Company CEOs see more staff layoffs in the next six months

Nearly a fifth of Nairobi-based companies plan to reduce staff in the next six months because of an unfavourable business climate, a study commissioned by the Kenya Private Sector Alliance (Kepsa) shows.

The survey by TIFA Research says banks, microfinance institutions and transport companies foresee staff cuts arising from information technology (IT) disruption and completion of the standard gauge railway while other sectors expect a slowdown in growth associated with political uncertainty and harsh weather conditions that have depressed agriculture.

“Only 30 per cent of the CEOs surveyed expect to hire more people in the next six months, 52 per cent said their hiring position would remain unchanged while 18 per cent foresee staff cuts,” Kepsa chief executive Carole Kariuki said.

The survey, which sampled 90 chief executives to gauge their view of the economy and concerns in the next six months, found that banks are suffering lean times due to disruption by incoming IT channels that are driving e-commerce on mobile payment platforms.

The shift, which has deeply hurt banks’ earnings, was confirmed last November by telecoms operator Safaricom’s #ticker:SCOM half-year results, which showed that Kenyans transferred Sh3.2 trillion on M-Pesa in one year.

Bank profits were also depressed by the coming into force last September of the interest rates control law that caps their margins at four per cent above the 10 per cent Central Bank of Kenya rate.

The drop in earnings has had a serious impact on the industry having forced a number of banks to cut their payrolls.

Equity Bank #ticker:EQTY topped the list of lenders that sent 400 employees home in a cost-cutting drive that also included Standard Chartered (300), Co-operative Bank (160), First Community (106) and Sidian (108).

More banks are expected to follow suit this year.

Ms Kariuki criticised politicians for passing the interest rate capping law, saying it “made good politics but very bad economics as it is likely to lead to a drying-up effect on credit market as banks shift their focus on more stable customers such as the government”.

TIFA’s CEO Business Confidence Index also says that 20 per cent of companies surveyed plan to decrease expenditure while another 39 per cent will withhold investments until after the August elections.

The survey found that 70 per cent of the CEOs are deeply worried about the impact of corruption on their business following revelations that misappropriation of public funds, massive bribery to win public tenders and procurement fraud — whereby tenders are awarded to losing bids — are on the rise.

The study found that national carrier Kenya Airways’ #ticker:KQ troubles have become a big letdown to the air transport while truck owners are apprehensive of what will become of their business once the SGR starts operating in June.

The CEOs are also worried of possible outbreak of political instability in the coming General Election.

To maintain peace during the election period, Kepsa has renewed its Mkenya Daima Peace drive — urging politicians to conduct peaceful campaigns ahead of the August polls.

READ: KCB to lay off more staff in cost cutting drive

Political instability tops the list of concerns among corporate executives having been identified by more than two thirds or 66 per cent of those surveyed. Interest capping is considered a major impediment to growth by 57 per cent of banks while insecurity is of concern to 52 per cent.

Things are, however, looking up for the energy and ICT sector CEOs where 67 per cent and 63 per cent were confident that things will be positive in the next six months, citing ongoing investments they said would improve livelihoods.

In ICT, e-commerce is seen as the biggest gainer as more Kenyans continue to access the Internet from their mobile phones, creating employment opportunities of up to 20 per cent.

Tourism, which has been hit hard in the past election years, got a 50 per cent rating on account of increased domestic tourism as well as an array of international conferences that are expected to sustain momentum in the sector over the next six months.

“Nairobi is seeing an increase in residential units targeting tourists and its prospects will continue rising with the expected launch of international hotel brands this year,” it adds.

The manufacturing front, largely dominated by agro-processing, got a 49 per cent rating based on the vagaries of weather that have adversely affected agriculture and power costs.