A majority of company chief executives in Kenya believe the high cost of doing business and taxation posed the biggest threat to their operations over the next 12 months, dwarfing the financial fallout of the Covid-19 pandemic, a new survey by the Central Bank of Kenya (CBK) shows.
The survey found that although most business leaders projected a substantial economic rebound in the second quarter of the current fiscal year on improving orders and sales, a challenging business environment posed the biggest threat to progression.
“The effects of the Covid-19 pandemic were a lesser concern compared to taxation issues like withholding tax/VAT refunds and excise duty on fast-moving consumer goods, the introduction of new taxes,” CBK stated in the CEOs survey report.
“Businesses were also concerned about the effects of the third wave of the Covid-19 pandemic, particularly the success or otherwise of the vaccine rollout and the general decreased economic activity due to the pandemic.”
The government earlier this year reversed a series of relief measures that it had put in place to cushion households and businesses from the economic fallout of the pandemic — raising concerns of a possible fresh slowdown in economic performance.
The State reimposed charges on mobile phone-based transfers of small amounts of cash at the end of last year, having removed them in March 2020 to encourage cashless transactions and curb the spread of the virus.
In January, the government also reversed payroll and income tax cuts, unveiled last April to prop up demand in the face of the economic shocks caused by the pandemic.
The CBK on March 2 also ended a grace period allowing banks to restructure loans for borrowers hit by the Covid-19 pandemic. Parliament had unveiled the initiative to help distressed borrowers in March last year at the onset of the Covid-19 crisis, helping to partly cushion the economy reeling from the pandemic impact. Banks had restructured loans worth Sh569.3 billion at the end of February.