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| Central Bank of Kenya headquarters building along Haile Selassie avenue in Nairobi |
Industry captains in Kenya are optimistic their companies and the global economy will expand in the next 12 months but are a bit uncertain about specific sector growth and the Kenyan economy.
The Central Bank of Kenya’s CEO’s survey between July 8 and 18 pegs growth prospects for companies on specific strategies to improve business performance, such as diversification of products and services portfolio, leveraging technology and innovation, and increased sales and marketing.
At least 38 percent of CEOs sampled are highly optimistic that their firms will grow during the period under review, 37 per cent foresee stalled growth while 25 per cent expect slower growth.
The level of optimism recorded in July was higher compared to the 33.9 per cent noted in May but lower compared to the 51.8 per cent recorded in March.
Industry leaders in the country expect global growth prospects to remain largely unchanged from the previous survey.
This is supported by easing global inflation, declining interest rates and political developments in major economies such as the UK, the US and India.
However, the increased geopolitical tensions pose a risk.
Top company executives expect moderated business optimism for the sector and Kenyan economic growth prospects, mainly because of uncertainty around protests and consequent disruptions to business activity.
CEOs’ optimism in the sector growth dropped to 24.1 per cent in July compared to 30.4 per cent recorded in May and 33.9 per cent in March.
Expectations on sector performance are driven by a variety of factors including improvements in the agricultural sector, largely on account of good weather conditions.
Tourism hotels and restaurants are expected to record increased activity during the peak season running from July to October 2024 and December to February 2025.
The education sector continues to benefit from increased demand for quality education and expansion of activities as a result of the growing adoption of digital learning.
The financial sector continues to expand, leveraging digitalization, innovations, and product diversification anchored on customer centricity. However, borrower defaults pose a risk to the sector.
The manufacturing sector activity is expected to be subdued, largely on account of the elevated high cost of doing business and muted consumer demand.
The health sector on the other hand continues to recover from the effects of the doctor’s strike in 2024 Q2. The planned rollout of the Social Health Insurance Fund (SHIF) is expected to open up opportunities.
However, respondents indicated that the cost of compliance as the sector adopts the new programme is expected to pose a challenge.
Moreover, they expressed concerns that delayed disbursements and non-payment of claims by insurance funds, competition from imports, and declining donor funding continue to constrain activity.
The ICT sector continues to record increased activity supported by the expanding digitalisation of the economy.
The transport sector is expected to recover from the slowdown recorded in the last quarter due to disruptions occasioned by excess rains and floods.
Activities in the real sector, building, and construction are expected to remain low. However, the Government’s affordable housing programme continues to boost the performance of the sector.
While the level of optimism in the country’s economic growth is the lowest since January, CEOs hope that the easing inflation, stability of the shilling, and good weather will continue to support the growth of the economy.
Business activity remained relatively stable in 2024Q1 and 2024Q2. This stability is expected to prevail in 2024Q3.
Performance of sectors such as health, finance, ICT, education, tourism, agriculture, education, transport and storage is expected to remain steady, supported by sector-specific opportunities and seasonality, despite the risks.
Concerns around taxation are lower, following the withdrawal of the Finance Bill 2024.
The elevated cost of doing business and the uncertainty around protests are some of the key domestic factors that could constrain firms’ growth in the next 12 months.
“Moreover, firm-specific strategies such as customer centricity, talent management, and technological innovations are expected to boost performance,” the survey reads.
However, concerns about external threats to growth such as geopolitical tensions, macroeconomic volatility, and energy prices remain.
The survey targeted CEOs of over 1000 private sector firms through questionnaires administered via a direct online survey.
by VICTOR AMADALA
