Half of manufacturing companies in the country expect gross earnings in the second half to drop, a survey showed yesterday, underlining the impact of the August 8 poll jitters on the business environment.
The Kenya Association of Manufacturers’ Barometer Survey indicates only 15 per cent of the participating firms see improved revenue margins in the next six months. About 36 per cent expect business performance to remain unchanged.
About 57 per cent of the firms are especially pessimistic about the general business environment in the three months to September, citing uncertainty in the outcome of the presidential vote. This is a steep rise from about 16 per cent in the second quarter of the year.
Opinion polls have repeatedly indicated that neither President Uhuru Kenyatta of Jubilee Party nor Raila Odinga of the National Super Alliance — the clear frontrunners — is likely to get more than half of the total vote required to clinch the presidency.
“If no clear winner emerges, the vote can go to a run-off. Given tensions that have preceded previous elections and early hints by some members of the opposition National Super Alliance that they might challenge the election results, risks are elevated,” Standard Chartered Bank in London said in an outlook report for the third quarter on June 19.
About 55 per cent of surveyed firms do not plan major new investments in the next 12 months because of uncertainty over demand for their products. The slowdow in new investments will further hurt creation of new jobs, which was muted in June, according to the monthly Purchasing Managers Index (PMI).
“The pace of job creation eased to a four-month low and was marginal overall, as the vast majority of respondents noted no change in employment. Furthermore, the latest increase was much weaker than the long-run series average,” stated the PMI, published on July 5.
KAM’s survey indicates that 52 per cent of the respondents expect average prices to decline in the third quarter, while 29 per cent see steady prices, a drop from 48 per cent in the second quarter.
KAM’s outlook mirrors the trend in June where firms reported they were offering discounts to ward off competition.
“In the coming months, we believe most company strategies will be aligned to lowering prices to attract demand as consumer purchasing power remains low especially for discretionary good/services. Price inflation remains high for consumer staples while access to credit remains low,” analysts at Standard Investment Bank said in a note yesterday.