By last week, 12 listed firms had issued profit warnings in a quick succession that should worry the government whose brief it is to nurture enterprises to grow.
It is noteworthy that the firms declaring a drop in profit are citing the cost of doing business as one of the major hurdles giving them sleepless nights. A firm’s profit dropping by at least 25 percent in a year should worry the management, the board, and staff that face the axe in retrenchment plans.
Besides hurting dividends, the loss in profitability will trigger budget cuts and slow down expansion plans and all these will come back to the government in the form of missed taxes and job losses.
However, the government that designs taxation, cost of power, cost of credit, licensing, and setting up costs should be more worried.
Indeed, the deteriorating performance is likely to dampen investor confidence in Kenya with the privatisation plan being refined.
Against this backdrop, the government must go back to the drawing as the profit warnings threaten to become a daily ritual.
This state of affairs should warn the government to go slow on saddling the employers with tax increases and other levies that they are being forced to match as the State eyes affordable housing and universal health coverage goals.
Instead of taxing employers more, it is time to cushion the enterprises so that they can stay afloat even if they can’t employ more.
And, this is the wrong time for the Central Bank of Kenya to increase the cost of loans.
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Note: The results are not exact but very close to the actual.
