Nearly a third (31.3 percent) of manufacturers cut full-time jobs in the three months to November 2024, a new Central Bank of Kenya (CBK) survey shows, as half of them recorded lower sales in an environment of weak demand for goods and elevated operating costs.
The CBK survey of private sector chief executive officers (CEOs) in November shows that full-time jobs were shed during the period in which 56.3 percent of the manufacturers reacted to reduced sales by cutting production volumes and therefore requiring fewer employees.
In the review period, only 6.3 percent of manufacturers stepped up hiring, while 62.5 percent kept jobs unchanged. Previous CBK surveys have been pointing to weakened demand across sectors, with manufacturing singled out as the hardest hit.
CBK noted in the latest survey that more respondents in the manufacturing sector recorded subdued business activity. This was reflected in lower levels of demand orders, sales growth, and production volumes.
“The manufacturing sector continues to be impacted by the high cost of doing business, taxation and statutory deductions, liquidity constraints from the elevated cost of borrowing and pending bills, subdued consumer demand, and reduced competitiveness,” says the CBK survey.
The survey usually targets CEOs of key private sector organisations, including members of the Kenya Association of Manufacturers, the Kenya National Chamber of Commerce and Industry and the Kenya Private Sector Alliance.
Nearly half (43.4 percent) of CEOs of manufacturing firms expect reduced growth in the next 12 months, making the sector the one with the lowest growth prospects. Just 23.1 percent of CEOs in this sector see increased growth in the next 12 months.
The persisting subdued demand and decline in sales have seen CEOs in the manufacturing sector ask the government to intervene through a stimulus programme in the form of reduced taxes, to give them room to lower prices and boost demand.
They see the stimulus as a breather to stimulate demand through relaxed sales prices to their consumers. This will help them ramp up production and cut on the idle capacity that the CBK has observed persisting.
Without State intervention, manufacturers have little room to cut prices and boost demand given that 31.3 percent of them reported increased purchase prices in the fourth quarter compared to the third quarter. Only 25 percent recorded a drop in purchasing prices, while 43.8 percent remained unchanged.
The CBK findings are in line with those of the November Stanbic Bank Kenya Purchasing Managers' Index (PMI), which showed that while Kenyan firms saw the fastest pace in the growth of sales since May, manufacturing joined the construction sector in posting declines in new orders.
The PMI rose to 50.9 from 50.4, driven by the wholesale and retail, and services sectors, even as manufacturing and construction bucked the trend.