Kenyan firms are looking into cost management, restructuring, diversification of operations and lobbying with relevant stakeholders as alternatives to managing external and internal risks anticipated in the next twelve months.
The Central Bank of Kenya’s (CBK) survey with Chief Executive Officers drawn from different industries indicate that increased taxation and the cost of doing business (economic environment), are the key domestic factors that could constrain firms’ growth in the next 12 months.External threats to firm’s expansion include macroeconomic volatility, increase in energy prices and geopolitical tensions.In the manufacturing sector, 7 per cent of the CEOs surveyed prefer restructuring or relocation as a solution to the risks, compared to 5 per cent and 3 per cent of counterparts in services and agriculture sector looking at the same measure.Managing costs form 30 per cent priority for CEOs in agriculture sector, it also occupies 28 per cent and 26 per cent respectively as a priority for captains in the manufacturing and services sectors.
Lobbying with relevant stakeholders is a popular option among CEOs in the agriculture sector with 18 per cent of those captured by the survey showing preference for it compared to 8 per cent of those from service sector and 12 per cent from manufacturing sector.
14 per cent of the CEOs opt for enhanced use of technology, 12 per cent of the CEOs surveyed are looking into diversification and marketing as strategies to get their companies out of the problems. Better branding, research and development are also options in navigating the challenges firms anticipate in the next 12 months.
Majority of the respondents (62 per cent) were privately-owned domestic firms, while the rest were privately-owned foreign businesses (28 per cent), publicly listed domestic companies and government owned entities. 48 per cent of the respondents had a turnover of over KSh 1 billion in 2023.
In terms of employment, 49 per cent of respondents employed less than 100 employees, while 26 per cent of respondents employed over 500 people. The responses were aggregated and analysed using frequencies, percentages, and simple averages where appropriate.
The survey shows moderated growth prospects for the Kenyan economy, but easing inflation, stability of the Shilling, and good weather prospects is expected to continue to support growth.
The manufacturing sector growth prospects are moderated in the next 12 months, largely due to the expected fiscal measures as outlined in the Finance Bill 2024. This is expected to further push the cost of doing business and subdue consumer demand.
Nevertheless, firms indicated that they are able to increase production or meet unexpected increase in demand through utilization of existing idle capacity, innovations, diversification and organization reorganization.
Growth prospects for the services sector over the next 12 months remain strong, driven by sector specific strategies and seasonality in sectors such as ICT, education, finance, real sector and health. However, activity in the wholesale and retail trade, transport and storage sectors remain low due to subdued consumer demand.
Optimism in the agriculture sector is supported by favourable weather conditions and expectations of good harvests. However, there are concerns of erratic weather patterns and challenges accessing credit to finance activity within the sector.
See Also:
CBK Raises Benchmark Rate to 13%
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