A new survey shows the private sector recorded slowest activities in four years last month

Some of the ever busy joints,streets and banks in Nairobi CBD remained closed a day after the general elections. Photo by WILLIS AWANDU

NAIROBI, KENYA: The empty streets and closed shops that characterised the aftermath of the August 8 General Election saw that month rated as the worst for businesses in four years.

Stanbic Bank’s Purchasing Managers Index (PMI) survey done on procurement officers in the private sector released yesterday dropped to the lowest point last month in its first review of an election year.

Economic health

The PMI, developed in 2014 and an indicator of the economic health of the manufacturing sector, fell to 42.0 in August, down from 48.1 in July, consistent with a sharp deterioration in business conditions across the country’s private sector.

“The Stanbic Bank PMI has now been in contractionary territory for four consecutive months. Notably, the anxiety around a tense General Election in August was one of the major factors that weighed down the private sector,” said Regional Economist for East Africa at Stanbic Bank Jibran Qureishi.

Output fell while there was also less money in circulation as well as weak demand as new orders fell for the first time in the survey’s history.

Private sector

Employment in the private sector also fell in August - the first decline in the survey’s history - even though the rate of job shedding was marginal.

Mr Qureishi said although the decision by the Supreme Court to annul the outcome of the presidential vote was a reflection of Kenya’s strengthening institutions and will certainly appease the foreign investor community, businesses will pay the price in the short-term.

“This angst is likely to extend over the coming months due to the recent decision by the Supreme Court to nullify the presidential election results,” he said.

However, all is not lost for the economy as it continues to receive dollars from the diaspora while tourism is also expected to pick up on the peaceful polls.

Diaspora remittances rose to Sh92 billion over the first six months of 2017, a four per cent increase compared to Sh88.3 billion in the first half of 2016. Remittances have over time grown to be the single largest foreign exchange earner, towering over other productive sectors such as tourism, tea, horticulture and coffee.

“A stronger euro currency will probably be quite beneficial for horticultural earnings while tourist arrivals are probably likely to increase further as political temperatures eventually cool down after the fresh presidential elections,” said Qureishi.