Firms lay off for first time in 7 months on new Covid restrictions

Kenya’s employment market conditions darkened in April as private firms cut jobs for the first time in seven months, hurt by month-long curbs on travel and longer night time curfews in the capital Nairobi and four surrounding counties to control the spread of Covid-19, a new survey shows.

The monthly Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) shows that the job sheds —the first since September — coincided with the sharpest decline in orders since May last year as businesses scaled down operations.

“Private sector companies in Kenya reduced their staff levels at the start of the second quarter, which was generally attributed to a drop in new work due to new Covid-19 measures,” the survey report says.

“The overall decline in employment was the first since last September and the most marked for 10 months.”

Under the restrictions imposed in March but which have since been relaxed, Nairobi, Kiambu, Machakos, Kajiado and Nakuru were treated as one zone, with residents barred from travelling to other areas.

The State also imposed a night-time curfew, extended by two hours starting from 8pm to stem, to contain the third wave of Covid infections. It further suspended in-person schooling and church services, closed bars and restricted restaurants to take-away services.

President Uhuru Kenyatta on May 2 lifted the partial lockdown, allowing for a reopening of bars and restaurants, religious services and schools as the rate of infections eased. The night curfew was also revised to start from 10 p.m. and religious services allowed to resume with some restrictions.

The rate of job cuts in April was, however, less severe compared to last year when the country experienced its first round of Covid-related lockdown between April and June 2020 largely because the tighter containment measures were limited to the five counties classified as disease-infected zones in March, the PMI report said.

Overall, monthly growth in business activity, as measured by the composite PMI index, fell for the first time since June 2020, sliding to 41.5 from 50.6 in March.

PMI reading above 50 denotes month-on-month growth in activity for private firms, while that below signals contraction.

Output of goods and services by private firms declined by the sharpest pace last witnessed in May 2020, reflecting a corresponding decline in demand for goods and services.

The slump in orders prompted some firms to offer discounts to customers despite increased cost of operation as a result of higher fuel prices and supply shortages, the PMI report suggests

“Business activity contracted in April following the reimposition of more stringent public health restrictions at the end of March,” Stanbic Bank’s fixed-income and currency strategist Kuria Kamau wrote in the PMI report. “The increased restrictions resulted in lower demand which forced firms to cut back on output and spending on inputs.”

Optimism for future growth amongst corporate managers fell to the lowest levels in the survey’s history dating back to January 2014, with only one in five respondents forecasting an expansion in output in the next 12 months.

“New business also decreased markedly, and at a pace beginning to approach those seen in the first half of 2020 during the initial Covid-19 lockdown,” the analysts wrote in the report.

The PMI report is based on feedback from corporate managers in key sectors such as manufacturing, services and agriculture.