NAIROBI, Kenya, July 3 – Kenya’s business activities fell sharply in June amid concerns about new tax proposals under the 2024 Finance Bill as well as sales declines amid protests and policy uncertainties.
Latest Stanbic Bank Kenya’s Purchasing Manager’s Index (PMI) dropped to 47.2 last month, indicating a deterioration in the health of the Kenyan private sector economy.
The decline was the sharpest recorded in seven months, which contrasted notably with the PMI’s 16-month high of 51.8 in May.
A PMI reading below 50 indicates a downtick and deterioration in business activities, while the figure above shows growth and improvement.
“In June, momentum in private sector activity declined, reflecting several concerns, top of the list being the proposed increase in taxes via the Finance Bill 2024, and the widespread protests in response, with unrest in Kenya restraining output and new business because customers delayed spending decisions in the face of such uncertainty,” Christopher Legilisho, an Economist at Standard Bank, said.
“After two months of increased purchasing activity by firms, there was a dip in purchasing quantities and inventories because of reduced sales in several sectors, namely construction, agriculture, wholesale and retail.”
However, stock depletion remained modest in the period, with an uptick in employment numbers.
“Input prices, purchase prices and output prices recorded a mild increase in anticipation of the increased taxes proposed in the Finance Bill 2024. However, a stronger exchange rate and lower pump prices managed to restrain costs,” Legilisho stated.
“Despite the recent upheaval, it was notable that job creation improved for a sixth month running as firms increased capacity despite the dip in overall activity. However, business optimism for the year ahead remains fragile.”
