Q3 growth reduces to 5.1 percent

The Kenyan economy grew at a slower rate in the third quarter ended September than during the same period in 2018 on modest activity in various sectors, including the dominant agriculture, manufacturing and construction.

The Kenya National Bureau of Statistics (KNBS) said the economy grew 5.1 percent year-on-year in the third quarter of 2019, compared with 6.4 percent in the same period in 2018.

The slower expansion came in an economy battered by reduced cash flow, which has ushered in job cuts, stagnant wages and freeze in hiring as firms adopted austerity measures to protect profits.

“Deceleration in growth was mainly on account of suppressed growth in most of the sectors of the economy,” the national statistics office said.

The agriculture, forestry and fishing sector, for example, expanded by 3.2 percent compared to the 6.9 percent growth recorded in Q3 2018.

“The sector’s growth was hampered by notable drop in production of key crops during the period under review,” said KNBS.

At Sh3 trillion, the sector accounts for 34 percent of the country’s Sh8.9 trillion gross domestic product and employs the bulk of Kenyans, making it critical in putting money in peoples’ pockets that is needed to boost other sectors.

Poor weather curbed faming activities in what affected other auxiliary sectors, especially agro-processing.

This is reflected in the fact that three of the six companies listed on the agricultural counters at the Nairobi Securities Exchange (NSE) have issued profit warnings for the financial year ended yesterday.

“The slowdown in agricultural growth somewhat affected agro-processing and consequently led to slowed manufacturing activities during the review period,” said a KNBS official.

Manufacturing grew by 3.1 percent from 4.6 percent expansion in the third quarter of 2018, further hurt by reduced demand for products following a cash flow hitch.

Central Bank of Kenya (CBK) data shows that money circulating outside banks, which means cash in Kenyans’ pockets, dropped to Sh176.9 billion in October — the lowest since July 2015. The effect of this has been reduced demand for goods and services, setting the ground for layoffs and near stagnant wages in the race to protect profit margins. Despite the economic expansion, private sector activity — which translates to jobs and higher pay — has remained muted.

“Broadly speaking, the last two years have been tough and challenging for the private sector and by extension, the pockets of an average consumer have not been deep enough,” said Jibran Qureishi, the lead economist at Stanbic Bank Kenya.

Other sectors where activity weakened included construction, electricity and water, food and accommodation, transport and ICT. “The depressed growth was reflected in the cement consumption which contracted by 4.5 per cent from 1,541,927 tonnes in the third quarter of 2018 to 1,472,473 tonnes during the review period,” said KNBS in reference to the construction sector. The sectors were hit by reduced sales for homes following a credit crunch and cash flow hitches that saw property developers finding it difficult to sell units that were built on loans, halting new projects.