Kenya’s private sector activities rise to a 10-month high in November

By Steve Umidha

Kenya’s private sector expanded at the second-fastest pace in November but moderated marginally from October, a private survey showed on Friday, marking a ten-month high for the country’s private businesses.

The latest Stanbic Bank Kenya Purchasing Managers Index (PMI) Survey posted 53.0 during the month up from 51.4 in October – a ten-month high as firms enjoyed a sharp increase in demand owing to the lifting of curfew restrictions.

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

The month under review saw output and new orders rise solidly in a period that also saw businesses return to profitability after months of indecisions that had been hampered by the Coronavirus pandemic.

“Business activity in November expanded at the fastest rate in 10 months following the lifting of the 10pm to 4am curfew. Domestic demand increased rapidly in response to the lifting of the curfew, with the main beneficiaries being firms in services, trade and construction,” commented Kuria Kamau, Fixed Income and Currency Strategist at Stanbic Bank.

The sector data further suggested that the November expansion was largely driven by the construction, services and wholesale and retail sectors, but unpredictably agriculture and manufacturing posted a decline in output.

Prior to last month’s reading, September figures had perhaps been the best reading by PMI for 2021, posting 56.3– the highest reading since April 2018 in the health of the private sector economy.

September data pointed to one of the highest monthly increases in output across the Kenyan private sector economy – with the rate of expansion quickening from August, and was the fastest seen in almost two-and-a-half years.

It was the period that coincided with the government easing lockdown restrictions during the third quarter of the year as firms saw a release of pent-up demand as clients largely returned to markets.

Kenyan companies rose sharply midway through the final quarter of the year, with the rate of growth accelerating for a second straight month to the quickest since May, with firms reporting higher sales on an increase in customer numbers that was often linked to the removal of curfew hours.

The private sector employment was also boosted by higher sales, with the latest PMI data signaling the quickest rise in job numbers in two years. “To achieve the higher output, firms ramped up their purchases and staff levels at record rates.

Employment levels, in particular, rose at the fastest pace in exactly two years,” argues Kamau.

But the labor market, particularly for the private sector could shrink in the coming year on account of the upcoming general elections, according to recent projections by Kenyan legislators tasked on labor matters, but the MPs foresee a rebound follow almost immediately but that will depend on the polls’ outcome.

“Growth in private investment is likely to remain muted as investors adopt a wait and see attitude pending the outcome of the general elections. A tension filled election marred with pockets of violence could lead to investor flight,” reads in part the Parliamentary Service Commission (PSC) report which covered the months between January and October 2021.

On a medium term alternatives for steady economic growth during the transition period for 2022/2023, the commission estimates show that employers in key industries such as manufacturing, will halt hiring as investors adopt ‘a wait and see’ attitude pending polls outcome.

Kenya’s unemployment rate, according to the Kenya National Bureau of Statistics (KNBS), had been increasing over the past five years with formal wage employment climbing from 2.68 million people in 2016 to 2.93 million workers in 2019 followed by a sharp decline to 2.74 million people seen in 2020 because of the pandemic.