Corporates in Kenya cut jobs in August, the first time this year, on the back of depressed sales in previous months because of economic uncertainties that followed deadly anti-government protests, hurting money supply.
This came in a month when output in labour-intensive manufacturing and agriculture sectors continued to fall even after youth-led protests faded, findings of Stanbic Kenya Purchasing Managers Index (PMI) suggest.
Activities in wholesale & retail, services, and construction sectors, however, recovered in the review month, but this was not enough to wipe out the impact of job losses in agriculture and manufacturing.
The uptick in private sector activities as firms recovered from disruptions brought home by the anti-government protests did not offer companies adequate confidence to add new jobs.
“Firms signaled that recent declines in output were to blame for the cut in staffing. Although employment decreased, it did so at only a marginal pace and mostly in the agriculture sector,” analysts at Stanbic Bank and American analytics firm, S&P Global said in the newly published PMI report for August.
The survey findings, based on feedback from 400 panelists polled across the five sectors, show private-sector output recovered to grow marginally for the first time since May.
Deadly anti-government protests in June and July disrupted business operations and delayed consumer spending decisions, pushing private sector activities to the lowest levels since April 2021 when the country was battling a second round of Covid-19 infections.
At the height of weekly youth-led anti-government protests, buyers of goods and services were reluctant to spend while firms were cautious about opening their businesses for fear of looting.
The return of political stability in August after President William Ruto acceded to some of the demands raised by youthful demonstrators helped raise demand for goods and services for the first time since May, the PMI findings suggest.
“Output and new orders improved after slumping during the months preceding, as anti-tax protests have been fizzling out,” Christopher Legilisho, chief economist for South African-based Standard Bank, the parent firm of Stanbic Bank, said in the PMI report.
“However, concerns linger about consumer spending, with many firms noting overall demand as weak in a tougher economic and business environment. Consequently, firms cut employment after seven months of robust hiring; work backlogs therefore increased.”
The headline PMI — a measure of monthly private sector activity such as output, new orders, and employment — recorded a marginal uptick, coming in at 50.6 in August from a 38-month low of 43.1.
Readings below 50 signal a decline in month-on-month private sector deals while levels above point to growth.
That marked the first growth since May before countrywide demonstrations against fresh taxation measures, elevated living costs, bad governance, and embedded corruption in government raised economic uncertainties amongst businesses.
“Cost pressures across the private sector intensified in August due to rises in import fees and tax burdens, according to survey respondents,” the PMI report states.
“The rate of overall input price inflation was the strongest for six months, but remained much softer than the historical trend.”
Inflation — a measure of the increase in average prices cost of goods and services over the previous year— rose marginally to 4.4 percent in August from 4.3 percent in the prior month largely on renewed cost pressure on some food items.
The July PMI figure was a drop from 47.2 in June and reflected the effects of protests against the government during both months which disrupted some business activity.
In June, President William Ruto discarded the government's finance bill for the year, which contained tax hikes worth Sh346 billion following the deadly street protests.
The August survey painted a gloomy outlook, with most of those polled expressing pessimism over economic prospects for the next 12 months, and only 5 percent of companies saying they expected growth.
"Business expectations worsened in August, implying firms as less hopeful about output over the next 12 months," Christopher Legilisho, an economist at Stanbic Bank, said.
