Five out of 10 manufacturing companies expect to downsize in the next six months

Five out of 10 manufacturing companies expect to downsize in the next six months as competition from cheap imports, among other challenges, dim their revenue outlook.

In sentiments captured in the latest report by the Kenya Association of Manufacturers (KAM), 64 per cent of manufacturers forecast zero or negative revenue growth, with only two per cent expecting a positive revenue growth.

The report, released on Monday, shows that the pulse of the manufacturing sector is slowing down.

More than half (56 per cent) of the managers polled expect the level of new orders to drop. This has led to a general negative outlook for the workforce.

In total, 47 per cent of industrial manufacturers plan to reduce their workforce in the next six months.

“Only 22 per cent plan to add the number of employees while 31 per cent will maintain the same number of employees,” says the KAM report.

Of the less than a quarter who will be recruiting, 39 per cent will only be interested in sales and marketing experts to try and revive revenue. About a third say they will be looking for semi-skilled or unskilled workers.

High prices of raw materials and political uncertainties top the list of concerns for 56 per cent of the manufacturers.

Cheap imports

The country has been on edge following the nullification of the August 8 presidential election results, setting the stage for Thursday’s repeat poll that the Opposition has vowed to boycott, further stoking political tensions.

In the months leading up to the August elections and the Supreme Court’s annulling of President Uhuru Kenyatta’s win, the country has experienced slowed economic activities as investors adopt a wait-and-see attitude.

In the three months to September, 53 per cent of manufacturing companies said they operated at half-capacity, with just 12 per cent reporting having been at near or full capacity. Pressure from cheap imports was cited as a concern by 63 per cent of manufacturers.

Also on the list of headwinds that are dimming prospects for the sector is lack of demand (59 per cent) and regulatory pressures, which were cited by 58 per cent of manufacturers.

Because of the environment, the majority (75 per cent) of the manufacturers who took part in the survey anticipate a downward trend in profits while 17 per cent were of the view that their profits would remain constant.

Asked about the direction the economy has taken in the past three months, more than half (53 per cent) of manufacturers polled believed the economy has been declining while a quarter said it has been stagnant from the second quarter.

Only 22 per cent said they have experienced some growth.

A majority of them (39 per cent ) remain pessimistic about the economy’s prospects over the next six months while only 14 per cent were optimistic.

“Looking forward, 56 per cent of industrial manufacturers remain pessimistic on the business outlook, perhaps due to the impact of the election period, as underscored by some of the surveyed manufacturers,” said KAM.