71% of more than 1, 000 businesses surveyed by the Kenya National Chamber of Commerce and Industries (KNCCI) expect to generate revenue in Q3, a significant decline from the 89% of businesses that expressed optimism at the start of Q2.
- •All the businesses surveyed in the mining sector had a positive outlook of Q3, with Agriculture and Education registering 81% and 80% respectively.
- •About 35% of the businesses cited rising consumer demand as a driving factor to revenue acceleration in this quarter, with 17% expecting an improved regulatory environment, and 16% foreseeing slackening competition.
- •For businesses with a negative outlook on revenue growth this quarter, 36% foresee decreased consumer demand due to high product prices and diminished revenues; with 23% pointing regulatory constraints as a barricade to growth.
“Additionally, businesses are more confident in the reduction of their primary input cost compared to Q2 though manufacturing is coming out as the least optimistic sector on this metric, calling for increased efforts to support this struggling yet vital sector,” said KNCCI President, Erick Rutto.
Businesses in the education and agriculture sectors were most optimistic about reduced costs in primary inputs, while taxation/inflation-hit sectors like manufacturing and tourism expressed a negative outlook on this end. 39% of the businesses looking foward to lower costs of inputs in Q3 project the stabilization of supply chains, with 32% citing subsidies and government-driven incentives as crucial.
In terms of expected staff growth, only 66% of the businesses factored in the report mentioned that they were likely to bring in more workers. These mainly included the mining and manufacturing sectors which attributed this to foreseeable rise in workload due to consumer demand and market expansion.
On the flip side, 72% of businesses not expecting to add more workers cite decline in consumer demand. These businesses are also likely to lay off some staff as they embrace automation and technology-oriented solutions to slash costs. The retail sector was the most pessimistic in this segment of the report, mainly due to the rising prominence of e-commerce and delivery services.
The start of Q3 has been characterised by an ongoing political crisis that ultimately led to the withdrawal of this financial year’s Finance Bill, and the dissolution of Cabinet. About 32% of the businesses in the KNCCI report say that economic activities are likely to slow down due to limited financial resources caused by high interest rates and constricted credit. This concern was also expressed in the KNCCI report leading to Q2.
About 22% of businesses mentioned that high taxes and tedious compliance processes would cause deeper challenges for businesses, with another 22% betting that supply chains would be affected due to rising transport costs. Overall, the KNCCI’s forecast will be dependent on multiple factors, atop of which are political and economic decisions affecting both monetary and fiscal factors, and the cooling of uncertainties.
