Kenyan: Firms Impose Salary Cuts As Spending Declines To 9-Month Low


NAIROBI, Kenya, Feb 2 – Kenyan firms imposed salary cuts in January even as private sector activity fell to a nine-month low on reduced demand, Stanbic Kenya Purchasing Managing Index(PMI)  survey has revealed.

The poll, conducted amongst around 400 private sector companies noted that payroll costs fell for the first time in nine months as many firms lowered staff salaries.

“Kenyan firms indicated that the slowdown in demand led them to lower staff salaries in January. Overall payroll costs fell for the first time in nine months, although the pace of decline was only marginal,” the survey indicated.

Overall. firms reported improved recovery in the employment index for the ninth consecutive month as firms continued to add their workforce, a trend which began in May 2021.

The pace of employment, however, eased to a 6-month low in January on struggling retail and wholesale sector which reported weaker sales.

“Kenyan firms continued to add to their workforce numbers at the start of the year. The overall upturn in staffing levels eased to a six-month low, however, as several firms mentioned that weaker sales,” the survey added.

Overall, Kenya’s PMI fell to 47.6 in January from 53.7 in December.

Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

Kuria Kamau, Fixed Income and Currency Strategist at Stanbic Bank said client spending was negatively affected by rising inflation and a resurgence in Covid-19 due to the Omicron variant while export demand grew marginally and domestic demand fell significantly.

“After registering the strongest upturn for 14 months in December, new business inflows declined sharply at the beginning of the year. This often reflected a drop in client spending and travel linked in part to the recent wave of the COVID-19 pandemic and increased
price pressures,” the survey noted.

According to Stanbic, lower client spending drove a marked decline in sales, in part related to strong price pressures and a recent surge in Covid-19 cases from the Omicron variant.

Kenyan business confidence, the survey noted, regarding future activity was again subdued in January, as pandemic-led uncertainty continued to weigh on expansion plans.