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Kenya’s business environment in 2024 was marked by closures of local companies and widespread layoffs, painting a grim picture of the economic landscape.

Across sectors, firms struggled under the weight of operational inefficiencies, macroeconomic pressures, and unfavourable regulatory conditions, underscoring the challenges facing businesses.

State and private sector data showed the manufacturing and agriculture sectors bore the brunt of the downturn, while the services and retail sectors exhibited relative resilience.

The decline was mostly attributed to sectoral contractions, shifts in regulatory policies, and persistent macroeconomic hurdles that created a challenging environment for businesses to thrive.

Copia’s shutdown after a decade of operations highlighted the funding challenges faced by startups in Kenya, particularly tech ventures, which continue to grapple with limited access to growth-stage capital.

Meanwhile, Mobius Kenya, an emblem of Kenya’s automotive ambition in the region, closed shop due to financial and production challenges, further illustrating the manufacturing sector’s slowdown, which posted a modest 2.0 per cent growth compared to 2.6 per cent the previous year.

The exit of Procter & Gamble from the Kenyan market spotlighted the unsustainability of high operational costs exacerbated by inflation.

Similarly, Foschini Group Kenya Limited cited financial difficulties and unstable taxation policies as reasons for its closure, signalling the urgent need for systemic reforms to stabilize the business environment.

Employment within Export Processing Zones (EPZs), dropped by 8.8 per cent, while domestic sales fell by 34 per cent, reflecting a contraction in export-driven industries and waning local demand. The sector’s struggles were compounded by broader economic pressures, including inflation, taxation policies, and rising credit costs, which stifled growth and eroded competitiveness.

Liquidation of Blue Shield

Financial distress and unsustainable liabilities led to Blue Shield Insurance being ordered into liquidation, leaving behind debts exceeding Sh855 million. Kansai Coatings Kenya Ltd followed suit, announcing voluntary liquidation due to economic challenges. These closures underscore the difficulties businesses face in navigating Kenya’s challenging macroeconomic environment.

Inflationary pressures and higher production costs further strained firms. By the end of 2023, the Central Bank Rate had risen to 12.5 per cent, driving up borrowing costs and suppressing investment in 2024. Higher taxes on inputs increased production expenses, leaving many companies unable to absorb or transfer the additional costs to consumers. Rising fuel prices, escalating electricity bills, and costly raw materials further pushed operational expenses to unsustainable levels.

The persistent depreciation of the Kenyan shilling against major global currencies throughout 2024 added to businesses’ woes, as did the enforcement of new taxation measures in September. These factors collectively exacerbated financial pressures, leading to job losses and closures across multiple industries.

Employment losses were significant, with over 7,000 jobs shed in the EPZs alone. Standard Media Group announced plans to lay off more than 300 employees in September, citing a difficult operating environment and prolonged revenue challenges. According to Stanbic’s Purchasing Managers Index (PMI) for November, job losses became a recurring issue, further weakening the economy and fueling uncertainty among workers and investors.

Despite policymakers pointing to new investments, such as 34 industrial projects and the famed government-sponsored housing projects, these initiatives have yet to offset the broader economic challenges. Investors continue to cite Kenya’s unpredictable macroeconomic environment as a key deterrent to sustained growth.

Assets are concentrated in MMFs and fixed-income trusts, reflecting a preference for economic stability in Kenya. It is also essential to consider macroeconomic factors, such as inflation, interest rates, and economic growth, which can significantly impact unit trust performance. For example, rising interest rates may benefit MMFs and fixed-income funds but negatively affect equity funds.

Discipline and consistency are crucial for success in unit trust investments. Regular contributions to a unit fund, regardless of market fluctuations, can help investors achieve their financial goals and ensure long-term success.

“One key aspect that would be able to determine whether or not one can be successful from a long-term perspective, just in terms of gathering wealth would be discipline, and the ability to just be goal-oriented,” said Oloo.

In Kenya, unit trust funds and assets are governed by the CMA and regulated under the Capital Markets Collective Investments Schemes Regulations, 2001.