Economy

Firms hire, raise salaries after end of night curfew

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Long queues of job seekers in their hundreds wait to hand in their documents at County hall on May 26, 2017, as they sought job opportunities. PHOTO | JEFF ANGOTE | NMG

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Summary

  • In late October, President Uhuru Kenyatta lifted a night-time curfew that had been in place since March 2020.
  • The increased hiring last month was meant to boost production capacity and clear orders from previous months.
  • The Treasury forecasts an economic growth rate of six percent this year compared with a 0.3 percent contraction in 2020.

Kenya’s private sector hiring increased in October and firms also increased workers’ pay, partly helped by the government easing some restrictions aimed at containing the spread of Covid-19, findings of a monthly survey show.

In late October, President Uhuru Kenyatta lifted a night-time curfew that had been in place since March 2020, a move that was expected to spur economic activity.

Stanbic Bank Kenya’s Purchasing Managers Index (PMI) found that companies increased their workforce for six months in a row, with salaries growing fastest as a form of staff motivation and compensation against inflation.

The increased hiring last month was meant to boost production capacity and clear orders from previous months said the survey— which tracks performance in key economic sectors such as agriculture, manufacturing, construction, wholesale and retail, services and mining.

The sustained hiring is a boost to jobseekers, especially the more than one million young people who graduate from colleges and secondary schools in search of low-cadre positions like clerks.

Nearly 730,000 jobs were lost last year when Kenya imposed coronavirus-induced lockdowns that led to layoffs, pay cuts and unpaid leave.

The pay rise is also a departure from last year when average earnings for workers in the private sector grew at the slowest pace in a decade.

“Following the trend for new business, Kenyan companies hired additional workers for the sixth month running in October,” said the survey.

“However, the pace of job creation slowed from the previous month and was modest, as some respondents cited delays in filling open positions.”

Agriculture, construction and services posted increased employment in October, while manufacturers — who have been the hardest hit by constraints in the global supply chain — slowed the pace of hiring for the first time in eight months.

Findings of the latest Economic Survey by the Kenya National Bureau of Statistics (KNBS) show companies raised average monthly pay by 3.82 percent to Sh67,490 in the year ended June 2020, a steep drop from the 8.16 percent raise to Sh65,006 the year before.

That was the slowest rise in earnings since 2011 when firms raised average pay by 3.48 percent, and nearly half the average 7.41 percent in a decade before last year.

The Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) rose to 51.4 in October from 50.4 a month earlier. The 50.0 mark separates growth from contraction inactivity.

“Business activity expanded at the fastest pace in the past five months, driven by higher demand and output. The improvement in domestic demand was driven by increased client spending primarily in wholesale and retail trade,” said Kuria Kamau, Fixed Income and Currency Strategist at Stanbic Bank.

The Treasury forecasts an economic growth rate of six percent this year compared with a 0.3 percent contraction in 2020.

The economic recovery has been overshadowed by higher taxation measures, global oil prices and persistent disruptions in global supply chains, which pushed cost pressures to a 16-month high during the peak in July.

Input costs last month rose at the highest pace since July on the back of a weak supply of materials as a result of constraints at major ports in China and the US, the rising cost of energy and higher value-added tax (VAT), according to the PMI report.

Consequently, employers in October raised wages modestly to cushion workers from the rising cost of living.

“Where salaries rose, respondents cited efforts to improve productivity and compensate workers facing higher living costs,” the analysts wrote in the PMI report.

The increased private sector activity was listed by “greater customer spending as cash flow and economic conditions improved”.

Increasing economic activity and rising consumer expenditure drove demand at the highest rate since May, prompting firms to raise the pace of output of goods and services, albeit modest, for the first time in five months.

Firms in services, as well as wholesale and retail, reported strong demand while those in agriculture and construction reported lower sales compared with September orders.

“The improvement in domestic demand was driven by increased client spending primarily in wholesale and retail trade,” said Mr Kamau.

“Export demand, meanwhile, rose at its fastest rate since August 2020 on account

of increased demand from Europe where public health restrictions continue to be lifted. To meet rising demand, firms increased their output following a normalisation of business spending as pandemic-related measures were eased.”

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