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Company jobs record slowest growth in July

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Kenya’s private-sector jobs in July expanded at the weakest pace since April when tighter Covid-19 restrictions were in force. PHOTO | POOL

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Summary

  • Kenya’s private-sector jobs in July expanded at the weakest pace since April when tighter Covid-19 restrictions were in force, hurt by higher taxation and fuel prices that slowed down growth in sales.
  • Stanbic Bank Kenya’s Purchasing Managers Index (PMI) suggests the onset of new taxation measures in July pushed cost pressures to a 16-month high.
  • The headline PMI reading for July — which measures month-on-month changes in private sector activity such as output, new orders and employment — slowed for the second month in a row to 50.6 from 51.0 a month earlier and 52.5 in May.

Kenya’s private-sector jobs in July expanded at the weakest pace since April when tighter Covid-19 restrictions were in force, hurt by higher taxation and fuel prices that slowed down growth in sales.

Stanbic Bank Kenya’s Purchasing Managers Index (PMI) — based on feedback from corporate managers in key economic sectors such as services, manufacturing and agriculture — suggests the onset of new taxation measures in July pushed cost pressures to a 16-month high.

The firms, which were already battling elevated fuel expenses, largely passed on the additional costs to consumers, raising prices of goods and services that softened growth in demand.

“With sales growth slowing, the rate of job creation among Kenyan firms eased to the softest in three months,” analysts at Stanbic Bank and UK researcher, IHS Markit, wrote in the PMI report for July.

“Cost pressures accelerated sharply at the start of the third quarter, as businesses found that tax changes led to a marked increase in the price of imported goods. Amid efforts to maintain profit margins, output charges were also raised to a greater extent, albeit not as quickly as input costs.”

The headline PMI reading for July — which measures month-on-month changes in private sector activity such as output, new orders and employment — slowed for the second month in a row to 50.6 from 51.0 a month earlier and 52.5 in May.

PMI readings above 50 denote growth in business conditions over the previous month, while those below point to a contraction.

“Domestic demand improved by the second slowest pace since the lifting of public health restrictions after the first wave of pandemic (July 2020), with some firms reporting a drop in customer numbers,” Mr Kuria Kamau, a fixed income and currency strategist at Stanbic Bank, wrote in the PMI report.

“Firms in agriculture, construction and services witnessed an increase in demand and output, while those in manufacturing and trade saw declines.”

The Finance Act 2021 imposed a 20 percent excise duty on fees and commissions lenders earn, raising the cost of credit, while the supply of cooking gas and clean cook stoves have been slapped with a 16 percent value-added tax. Others are a 10 percent excise duty on articles of plastics, a super absorbent polymer used to make diapers and imported resins.

“Manufacturers were totally uninformed and unprepared to start implementing the excise regime and, in many cases, the enforcement of the provisions remains unclear,” Mr Mucai Kunyiha, the chairperson of the Kenya Association of Manufacturers (KAM), said in a statement on July 30.

“Adding to this conundrum for businesses, the Kenya Revenue Authority i-tax system was also not prepared for some of these changes and manufacturers cannot, for example, register to collect excise on plastic bottles, forestalling production and sales and severely diminishing efforts to steer the country from the pandemic effects.”