Revealed: Sectors most affected by anti-tax protests

The results of a closely watched survey suggest that retailers, builders and farmers have been hit hardest by nationwide anti-government demonstrations that have paralysed business in major cities.

These sectors were hit hardest by new and higher tax proposals in the now-withdrawn Finance Bill 2024, with overall private sector sales falling at the fastest rate in seven months.

Results from the Stanbic Kenya Purchasing Managers Index (PMI) — based on the opinions of about 400 corporate executives across key sectors — suggested on Wednesday that clients “have held back on spending decisions due to uncertainty surrounding the country’s finance bill.”

This negatively affected production in all major sectors, except manufacturing, where respondents reported growth.

“After two months of strong corporate buying activity, there was a decline in purchases and inventories due to reduced sales in several sectors, namely construction, agriculture, wholesale and retail,” Christopher Legilisho, an economist at South Africa’s Standard Bank, parent company of Stanbic Bank, wrote in the June PMI report.

“Input prices, purchase prices and producer prices all rose slightly in anticipation of tax increases proposed in the 2024 Finance Bill. However, a stronger exchange rate and lower pump prices helped contain costs.” Overall, June’s PMI — a monthly measure of private sector activity such as output, new orders and employment — fell the most in seven months to 47.2 from 51.8 in May.

The new higher tax measures that were withdrawn were intended to raise an additional 346 billion shillings to finance a budget of almost 4 trillion shillings for the fiscal year starting in July.

The plan called for cutting the budget deficit from 5.7% of gross domestic product, a measure of economic performance, in the current fiscal year to 3.3% of GDP in the fiscal year starting next month.

This was partly to comply with an IMF programme that required Kenya to raise taxes and cut spending to keep the budget deficit to a minimum.