Kenyan Companies Cut Jobs On Decreasing Purchasing Power For 3 Consecutive Months - Report

• A report by Stanbic Bank Kenya’s Purchasing Managers Index (PMI) showed that firms continued to cut jobs for the third month in a row
• The November 2023 index revealed that construction was the worst-hit sector in terms of reduced workload and output
• The companies attributed this to the increased cost of operations and reduced purchasing power

TUKO.co.ke journalist Wycliffe Musalia brings over five years of experience in financial, business, and technology reporting, offering deep insights into Kenyan and global economic trends.

The number of staff in various companies dropped sharply in November 2023, compared to the stronger falls registered during the first COVID-19 lockdown, a recent survey has shown.

According to the survey, Kenyan companies shed jobs for the third month due to reduced sales and workloads.

Why firms are shedding jobs in Kenya

The drop is attributed to low purchasing power and output levels experienced by various firms.

"Rapid inflationary pressures on businesses and customers alike resulted in sustained contractions in activity and new business. Customer spending had fallen due to increased prices and cash flow challenges," read the report in part.

The Stanbic Bank Kenya’s Purchasing Managers Index (PMI) for November 2023 further noted that job levels fell in all five of the monitored sectors.

These are agriculture, mining, manufacturing, construction, wholesale, retail, and services.

Which sector faces more job cuts?

Christopher Legilisho, economist at Standard Bank, noted that construction firms suffered the worst declines in new orders and output.

"Besides the agricultural sector, output and new orders declined across all monitored sectors; the construction sector was the worst hit. Inflationary pressures and cashflow difficulties saw customer spending declining, and the rate of job losses increasing in the private sector because of weaker output and reduced workloads," Legilisho reiterated.

Legilisho explained that the rising input and purchase price pressures resulted from further increases in fuel prices, electricity costs and taxes, among other factors.

The survey, with purchasing managers as respondents from 400 firms, saw the confidence level remain modest.

Employers predict further job cuts

Only 17% of companies were confident of growth linked to expansion plans and the launch of new products and services in 2024.

The survey followed the Federation of Kenya Employers (FKE) report showing that Kenya has lost approximately 3% year-on-year (70,000) of the jobs in the formal private sector due to the rising cost of doing business.

FKE noted that the cost of doing business has become unsustainable since the enactment of the Finance Act 2023.

The employers disclosed that the country was experiencing a high outflow of investors from Kenya due to the weakening shilling and high cost of doing business.