NAIROBI, Kenya, October 6 – Surging political temperatures in the build-up to the 2022 presidential election could slow the growth of firms over the next year, a new report has shown.
A survey conducted by the Central Bank of Kenya (CBK) among Chief Executive Officers (CEOs) of 230 private sector firms, revealed that the political uncertainty index rose from 10 percent in July to 12 percent in September while other factors hindering growth declined marginally.
While respondents raised concerns about the increased cost of doing business, increased taxation, COVID- related factors, and reduced consumer demand, the respective indexes declined over the three-month period.
Respondents in the services sector listed factors relating to political uncertainty higher at 16 percent followed by agriculture and manufacturing at 13 percent and 5 percent.
“The results show that while firms continue to be concerned about the Covid-19 pandemic, there is increasing concern over political noise associated with the forthcoming elections. This confirms that firms may have found ways to adapt to the pandemic,” the survey indicated.
Reduced consumer demand and increased cost of business whose rate stood at 28 percent each in July declined to 14 and 11 percent in September.
Increased taxation and COVID-19 related factors which were rated 22 and 12 percent in July also dropped to 14 and 11 percent respectively.
Overall, the respondents expressed optimism in the growth prospects for their own companies mainly driven by “improved business activity following the easing of Covid-19 restrictions, containment of the pandemic in view of increased vaccinations, and improved prospects for global recovery.”
“Business prospects are especially higher for firms in healthcare, security, and manufacturers of medical supplies where activity has rebounded. Firms in professional services have also witnessed positive gradual growth and refreshed demand following the slowdown witnessed in 2020,” the survey indicated.
Nearly a quarter of the respondents, nonetheless, said they did not expect a change in growth prospects over the next 12 months citing “the Covid-19 situation and heightened political activity associated with the 2022 elections.”
To mitigate the factors constraining expansion, the respondents proposed various solutions including management of costs and risks, diversification as well as increased sales and marketing.
“Besides managing costs/risks and diversification, Covid-19 mitigation measures were an important solution for the services sector, while lobbying with relevant stakeholders was deemed important for the agricultural sector. In addition to diversification, lobbying with relevant stakeholders and increased sales and marketing were key solutions for the manufacturing sector,” the CEOs said.
The respondents were spread across manufacturing (25 percent), agriculture (13 percent), professional services (20 percent), ICT, media and telecommunications (8 percent), financial services (7 percent), real estate (7 percent), pharmaceuticals and healthcare (7
percent) an d wholesale and retail trade (5 percent).
