Kenya’s private sector activity fell by the most in more than three years in July as deadly social unrest disrupted businesses.
Business conditions such as output, new orders and employment in July deteriorated at the fastest rate from June since April 2021 when the world was grappling with the shocks of the Covid-19 pandemic on earnings, a closely watched monthly survey showed.
The Stanbic Kenya Purchasing Managers’ Index (PMI) – which is based on the views of about 400 company managers surveyed from key sectors such as agriculture, manufacturing, construction, wholesale & retail and services – fell to 43.1 from 47.2 in June.
Readings below 50 indicate a decline in private sector deals on a monthly basis, while higher levels indicate growth.
“The deterioration in business conditions was driven by rapid declines in both output and new orders, which in turn largely reflect disruptions caused by protests and political instability,” analysts at Stanbic Bank and US analytics firm S&P Global wrote in their July PMI report.
“The shortage of money in circulation and cost of living pressures also contributed to the decline in demand and business activity.”
The data shows that disruptions occurred in all sectors covered by the survey, except for manufacturing, where activity rose slightly.
Thousands of young protesters took to the streets of Kenya’s four major cities and towns in late June to oppose plans to impose new, higher tax measures for the year starting in July.
Protests across the country, largely organised by young people who said they were not affiliated with any political or ethnic group, continued into early July, prompting President William Ruto to drop the 2024 Finance Bill.
He also began the process of reorganizing his government after nominating a new cabinet that includes 11 of the ministers he dismissed on July 11 and five officials from the main opposition party, the Orange Democratic Movement.
The protests, allegedly infiltrated by hired thugs, paralyzed business in major urban centres on the day of the demonstrations, with hundreds of retail stores looted during the height of the protests on June 25.
“Business activity in the private sector has deteriorated, reflecting the ongoing demonstrations and unrest in parts of Kenya for a few weeks now, which has dampened output and new orders. Business operations have been disrupted and customers have postponed spending decisions due to uncertainty,” Christopher Legelesho, an economist at Standard Bank, the parent company of Stanbic, said in Monday’s PMI report.
“With sales and orders falling in most sectors surveyed, purchasing volumes and inventories fell for the second month in a row.