High taxation, a constraining business environment, and high interest rates are constraining Kenyan companies’ growth ability dampening their performance and outlook for the rest of the year.
At least half of firms in the country now cite heavy tax burden, difficulties raising financing, and challenging trade environment as the key factors limiting their expansion capacity, according to the latest CBK’s survey of company executives.
As a result, the majority foresee dampened performance for the last quarter of the year, with many expecting orders, sales and production to either decrease or remain static compared to the last three months.
“Overall, business environment, challenges in business financing, and increased taxation are key constraining factors across all sectors,” said the CBK in the recently published survey.
The manufacturing sector is the most affected by these factors, with a total of 67 per cent citing the three issues as their top concern domestically in the quarter to September.
The business environment is the most constraining factor for goods makers, cited by 29 per cent while increased taxation is cited by 26 per cent of businesses in the sector, and difficulties accessing finance was cited by 12 per cent.
The high cost of doing business is constraining about 22 per cent of businesses in the agriculture sector, while increased taxation is the top deterrent for 11 per cent of them while lack of business finance impacted 19 per cent.
Generally, more companies are complaining about these factors this year compared to last year, highlighting the impact of new regulatory measures introduced over the period, such as the mandatory housing levy contributions and new taxation measures.
In a similar survey done in November last year, only 45 per cent of agriculture sector firms cited these issues as constraining factors, compared to 52 per cent this year, while in the manufacturing sector, the number has risen by over half from last year’s 40 per cent.
In the services sector, three per cent more firms now cite these factors as constraining issues to their growth, compared to last year, with about 44 per cent now saying they are struggling with these
To deal with these challenges, a majority of the firms are considering managing costs or risks and lobbying with relevant stakeholders.
