Private companies in Kenya have continued to lay off employees as their profit margins continue to reduce three months in a row.
According to the Stanbic Bank Kenya’s Purchasing Managers Index (PMI) released on Tuesday, December 5, companies have recorded a huge drop in sales for three months in a row, as the demand for goods and services decline.
Notably, the respondents in the survey indicated that all key economic sectors including agriculture, manufacturing, construction, wholesale and retail, services, and mining registered job cuts in November 2023.
As a result, the Stanbic Bank Kenya Purchasing Managers’ Index (PMI) fell to 45.8 last in November from 46.2 in October.
“Business conditions in Kenya remained in a steep decline halfway through the final quarter of the year amid sizeable falls in output, new orders and employment.
“Firms across the private sector noted that rapid inflation had again suppressed demand and created cash flow challenges, leading to further cuts in activity, staffing and purchasing,” the report read in part.
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Private Companies Explain Financial Situation
Further, the report showed companies indicated that they were majorly affected by the depreciation of the Kenya shilling.
Also, higher taxes and increased fuel charges were listed as some of the reasons that led to huge losses and the rise in cost of production.
Notably, the reading was among the weakest ever recorded in almost 10 years.
“At 45.8, dropping from 46.2 in October, the headline index pointed to a sharp decline in the performance of the Kenyan private sector in November.
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“The reading marked the third contraction in as many months and was among the weakest seen in the index’s near decade-long history. The rise in input costs translated into another marked uplift in firms’ output charges, which was also slightly softer than October’s survey record,” detailed the report.
Most Affected Sector by Layoffs
According to the report, the construction sector, meant to be one of the biggest employment creators in the country according to President William Ruto, suffered the most severe decrease in output.
The 400 corporate managers that responded to the survey noted that Firms have complained of rising operational costs stemming from costly raw materials.
Additionally, the report indicated that the challenge was as a result of lingering global supply constraints amid a persistently weakening shilling against major global currencies and high taxation.
Also, the PMI findings indicated that companies largely did not adjust pay for employees to cater for inflation for the second month in a row.
