Kenya’s private sector activity falls sharply in 39 months amid Gen Z protests

Private sector activity in Kenya fell by the most in more than three years in July as deadly civil unrest disrupted businesses.

The results of the closely watched monthly survey showed that business conditions such as production, new orders and employment deteriorated at a faster pace in July compared with June since April 2021, when the world was grappling with the impact of the Covid-19 pandemic on profits.

This followed a decline in the Stanbic Kenya Purchasing Managers Index (PMI) – based on the views of some 400 corporate executives from key sectors such as agriculture, manufacturing, construction, wholesale and retail trade and services – to 43.1 from 47.2 in June.

Readings below 50 signal a decline in private sector transactions on a month-on-month basis, while values ​​above indicate an increase.

“The deterioration in business conditions was driven by a sharp decline in production and new orders, largely reflecting disruptions caused by protests and political instability,” analysts at Stanbic Bank and U.S. analyst firm S&P Global wrote in their July PMI report.

“The lack of money in circulation and pressures on the cost of living also contributed to the fall in demand and economic activity.”

The data shows that disruptions were recorded in all sectors examined, except manufacturing, which saw a slight increase in activity.

In late June, thousands of young protesters took to the streets of four Kenyan cities and larger towns across the country to oppose plans to introduce new, higher taxes for the fiscal year starting in July.

Nationwide protests, mainly organised by youth who said they were not affiliated with any political or ethnic groups, continued until early July, prompting President William Ruto to withdraw the 2024 Finance Bill.

He also began the process of reorganizing the government, nominating a new Cabinet including 11 ministers dismissed on July 11, as well as five officials from the main opposition party, ODM.

The protests, allegedly involving hired thugs, paralyzed economic activity in major urban centers on the day of the demonstrations. At their peak on June 25, hundreds of retail stores were looted.

“Private sector business activity deteriorated, reflecting weeks of demonstrations and unrest in parts of Kenya, discouraging production and new orders. Business operations were disrupted and customers postponed spending decisions due to uncertainty,” Christopher Legilisho, an economist at South Africa’s Standard Bank, parent company of Stanbic Bank, said in a PMI report on Monday.

“As sales and orders fell across most of the sectors surveyed, purchase volumes and inventories fell for the second month in a row.