Firms reduce production amid negative polls outlook

 

A survey by Kenya Association of Manufacturers for the second quarter found that firms have cut down on production, making new jobs harder to come by. [File, Standard]

Kenyan consumers could be forced to dig deeper into their pockets over the next 12 months as manufacturers and investors suspend operations amid uncertainty over the next Tuesday's General Election.

A new report by the Kenya Association of Manufacturers (KAM) says the majority of firms have slowed down production in the last three months, impacting negatively on revenues and employment.

Most of the manufacturers surveyed expressed pessimism about the current business environment, with 57 per cent of the respondents saying the general business outlook was gloomy compared to 16 per cent in a similar period last year.

Another 30 per cent were reported to be uncertain, with only 13 per cent reportedly expressing optimism about the business environment.

The cut in production could lead to supply constraints in the short term, causing a spike in the price of goods.

“Historically, elections have negatively impacted Kenya’s economy and this election period is no different,” said the KAM Manufacturing Barometer for the second quarter.

The survey found that the industry’s optimism had deteriorated with regard to the general business environment compared to the same quarter in 2016.

Domestic demand

There was also inadequate domestic demand, inaccessibility of finance because of interest rate capping and competition from cheap imports.

KAM is warning that the uncertainty could slow down economic growth, reducing the number of new jobs available and at the same time eating into revenues for both the private and public sectors.

“Low economic growth means companies have fewer opportunities to expand and hire new staff, making jobs harder to come by,” said the lobby. “It also means less revenue for the Government and more taxes to cover overheads. For individuals, it results in less spending money, fewer job opportunities and a general high cost of living.”

Kenya’s manufacturing order book is below normal, with 73 per cent of manufacturers surveyed reporting a decline in the volume of orders while 20 and 6.7 per cent reported normal and above-normal orders respectively.

Profit down

Some 61 per cent of the respondents reported that profit has been down in the last three months while 26 and 13 per cent reported that profits had remained the same or gone up in the same period compared to 2016.

The same has been reported for manufacturing output, with six in 10 of the respondents surveyed reporting reduced manufacturing production over the last three months.

“Significantly, 55 per cent of Kenya's industrial manufacturers surveyed do not plan major new investments of capital during the next 12 months while 45 per cent do,” said the survey.

The report is a quarterly publication used to measure the pulse of the Kenyan industrial sector using a number of indices. It is a predictive tool for gathering information on the current situation and what is likely to happen in the sector in the next three months.

Some 48 per cent of the manufacturers in the survey reported that employment trends in the last three months had gone down while 45 per cent reported they remained the same.