Security agents and presiding officers queue at Jamhuri High School to deliver voting materials at the tallying Center for Starehe Constituency, Nairobi on August 10, 2022. PHOTO | BILLY MUTAI | NMG
Production by Kenyan firms fell in August at the sharpest rate since the third wave of Covid-19 lockdowns following disruptions related to the hotly-contested presidential election, resulting in layoffs.
Findings of Stanbic Bank Kenya’s Purchasing Managers Index (PMI) — a monthly survey on the private sector — suggest the drop in output was the fastest since April 2021.
Businesses reported that production of goods and services “fell steeply and at the quickest pace in 16 months”, according to the PMI which is based on feedback from a sample of about 400 corporate managers. Construction was the hardest hit sector.
The report suggests firms, which had resumed hiring in July after two months of layoffs, went back to cutting workforce amid falling sales in a high inflationary environment and weak circulation of cash.
“The election had a notable toll on economic activity during August,” analysts at Stanbic Bank and American analytics firm, S&P Global, wrote in the PMI report for August.
“Election-linked disruption meant that some vendors were unable to deliver inputs, leading to the first (albeit marginal) lengthening of lead times since the first wave of the Covid-19 pandemic in early 2020.”
The seven-judge Supreme Court yesterday unanimously upheld the August 9 election of Deputy President William Ruto as the fifth President after throwing out a petition by his closest rival Raila Odinga for lacking merit.
Dr Ruto, who won 50.49 percent of the presidential vote against Mr Odinga’s 48.8 percent, will take power Tuesday next week.
The PMI findings suggest the closely-contested electioneering, which has effectively come to an end, left the private sector on a weaker footing than previously thought.
For example, the findings of the Central Bank of Kenya’s market perception survey — conducted every two months — suggested in July that 79 percent of business leaders in the banking industry were upbeat on economic prospects for the next 12 months compared with 26 percent in 2017.
The confidence levels among respondents in non-bank sectors were 73 percent compared with 35 percent during the previous presidential election.
“This in effect shows with clear data how people are proceeding with making economic decisions. Last time [2017] there was a lot of wait-and-see in terms of decisions, but you haven’t seen much of this wait-and-see [this year],” Central Bank of Kenya governor Patrick Njoroge had said on July 28 ahead of the elections.
“The economy is still going on despite what some had thought will be a problematic year. I think this [findings of the survey] is a phenomenal outcome.” The overall PMI reading for August — a gauge for month-on-month private sector activities such as output, new orders and employment — fell for the fifth month in a row to 44.2 from 46.3 in the prior month.
Reading below 50 signals a drop in business deals, with levels above denoting growth.
