Companies Hopeful for Expansion as Global Economies Reopen

Kenyan companies are confident of reviving growth over the next year thanks to the easing of the coronavirus pandemic and the reopening of more global economies, which has elevated the demand for goods and services, says an IHS Markit survey.

The monthly Stanbic Bank Kenya’s Purchasing Managers Index (PMI) report said that close to a third of the 400 businesses surveyed confirmed that they are planning to resume investment to expand their business in the next one year. They noted that the eased COVID-19 pandemic and the increased vaccinations have raised hopes of progressive job recovery.

In May, the optimism among company CEOs was the highest in the PMI in three months registering the same levels recorded before the third wave of the coronavirus infections forced the government to lock down five counties including Nairobi, Kajiado, Machakos, Kiambu, and Nakuru.

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Another study, the Market Perception Survey, conducted by the Central Bank of Kenya (CBK) every two months shortly before the monetary policy committee meeting, indicated that almost half of company chiefs were upbeat of business growth prospects in the next 12 months.

The PMI optimism levels at 48 percent were barely unchanged from 49 percent in March.

According to these business leaders, their confidence in expansion prospects is banked on the increased protection against COVID-19 from the progressive vaccination and the reopening of global economies worldwide which is likely to boost exports.

“Firms appear to be increasingly optimistic about the next 12 months as new Covid-19 case numbers continue to fall and vaccinations continue to rise. The future outlook for firms improved for the first time in four months” stated Kuria Kamau, a financial strategist at Stanbic Bank in May.

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“Corporate individuals looking to expand their business portfolio noted that they plan to inject more cash into new branch openings, raise marketing budget, and hunt for more deals in international markets,” stated the PMI report focusing on agriculture, manufacturing, construction, and services.

Meanwhile, hiring in the private sector, according to the May PMI report, has risen at the fastest pace since January with employers raising their employees’ remuneration for the first time since October 2020, mainly to retain them.

Of the surveyed sectors, the agricultural sector registered a drop in month-to-month hiring whereas, in the retail and wholesale sector, the jobs remained flat.

There are, however, going concerns that the looming threat of the fourth wave of coronavirus infections, which was initially forecast from July, may pose downside risks to recovery in private investment. The reduced purchasing power due to likely tax increases in the Finance Bill 2021 and the rising fuel prices for the fiscal year starting July will majorly influence the trend.

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There is an urgent need for the government and stakeholder focus and support to be directed to enterprises to help them bounce back, particularly in the hard-hit sectors such as manufacturing, transport, tourism, and aviation. This will create more jobs and incomes.

The renewed interest in future growth plans is likely to spur uptake of credit by the private sector that grew 7.7 percent in the year to March, the slowest since September 2020.