July trade activity takes a big hit on tax revolt—report
Anti-government protests that rocked Kenya in July have seen business activity drop sharply as companies experienced a sharp drop in production and new orders.
During the month under focus, business confidence in Kenya was the second-lowest on record, only marginally above the levels last observed in February this year.
Since June 18, Kenya—East Africa’s largest economy—has been rocked by public displeasure against the government, which was sparked by demands from wananchi, calling for the rejection of Finance Bill 2024 citing punitive tax proposals.
“Private sector business activity deteriorated, reflecting ongoing demonstrations and unrest in parts of Kenya for some weeks now, discouraging output and new orders. Business operations were disrupted, and customers delayed spending decisions due to the uncertainty,” noted Christopher Legilisho, Economist at Standard Bank.
Whereas companies reported continued hiring during the month, the survey notes that the pace of job creation was only fractional and “the slowest in the current seven-month sequence of rising staffing levels.”
According to the Stanbic Bank Kenya PMI, the country’s private sector marked deterioration in trade as a result of public protests that saw businesses blocked from opening.
What’s more, “customers delayed spending decisions due to the uncertainty” as many suppliers reported an inability to deliver orders in July.
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“The headline PMI dropped sharply in July to 43.1 from 47.2 in June, signaling a marked deterioration in business conditions in the Kenyan private sector at the start of the third quarter of the year. Operating conditions worsened for the second month running, and to the greatest extent since April 2021,” the report notes in part.
Additionally, the report notes that a lack of money in circulation and cost of living pressures also contributed to declines in demand and business activity across the country in July. “In both cases, rates of contraction were the most pronounced since April 2021.”
The survey added that business activity contracted across four of the five broad sectors covered, with the sharpest decline being experienced in agriculture. “Manufacturing was the only category to post a rise in output.”
“Furthermore, there was a slight increase in input prices, purchase prices, staffing costs and output prices, reflecting the higher cost of living and taxation. However, output price increases in agriculture, services and wholesale and retail trade were counterbalanced by declines in construction and manufacturing,” added Legilisho.
“Notwithstanding reduced overall activity, job levels expanded for a seventh month in a row as firms increased their capacity to address mounting backlogs which have been exacerbated by the protests. Business confidence about the coming year weakened to a level last seen in February and was still relatively fragile,” he explained.
