Job loss: How high taxes, weak demand are pushing firms to the brink

Customers shop for household goods in a supermarket. [File, Standard] Kenyan businesses are being squeezed by soaring taxes and muted consumer demand, forcing them to slash costs and automate operations to survive, a Central Bank of Kenya (CBK) survey shows. The July 2025 CBK CEOs Survey, which polled over 1,000 executives, found that the "elevated cost of doing business, reduced consumer demand, taxation and levies" were the primary domestic headwinds crushing growth prospects for the coming year. The move highlights a stark divide between the State's pronounced national economic optimism and corporate distress. This corporate pessimism persists even as the same survey noted improved overall confidence in Kenya's macroeconomic stability. Confronted with these pressures, a significant 23 per cent of firms identified "managing costs/risks" as their primary survival tactic. This strategic shift towards austerity and efficiency, rather than expansion, signals potential headwinds for job creation and investment, as companies opt to tighten belts rather than risk growth in a high-cost environment. The CBK survey, which captured the views of over 1,000 top executives, found that the "elevated cost of doing business, reduced consumer demand, taxation and levies" were the primary domestic headwinds expected to constrain growth over the next year. The pain is widespread. The survey showed 21 per cent of respondents cited the high cost of doing business as a key constraint in July, up from 20 per cent in May, while 17 per cent pointed to reduced consumer demand and 15 per cent to increased taxation. Confronted with these challenges, companies are being forced to adapt. A significant 23 per cent of firms stated that "managing costs/risks" was their primary method to mitigate these constraints, making it the most cited strategy. This is followed by a push towards "digitisation/innovation/enhanced use of technology" (17 per cent) and "increased sales and marketing" (15 per cent). The strategic shift has profound implications for the broader economy. When companies face such financial pressure, they typically have two options: pass the costs on to consumers, fuelling inflation, or cut costs internally, which often impacts jobs and investment. The survey suggests a strong lean towards the latter, with efficiency and cost-optimisation becoming core survival tactics. Looking beyond immediate fixes, firms are embedding this cautious approach into their long-term plans. The survey concluded that firms' key strategic priorities for the next three years are "improvement in efficiency, diversification of operations and sustainable business growth." This corporate belt-tightening comes despite an overall improvement in executive confidence regarding Kenya's macroeconomic prospects, which was supported by expectations of better weather and lower lending rates. The findings underscore a critical disconnect between improving national economic indicators and the persistent day-to-day struggles of private sector firms, who are now hunkering down for a prolonged period of streamlined operations and technological adaptation to protect their margins. Similar sentiments were captured in the Stanbic Purchasing Managers' Index (PMI) - a crucial barometer of the health of Kenya's private sector - which dipped below the critical 50-point mark in May, signalling a contraction for the first time in eight months. The PMI is a national report card for businesses; a reading above 50 means the economy is growing, while a score below 50 indicates a slowdown. Kenya's PMI fell to 49.6 in May from 52.0 in April, showing a slight but worrying decline after seven months of steady improvement. This fragility in the private sector's recovery has direct and severe consequences for the average Kenyan. When businesses experience a decline in orders and output, they face a stark reality: they cannot afford to maintain their current staffing levels, let alone hire new employees.

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