

In a statement made on 16 June 2014, al-Shabaab claimed responsibility for the attacks in Mpeketoni, which is located less than 50km from the port city of Lamu. However, this claim of responsibility was rejected by Kenyan President Uhuru Kenyatta, who instead blamed ‘local political networks’ and insisted that his own Kikuyu ethnic group had been targeted. This was the first time the government has rejected al-Shabaab’s claim of responsibility. Kenyatta’s decision to blame local political actors risks playing into the hands of al-Shabaab by exacerbating entrenched ethnic and political tensions and thereby potentially provoking wider societal violence.

Attacks could signal strategy shift

Al-Shabaab is not believed to have falsely claimed responsibility for any previous attack, suggesting that it is highly likely that the group was involved in the assault on Mpeketoni. Indeed, the sophisticated nature of the incident – which included the jamming of mobile phone networks – points to a well-planned terrorist attack. However, the choice of the target – a small town with few obvious targets – is an unusual target for al-Shabaab. Previous large-scale attacks have occurred primarily in major cities, especially Nairobi and Mombasa.

Al-Shabaab’s targeting of Mpeketoni – an area which faces profound tensions over the interlinked issues of land and ethnicity – appears designed to provoke wider sectarian tensions. These tactics have been widely used by Islamist militant group Boko Haram in northern Nigeria, as well as – to a much lesser extent – by radical Islamist groups in the Tanzanian Zanzibar archipelago. Given deep divisions within Kenyan society, sectarian violence in one part of the country could rapidly spread into more widespread clashes, as highlighted by ethno-political violence following the 2007 presidential elections, during which over 1,200 people were killed.

Politicisation of security response risks compounding tensions

If al-Shabaab’s aim was to provoke sectarian violence in the country, the government’s response to the June 2014 attacks is likely to play into the hands of the militant group. President Kenyatta’s speech illustrated the government’s willingness to use major security incidents to discredit the main political opposition. His attribution of the attacks to ‘local political networks’ was widely seen as a thinly veiled reference to the main opposition party, the Coalition for Reform and Democracy (CORD), led by Raila Odinga. Other members of the government explicitly blamed CORD for the attacks, although there does not appear to be any evidence to support these allegations.

Kenyatta’s focus on the targeting of Kikuyus during the attacks also risks elevating ethnic tensions in the deeply polarised country. This is particularly significant as it was the first time the government has blamed an attack claimed by al-Shabaab on domestic ethnic violence. Additionally, although most of the dead in the Mpeketoni attacks appear to be Kikuyu, eyewitness accounts of the attack do not suggest that people were deliberately targeted based on ethnicity. In a sign of rising tensions, several politicians led calls for ‘community defence’ groups on ethnic grounds shortly after the president’s speech.

Widespread ethnic violence is far from inevitable, especially given the desire by most Kenyans to avoid a repeat of the 2007-08 post-election unrest. Nonetheless, rising friction over perceptions that certain ethnic groups are being favoured for senior civil servant positions as well as continuing tensions over land ownership rights point to ongoing risks of more widespread violence. Attempts by al-Shabaab to capitalise on these divisions will serve to further stoke tensions. This will be compounded by the government’s divisive response to security threats, and political rhetoric by both the government and opposition politicians following the Mpeketoni attacks.

Rising risks for businesses

Extremely strong demand for Kenya’s debut US$2 billion Eurobond, announced on 16 June 2014, indicates that as of yet international bond investors have remain relatively undeterred by the deteriorating security environment. Nonetheless, investors with operations on the ground in Kenya are increasingly concerned about risks to personnel and assets from escalating terrorist attacks. The announcement by the US Embassy in Nairobi on 19 June 2014 that it would relocate some of its staff from Kenya highlights growing risks to company personnel. Expatriate employees are likely to be increasingly unwilling to relocate to Kenya and companies may need to raise salaries to attract personnel in light of the security risks.

Oil and gas investors could be particularly affected by the attacks in Mpeketoni. The attacks occurred less than 50km from Lamu and in close proximity to the planned US$25.5 billion Lamu Port South Sudan Ethiopia Transport (LAPSSET) corridor, which is expected to involve the construction of a new port, oil pipelines and refinery. The project has already struggled to secure sufficient backers and its high cost will be raised further by increasing insurance and security costs associated with heightened localised security risks. Plans are likely to be scaled back, while security-related interruptions to the project could delay exports of oil.

Although repeated and increasingly sophisticated terrorist attacks are damaging investor confidence, the possibility of widespread ethnic violence remains the greatest concern to companies with operations in Kenya. Any resurgence of ethnic violence in major towns and cities would have severe implications for business continuity and global investor perceptions of the country.