Business leaders are optimistic of good returns in the next one year following improving relations in the East African Community (EAC), a new report by the Central Bank of Kenya shows.
The May survey conducted among Chief Executive Officers of 230 private sector firms comprising members of the Kenya Association of Manufacturers (KAM) and Kenya Private Sector Association (KEPSA) anticipate an increase in exports following improved relations in the East African countries.
In May, Kenya and Tanzania turned over a new page when the two neighbours committed to enhancing bilateral ties, signaling an end to a turbulent chapter marked with trade barriers and strife at the borders.
President Uhuru Kenyatta and Tanzanian counterpart Samia Suluhu agreed to solve issues that impeded trade and strain relations. This painted the picture of a re-energised partnership, one that would address challenges in trade among other challenges.
"The optimism was mainly driven by the services (professional, media, wholesale/retail, financial and telecommunications sectors) and manufacturing sectors due to post Covid-19 bounce back, businesses shifting to more digitisation and anticipated increase in exports following improved relations in the East African Community (EAC) countries,” noted the CBK survey.
About 37 per cent of respondents do not expect a change in growth prospects over the next 12 months citing the continued effects of the pandemic, reduced purchasing power of consumers, increasing commodity prices as well as the possibility of tax increases that could further erode consumer purchasing power.
The Survey revealed that business confidence in the Kenyan economy, compared to the growth for the other indicators were mixed, with 31 percent expecting lower growth.
Respondents noted that businesses are still reeling from the effects of the Covid-19 pandemic.
Coupled with uncertainty over how a fourth wave could pan out, respondents indicated that it may take another six months before the situation improves.
This is particularly so for sectors such as tourism which depend on foreign economies, several of which remain depressed with the gradual lifting of restrictions on international travel.
Furthermore, some respondents reported a wait-and-see attitude of the outcome of the Finance Bill 2021 with regard to the likely impact of any newly introduced taxes. The highest levels of optimism were recorded in the services and manufacturing sectors.
However, respondents had mixed reactions to the Kenyan economy, with concerns raised about delays in receiving payment from the government.
Other concerns that could constrain growth, according to the chief executives, were a restrictive business environment, Covid-19-related issues, and inadequate access to business financing.
“An improved regulatory environment, a stable economic environment, and easing of the cost of doing business ranked highest among the external factors that businesses anticipate could support their outlook in the next 12 months,” the survey reports.
From regulators, the business leaders wanted a more predictable tax regime, a taxation policy that spurs growth and faster processing of tax refunds.
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On the economic front, the respondents want controlled inflation, increased lending to sectors identified as a priority by the government, stable shilling, and lower interest rates. To address the challenges and concerns identified in their sectors, most companies plan to manage costs, lobby with relevant stakeholders, and innovate.
The survey says business leaders also plan to continue leveraging on their firms’ top strengths, among them a highly skilled workforce which is integral in offering superior customer satisfaction and trusted brands.