Kenyan private firms sustained pay cuts for the fourth month in a row in February, citing slowed growth in sales amid weak supply of cash in a soft economy.
Staff costs dropped at the fastest pace since July 2020 when authorities started gradual re-opening of the economy, according to a monthly poll of corporate managers in key sectors such as manufacturing, services and agriculture.
This is a pointer to reduced wages for employees.
Kenyan private firms sustained pay cuts for the fourth month in a row in February, citing slowed growth in sales amid weak supply of cash in a soft economy.
Staff costs dropped at the fastest pace since July 2020 when authorities started gradual re-opening of the economy, according to a monthly poll of corporate managers in key sectors such as manufacturing, services and agriculture.
This is a pointer to reduced wages for employees.
Findings of the Stanbic Bank Kenya’s Purchasing Managers Index (PMI) showed that corporate chiefs blamed the salary cuts on need to maintain the current staff numbers rather than layoffs in anticipation of an uptick in demand in coming months.
“Firms often commented on efforts to maintain their current workforce sizes amid a drop in revenues due to Covid-19,” analysts at Stanbic Bank and UK research firm, Markit, wrote in the February PMI report.
Businesses, which were already grappling with flagging sales even before coronavirus struck mid-March 2020, have struggled to sustain sales.
The Covid knocks saw economic activity contract 5.5 per cent at the height of travel restrictions and trade shutdowns in the April-June 2020 period, before the slump slowed to a 1.1 per cent in July-September after easing of some of the measures.
The overall headline PMI reading— a month-on-month gauge of private sector activity such as output, new orders, backlogs (outstanding work) and employment — was the most sluggish since businesses deals started recovering in July 2020 from economic fallout as a result of Covid-19.
The PMI reading came in at 50.9 in February from 53.2 a month earlier, just staying above the 50 mark that separates growth from contraction.
"The pace of the post-pandemic recovery slowed down in February on account of a marginal increase in demand,” Mr Kuria Kamau, a fixed income and currency strategist at Stanbic Bank wrote in the PMI report.
“The improvement in demand was negatively impacted by subdued cash flows in some sectors of the economy which resulted in limited household and client spending.”
Expenditure was also hurt by higher purchase prices after the value added tax (VAT) reverted to pre-Covid rate of 16 per cent from 14 per cent which was in place between April and December 2020, while fuel prices edged up on recovering global crude oil prices amid a weaker shilling.
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