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Civil unrest damaging Kenya's economy

  • Story Highlights
  • Kenya's once-stable economy faltering due to violence following disputed election
  • Equity market on Nairobi Stock Exchange lost $591 million on first day of 2008
  • Business leaders say the government losing $29.5 million a day in revenues
  • Thriving tourist industry also hit, with British tour operators calling off flights
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(CNN) -- The orgy of violence that has greeted Kenya's disputed election result has led to hundreds of deaths and forced tens of thousands to flee their homes.

But away from the tragic human cost, the unrest has also provoked concerns about the stability of the east African country's economy, until now seen as a model for the region.

Businesses have been destroyed and looted and supply routes disrupted after the opposition accused incumbent president Mwai Kibaki of election fraud after he was declared winner Sunday.

Investors are watching events closely in the country, fearful of how it could affect one of Africa's few economic success stories.

And the early signs have been worrying.

The equity market on the Nairobi Stock Exchange lost 40 billion Kenyan Shillings ($591 million) in value on its first day of New Year trading Wednesday, the Kenyan financial newspaper Business Daily Africa reported.

And business leaders said that the government was losing around 2 billion Shillings ($29.5 million) a day in lost revenue as a result of the political violence, the paper reported.

"We do seem to be in a new place, there's a lot of uncertainty about where we go from here. And a lot depends crucially on how long-lasting this is," said Razia Kahn, an analyst specializing in Africa at Standard Chartered bank.

Kenya has attracted a large number of multi-nationals and is home to one of the world's fastest growing stock exchanges.

Its relative economic success has been helped in part by its thriving tourist sector, with visitors attracted by its abundant wildlife and pristine beaches.

Provisional figures for 2006 from the Kenya's tourist board said the country had received 1.5 million visitors for the year, a growth of 5.2 per cent.

However, fears that the tourist industry could take a heavy hit from the unrest grew with the British Federation of Tour Operators announcing Thursday it was suspending all holidays to the country departing up to and including this Saturday. Video Watch an aid worker describe fears that crisis may resemble Rwanda's »

British tourists already in the country have been advised by the British Foreign Office to stay indoors and to stay away from the major cities.

There are also worries about the knock-on effect for the region, since around 40 percent of Kenya's exports go to other African nations, Kahn said.

Of even greater concern is the effect on Kenya's lucrative agriculture industry.

Exports of tea, coffee, vegetables and flowers are big earners for the country, with agriculture making up about a fifth of the total economy.

There have been media reports of tea and coffee auctions being halted by the violence as well as widespread disruption to transport routes as rioters blockade major roads across the country.

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Arun Shah, who runs a coffee import business based in London, told CNN his livelihood depended on a stable Kenya.

"We have had absolutely reliable supply," he said. "We have had reliable quality and the quantities that we need for our trade." E-mail to a friend E-mail to a friend

CNN's Jim Boulden in London contributed to this report

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