Retailers, construction firms, and farmers were the hardest hit by the countrywide anti-government demos, which have paralysed business in major towns, findings of a closely-watched survey have suggested.
The sectors bore the brunt of anxiety over new and higher tax proposals in the now-dropped Finance Bill 2024, with overall private sector sales falling at the steepest pace in seven months.
Findings of the Stanbic Kenya Purchasing Managers Index (PMI) — based on feedback from about 400 corporate managers in key sectors — suggested on Wednesday that customers “withheld spending decisions due to uncertainty around the country's finance bill”.
A security officers assesses damage on shops along Wabera Street in Nairobi following a looting spree during the anti-Finance Bill protests on June 26, 2024.
Photo credit: Wilfred Nyangaresi | Nation Media Group
That hurt output in all key sectors covered except manufacturing where respondents reported an uptick.
“After two months of increased purchasing activity by firms, there was a dip in purchasing quantities and inventories because of reduced sales in several sectors, namely construction, agriculture, wholesale, and retail,” Christopher Legilisho, an economist with South African-based Standard Bank, the parent firm of Stanbic Bank, wrote in the PMI report for June.
“Input prices, purchase prices, and output prices recorded a mild increase in anticipation of the increased taxes proposed in the Finance Bill 2024. However, a stronger exchange rate and lower pump prices managed to restrain costs.” Overall, June’s PMI— a measure for month-on-month private sector activity such as output, new orders, and employment— fell at the sharpest pace in seven months to 47.2 from 51.8 in May.
The now-dropped new and higher taxation measures targeted to raise an extra Sh346 billion to fund a nearly Sh4 trillion budget for the year starting July.
Members of the public rummage through litter outside shops along Wabera Street in Nairobi following a looting spree during the anti-Finance Bill protests on June 26, 2024.
Photo credit: Wilfred Nyangaresi | Nation Media Group
The plan involved cutting the budget deficit from 5.7 per cent of gross domestic product, a measure of economic output, in the current financial year to 3.3 per cent of GDP in the financial year starting next month.
This was partly to comply with an IMF programme that requires Kenya to increase taxes and cut expenditures to keep the deficit in the budget to minimal levels.
