Economy
Kenyan companies slow hiring and freeze salary increases
Friday April 5, 2024
Kenyan businesses have slowed hiring workers and frozen wage increases, citing reduced demand for goods and services amid acute cash flow problems in a difficult economy.
Results from Stanbic Bank Kenya’s Purchasing Managers’ Index (PMI) suggest that businesses increased their headcount in March at the slowest pace since the start of the year.
The slowdown reversed a trend that had begun to take shape, with hiring in February seeing the fastest growth in 13 months.
Companies had relied on growing orders to hire more (largely casual) workers and increased budgets for marketing campaigns in an effort to further stimulate demand through easing inflationary pressures.
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Demand for goods and services, however, fell in March, prompting businesses to reduce production, according to the PMI findings. The report is based on feedback from approximately 400 panelists from key economic sectors including agriculture, manufacturing, construction, wholesale and retail, services and mining.
“The degree of headcount increase was the lowest recorded in the current sequence and only slight,” wrote analysts at Stanbic Bank and US analytics firm S&P Global in the March PMI report.
Businesses reversed a four-month decline in payrolls that began to take hold last September after the second round of new tax measures took effect.
Businesses have complained of rising operating expenses, driven largely by soaring fuel prices, rapidly rising electricity bills and high raw material costs, the result of persistent material constraints. of global supply, in a context of persistent weakening of the shilling against the main world currencies and higher taxation.
The Federation of Kenya Employers (FKE) had reported in November that rising costs of doing business had pushed about 70,000 workers, or almost 3 percent of the workforce, in the formal private sector into unemployment between October 2022 and November 2023.
The employers’ lobby further warned that 40 percent of its members were considering laying off workers to cope with rising operating costs and protect profit margins.
“The employment situation is still very fragile. We are not yet back on track since Covid-19. Every day we receive notifications from employers about their intention to declare layoffs,” the FKE said in a statement on November 24.
“Increasing business costs are largely due to tax measures, global geopolitical developments and climate change. The country may not have much control over global geopolitical developments and climate change, but we can work on our tax measures to reduce the cost of doing business.
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The headline PMI – a measure of private sector activity such as production, new orders and employment – for March fell to 49.7 from 51.3 in February.
PMI figures above 50 signal growth in business transactions over the previous month, while levels below this indicate contraction.