Firms freeze expansion plans on Covid-19 resurgence

Jobseekers in Nairobi. FILE PHOTO | NMG

By CONSTANT MUNDA
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Summary

• More Kenyan companies have put on hold expansion plans, citing the second-wave of coronavirus infections which hasprompted fresh rounds of shutdowns in key markets.
• The number of corporates planning to raise output in the next one year fell to 20 in every 100 as at the end of last month, down from 30 in October, according to findings of a closely-watched survey that gauges activity in the private sector.
• This is despite a global breakthrough in Covid-19 vaccine which has raised confidence in protection against the contagious virus, with Kenya expected to get an order of 24 million doses mid-February.

More Kenyan companies have put on hold expansion plans, citing the second-wave of coronavirus infections which hasprompted fresh rounds of shutdowns in key markets.

The number of corporates planning to raise output in the next one year fell to 20 in every 100 as at the end of last month, down from 30 in October, according to findings of a closely-watched survey that gauges activity in the private sector.

This is despite a global breakthrough in Covid-19 vaccine which has raised confidence in protection against the contagious virus, with Kenya expected to get an order of 24 million doses mid-February.

Findings of Stanbic Bank Kenya’s Purchasing Managers Index (PMI), however, shows majority of participating corporate managers grew increasingly concerned over a resurgence in the pandemic with key exports markets clawing back some of lockdown measures which had been eased.

PMI shows that only 22 percent of the firms were positive of an expansion in output by end of this year, down from 29 percent in October.

“Business confidence fell to a new record low in December, amid ongoing concerns surrounding the Covid-19 pandemic,” analysts at Stanbic Bank and UK’s Markit wrote in the December PMI report Wednesday last week.

“Most of the remaining firms (78 percent) gave a neutral outlook for activity.”

Kenyan key export markets such as the UK and South Africa have identified new variants of coronavirus which have resulted in tightening of restrictions.

For example, the UK — a key buyer of Kenya’s fresh produce such as cut flowers, tea and fruits— re-imposed stricter lockdowns on January 5, including closure of most schools and colleges, to run until mid-February.

“A resurgence in Covid-19 cases as well as the re-introduction of lockdowns in some international markets has lowered expectations for the post pandemic recovery in 2021," Kuria Kamau, a fixed income and currency strategist at Stanbic Bank wrote in the PMI report.

The report showed that overall expansion in private sector activity such as output, new orders, employment and backlogs for December in key sectors like manufacturing, services and agriculture recovered marginally from a sharp deceleration a month earlier largely helped by increased festive sales.

The PMI for December rose slightly to 51.4 from 51.3 a month earlier, suggesting growth in business deals was nearly flat, just staying above the 50 mark that separates growth from contraction.