Firms ‘stepped up hiring ahead of curbs’

Kenyan private firms stepped up hiring at lower pay in March as they sought to clear work a backlog had been growing since November and build future stocks ahead of a fresh lockdown on five counties, a monthly suggested yesterday.

Findings of Stanbic Bank Kenya’s Purchasing Managers Index (PMI) — a measure of month-on-month private sector activity — suggested yesterday employers cut average salaries for workers for the fifth month in a row.

This happened in a depressed economic setting which saw corporate output weaken to a nine-month low amid softening demand attributed to a cash crunch over fresh concerns over a spike in the third round of Covid-19 infections.

“Demand growth was negatively affected by a resurgence in Covid-19 which resulted in households conserving cash and prioritising spending to essential items,” Kuria Kamau, a fixed income and currency strategist at Stanbic Bank wrote in the PMI report. “Output prices continued to rise, driven by higher input prices, and employment levels increased to clear backlogs of work.”

Private sector output growth levels were largely sustained by the key agricultural sector, which accounts for more than a quarter of the country’s annual economic output, ahead of the planting season.

The construction sector, the report states, was the hardest hit by fresh cash flow challenges that affected new projects and undertakings.

Overall, the composite headline PMI reading came in at 50.6 in March from 50.9 in the prior month, the slowest growth since private-sector activity started recovering last July from a six-month downward streak in the first half of 2020.

Reading above 50 denotes growth while those below point to a contraction in activity month-on-month. The PMI findings — based on feedback from corporate managers in key economic sectors such as manufacturing and agriculture — showed corporate sales grew at the slowest pace since November 2020 with momentum in exports demand sliding to levels last seen in June 2020.

Analysts at Stanbic Bank and Markit, a UK research firm, which conduct the monthly survey, said corporate managers attributed the job openings to “rising workloads and efforts to reduce backlogs” which had been rising since November.

“Kenyan businesses raised their workforce numbers again during March, with the rate of hiring accelerating slightly from the previous month. That said, it remained modest and slower than the series trend (dating back to January 2014),” the analysts wrote in the PMI report for March.

“Salaries paid to workers in the Kenyan private sector fell again in March, marking a fifth successive monthly decline. The latest fall was the softest seen in the aforementioned period (five months).”

However, private sector activity could depress further after authorities imposed fresh partial shutdowns and restrictions in Nairobi, Kiambu, Machakos, Kajiado and Nakuru counties to curb the spread of the third wave of the pandemic.

President Uhuru Kenyatta on March 27 restricted movement in and out of the five key counties, lengthened night-time curfew by two hours to start from 8pm and ordered closure of bars, churches and in-person schooling.

“This (March’s) month’s reading indicates a marginal improvement in business activity before the new public health restrictions were announced,” Mr Kamau said.

“Firms’ outlook for output worsened on account of the resurgence in COVID-19 which is expected to affect demand.”