According to a Stanbic Kenya Purchasing Managing Index (PMI) survey, Kenyan firms-imposed salary cuts in January even as private sector activity fell to a nine-month low on reduced demand.
The poll which was conducted amongst around 400 private sector companies revealed that payroll costs fell for the first time in nine months as many firms lowered staff salaries.
“Kenyan firms indicated that the slowdown in demand led them to lower staff salaries in January. Overall payroll costs fell for the first time in nine months, although the pace of decline was only marginal,” indicated the survey.
Meanwhile, the firms reported an overall improvement in the recovery of the employment index for the ninth consecutive month as firms continued to add their workforce.
However, the pace of employment dropped to a 6-month low in January in the struggling retail and wholesale sector which reported weaker sales.
ALSO READ: Treasury Approves Ksh.65 Million to Modernize Posta’s Logistics Fleet
“Kenyan firms continued to add to their workforce numbers at the start of the year. The overall upturn in staffing levels eased to a six-month low, however, as several firms mentioned that weaker sales,” stated the survey.
Fixed Income and Currency Strategist at Stanbic Bank, Kuria Kamau, attributed the drop in client spending to the negative effects of the rising inflation and a resurgence in Covid-19 due to the Omicron variant.
“After registering the strongest upturn for 14 months in December, new business inflows declined sharply at the beginning of the year. This often reflected a drop in client spending and travel linked in part to the recent wave of the COVID-19 pandemic and increased price pressures,” the survey added.
The survey further showed that lower client spending led to a marked decline in sales, largely due to strong price pressures and a recent surge in Covid-19 cases from the Omicron variant.
Kenyan business confidence future activity was again subdued in January, as pandemic-led uncertainty continued to weigh on expansion plans according to Stanbic.