John Otini

Kenya’s businesses endured a historic dip in demand for goods as households struggled with weak cashflow, dashing hopes that business could recover in early 2020, the February Purchasing Managers Index shows.

Firms reportedly lost sales due to a lack of money, amid ongoing cash flow problems in the economy.

“The private sector was nevertheless forced to increase prices as firms faced greater cost pressures from inflated raw material prices,” the most recent Stanbic Bank Kenya PMI shows.

Pending bills

Private measures of manufacturing activity released yesterday echoed concerns that cashflow issues were still a sticky one despite government saying it had paid its pending bills and removed interest rate controls.

The drop was a second successive fall in business activity and the first fall in new orders in over two years.

Kenyan workers have endured mass layoffs starting last year across several sectors as businesses sought to cut costs causing a feedback loop that is resulting in poor sales for finished goods.

At 49 in February, the headline reading pointed to a second successive month of decline in the Kenyan private sector. The index dropped from 49.7 in January, and was the lowest recorded in more than two years.

Readings above 50 signal an improvement in business conditions, while readings below 50 show deterioration.

“I expected things to pick up but I am not surprised. It is a mix of issues ranging from lack of merchandise imports from China, to lack of payment to staff by businesses and staff layoffs,” said Rodney Omukhulu of Cytonn Investments.

Contributing to the decline was a softening in new businesses in Kenyan firms, marking the first monthly fall since November 2017.

Foreign sales meanwhile rose at a much softer pace, which analysts linked to weaker exchange rates.