Is sentiment an economic fundamental?

Moses would crack up whenever journalists used the phrase ‘weak macro-economic fundamentals’ as an explainer of poor economic or business performance. ‘And what might they be’? he would quip in mirth.

Interest rates, exchange rates and inflation, I would offer quickly, adding to his amusement. Were it today, I would add sentiment. Here is why.

In any account of events, context infuses perspective. And perspective matters a great deal. Last week, I run into this idea twice in the same day. First, I led a KRA team – board and managers, in meeting 300 clients in a Kisumu hotel.

The discussions were candid, robust and illuminating. We heard how onerous requirements may be pushing small traders into panya routes at the Ugandan border.

As we hurried to catch a plane to the Annual Journalism Excellence Awards (AJEA), colleagues and I marveled at how clean Kisumu City is. We were impressed by the road infrastructure.

We noted how the City is often caricatured as the hotbed of maandamano, while Mt Kenya is seen as too posh and focused on their businesses to picket.

Yet, while new hotels are opening and old ones getting renovated in Kisumu, iconic hotels are closing in Nyeri. While interchanges are springing up in the lakeside City, the town of my parents boasts of one old, small roundabout.

Sipping tea in the café at Acacia Premier, we were introduced to the CEO of World Smart Cities, who is visiting from New York, to support Kisumu’s Lake Front Development.

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I walked away crest fallen, recalling how my smart towns project was thrown into the dustbin in my beloved Laikipia. Holding government to account, including by street protest has not stopped Kisumu from being a first-class city! Context. Perspective.

But interesting perspectives did not stop there. At the AJEA, our host, Mr David Omwoyo, the Media Council CEO expressed surprise, tongue in cheek of course, that KRA had not only met stakeholders but bought them lunch.

The audience had a good laugh. Broadcasting and Communications PS Steve Isaboke and I, reflecting on the critical role of journalists posed the question. What and who drives public sentiment? What is the effect of sentiment?

Consider the Lapsset corridor. If you are willing to travel north-east on the Isiolo – Mandera road, to Mado Gashi, you can get from Moyale to Lamu Port, on tarmac, except for about 80 kilometers between Isiolo and Modogashe. That is not in the future. Today. Since a contractor is on site, this section should be complete in another year or so.

But the use of the Lapsset corridor is yet to pick up. In fact, most folks don’t really know that the route is open and in fairly good condition. Granted, the Garissa-Lamu, through Ijara, and the Garissa-Isiolo, both more direct sections of the route,are not yet tarmacked.

But the corridor is useable now. The Isiolo-Mandera road is itself under development with many segments under active construction. But a recent presidential announcement to this effect was met with mockery, begging the question, what really drives perceptions?

Receiving a lifetime achievement award at the AJEA was Mr. Lee Njiru. He told a gem. Communication can build or destroy you, he informed me.

Suppose we report that you went to the national park with three women. It could be interpreted that you are amorous, bringing your name into some disrepute. As a statement fact, it would not be actionable in court.

Except of course you were with your mother, wife and daughter, on a game drive after church! Context drives perspective!

Sentiment is the sum total of communications that can both build and destroy. As things stand today, two of the macro-economic fundamentals – inflation and exchange rate, are sitting in the right corner.

Lending rates are trending in the right direction but not fast enough. But business and consumer confidence is yet to recover. Citizens, yet to feel the effect of low inflation in their pockets, remain skeptical. That view influences behavior, consumers remaining restrained, and demand weak. Could sentiment be the 4th economic fundamental?

The writer is an economist, is Partner at Ecocapp Capital, an Advisory Firm