Private sector’s activity shrinks during electioneering period

Rising political temperatures in October had a toll on the private sector, with hiring and new orders declining sharply, according to Stanbic Bank.

The latest Purchasing Manager’s Index (PMI), an important barometer for the health of the country’s private sector, fell to a record 34.4 in October compared to 40.9 in September with output and new orders contracting.

Readings above 50 signal an improvement in business conditions on the previous month, while readings below 50 show a deterioration.

Employment also fell further during this period that saw Kenyans take part in the highly contentious repeat presidential poll that were boycotted by part of the country, particularly in Opposition-leaning counties. 

“Political instability led to another severe contraction in the Kenyan private sector during October. The overall downturn reflected survey-record declines in output, new orders, employment and stocks of purchases,” reads report. The data for this index was collected between October 12 and October 27.

“On the price front, firms raised selling prices for the first time in six months as their ability to absorb higher input costs was restricted,” added the report. “In response to lower output requirements (and subsequent spare capacity), firms reduced their staffing levels. Although marginal, the pace of job shedding was the fastest in the survey so far.”

The prolonged electioneering period has had adverse effects on the economy, with Kepsa estimating that businesses lost about Sh700 billion to the toxic political climate.

Political impasse

However, Jibran Qureishi, regional economist in charge of East Africa region at Stanbic Bank, was optimistic that things might change for the better.

“That being said, the recent rains should be broadly supportive of the agriculture sector and if this is combined with an end to the political impasse, then the private sector in general is likely to begin showing some much needed signs of improvement over the near to medium term,” said Qureishi.