Kenya: Poll Jitters Cut Business Output to Four-Year Low

IEBC officials in a meeting with Jubilee and Nasa officials at Bomas of Kenya on September 27, 2017.
4 October 2017

Businesses have sharply cut output in a tough economic climate that saw the private sector activity shrink to a nearly four-year low last month, shaken by prolonged electioneering period and drought.

Stanbic Bank said in its monthly market survey that output tumbled for the fifth month in a row in September, weakened by a constrained money circulation and dropping customer orders.

The downturn pushed firms into trimming their payroll numbers, according to the Kenya purchasing managers' index (PMI) survey.

"For a fifth consecutive month conditions in Kenya's private sector continued to deteriorate which is reflective of the protracted political impasse in the country," said Jibran Qureishi, Stanbic's economist for East Africa.

"The overall decline of the private sector was driven by sharp contractions in output and new orders. In response to lower output requirements, firms decreased their payroll numbers."

He added that businesses had also taken a knock from a credit squeeze as banks held back on lending in the wake of introduction of legal caps on lending rates in September 2016.

Since the Supreme Court annulled President Uhuru Kenyatta's victory on September 1, both the opposition and the ruling parties have engaged in increasingly bitter rhetoric.

The Kenya Private Sector Alliance (Kepsa) said investors are postponing projects on political jitters that has triggered a slowdown in spending, hurting businesses.

Business people, especially those operating retail shops, say consumers are hoarding their money due to the turbulent election period.

Monthly sales for business have been falling since June with hospitality, retail and transport sectors being hit the most.

The Stanbic survey indicates that the country's PMI fell to 40.9 in September from 42.0 a month earlier, the lowest level since the data series began in January 2014. The figure is also well below the 50-point line separating contraction in activity from expansion.

"Mirroring the trend for total new business, new export orders declined for the second consecutive month," said Stanbic.

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