More than a quarter of chief executives expect to cut jobs before the end of the year on increased operating costs and softened demand for goods and services, setting up families for a gloomy festivities period.
The Central Bank of Kenya (CBK) survey that targeted CEOs of more than 1,000 private sector firms through online questionnaires, shows 26.3 percent of those surveyed expect to cut their workforce between now and the end of the year while 63.5 percent will not be hiring.
At 26.3 percent, this will be the highest number of firms cutting jobs in a single quarter since the CBK introduced the survey in March 2021.
The planned job cuts set up employees and their dependants to a dull Christmas and New Year festivities as firms react to the increasing cost of doing business, which is manifesting through higher purchase prices in an environment that does not offer room to increase selling prices.
“Respondents reported subdued business activity in 2023 Q3 compared to 2023 Q2 due to high input costs and reduced consumer demand,” said the CBK.
A majority of the respondents (65 percent) were privately-owned domestic firms, while the rest were privately-owned foreign businesses and publicly listed domestic companies, with 45 percent of them overseeing firms that had a turnover of over Sh1 billion last year.
The survey covered sectors such as manufacturing, financial services, professional services, healthcare and pharmaceuticals, agriculture, tourism, hotels and restaurants, ICT and telecoms, transport and storage, real estate and wholesale and retail trade.
About 77.9 percent of CEOs surveyed told the CBK they had seen a rise in purchase prices of raw materials and goods for sale between June and September when compared to the second quarter of the year.
Just 22.8 percent of the firms had seen a rise in demand for goods and services compared with 37.5 percent which saw a drop in demand and 39.7 percent which did not see a change in demand.
Such an environment has proved difficult to increase selling prices to cover for the increased purchase prices. Just about a third (39.3 percent) had increased their selling prices while 15.6 percent had to slash prices.
“Manufacturing sector firms reported the lowest production volumes due to challenges associated with low consumer demand and erosion of margins that is reported to have dampened both volume and price of goods,” says the CBK.
The survey said a weaker Kenya shilling against the dollar, increased fuel and electricity prices and taxes and reduced purchasing power are affecting demand.
The CBK data shows the number of CEOs cutting jobs has been rising since the second quarter of the year where 20 percent said they had cut their headcount.
The September survey shows 23.5 percent of the surveyed CEOs cut jobs in the three months to September and now 26.3 percent expect to do so this quarter ending December.
While there were 17.5 percent of CEOs adding jobs in the second quarter ending June, this has fallen to 9.6 percent in the quarter that ended September, being the least since the CBK started the survey.
Some firms have had to put on hold expansion citing reduced orders and customer inability to afford higher prices, making it difficult to operate at full capacity.
