Survey reveals consumers’ high hopes for the New Year

Consumers have in the last couple of years faced a hostile environment characterised by galloping inflation as drought pushed up energy and food costs, slowing down their purchasing power amid limited jobs and subdued incomes.

The findings seem to differ with those of TNS Research International early this month which showed pessimism among Kenyans with many maintaining that the current economic circumstances are unfavourable.“People in rural areas are more pessimistic about their economic conditions in the next six months than those in urban areas. In addition, females tend to be more negative about this topic than males,” TNS Research International had said.

The Synovate survey is in line with growing optimism among business executives who are banking on new developments on the domestic and regional front to lift the dark clouds of stagnation that have persisted since last year. “We are hopeful of an improvement in the business environment and a possible pick up in demand and stability in costs of production, ” said Mr Vimal Shah, the managing director of Bidco Oil.

At least half of the 2,000 people polled by research firm Synovate in its current Consumer Sentiments Index Quarter Three 2009 said they see their economic times improving in the next one year.

Many executives also believe that economic recovery is in the offing in 2010, signalling the end of cost-cutting initiatives in the coming months and raising hopes of Kenya improving its national output and creating new jobs. “Things can only get better in 2010, ” said Mr Patrick Obath, the chairman of the Federation of Kenya Employers (FKE).

He says better economic times for the consumers would lead to a rise in earning power with a resulting improvement in spending by families which could mean higher demand for businesses and taxes for the government. That would be a welcome relieve from the last two years when businesses grappled with depressed demand for their goods and services and rising cost of production.In recent months, the environment has been further polluted by a persistent drought that has devastated agriculture, a sector that accounts for a quarter of the GDP and forced the country to rely on costly thermal electricity and water rationing.

The positive consumer outlook comes two months after confidence suffered a major setback with the release in October of data showing that the economy grew by 2.1 per cent in the second quarter compared with a 2.2 per cent growth during a similar period in last year.

The Central Bank predicts Kenya’s GDP will grow at three per cent in 2010 and the World Bank is equally optimistic about the Kenyan economy.
Analysts said restoration of dwindling investor confidence, taming high cost of living and a rebound of the economy is dependent on a rapid return to credibility in governance structures, especially the Judiciary and delivery of a new constitution.

Hostile politics, ranked as Kenya’s top risk factor, has eased in recent weeks , replaced by a passionate but more reconciliatory debate on the draft constitution that will be put to a popular vote later in the year, suggesting the country is maturing politically.

“With progress on constitutional review and possible reduced political bickering, the situation cannot get worse than it has been this year, ” added Mr Shah, who is also the chairman of the Kenya Association of Manufacturers (KAM). “We must watch the sensitivity around the political climate which could make things worse, ” said Mr Obath.

According to the findings, quarter three of 2009 was the worst for over two thirds––65 per cent of Kenyans––compared to the economic conditions one year ago. “While this could easily be seen as part of a global crisis, the national drought brought businesses to standstill. Farmers lost their produce and herds of livestock, businesses that operate using electricity were forced to either shut down due to extended nationwide power rationing or purchase other power sources such as generators,” says Synovate.

Besides the high cost of doing business in the country, recent reports have identified corruption, political risk and official bureaucratic red tape as some of the leading hindrances to investment in the country. “If the fundamentals informing the positive outlook are well handled, we could soon start seeing employment picking up and incomes improving, ”said Mr Obath.

The new study reveals consumers in Nairobi, Rift valley and Eastern were the most optimistic compared to those in Western and Coast who were largely pessimistic on an economic rebound.

“For Eastern and Rift Valley, this optimism might have been based on the arrival of rains while Nairobi is now back to regular power supply, ” says the study adding; “It is unlikely that policy interventions are linked to this optimism, if we consider perceptions around service delivery.”

On these, the top three biggest problems faced by majority of Kenyans are traditionally government duties. These include; high food prices (81 per cent), unemployment and poverty (59 per cent).

Improved confidence in the economy got a firm grounding last week with the release of an International Monetary Fund (IMF) report showing that global output will recover by about 2.5 per cent in 2010 and 2011, helped by fiscal stimuli, monetary easing, and financial sector measures in major economies.

The IMF says Kenyan banks had come out of the crisis and are now more stable and capable of driving growth.