The decision by President William Ruto and Azimio leader Raila Odinga to temporarily end their political tiff and call for ceasefire talks has had a positive effect on private businesses in Kenya, the latest Stanbic Bank Kenya Purchasing Manager’s Index (PMI) released on Tuesday, September 5 shows.
According to the PMI, a survey of over 400 private businesses showed that in August, their activities expanded, ending a six-month contraction.
The growth was attributed to improved political stability, which benefited both the services and manufacturing sectors. The PMI increased to 50.6 in August, up from July's 45.5, marking the first time since February that it reached the pivotal 50-point threshold, distinguishing growth from contraction.
“Many of the companies surveyed revealed political stability had helped to boost demand and lead to higher activity,” Stanbic noted.
In August, business activities continued without interruption following the decision by opposition leader Raila Odinga to call off protests.
Raila's announcement indicated that the move was aimed at providing the government with a 60-day window to address the concerns raised by the opposition and civil groups.
Areas of concern
Despite the positive development, the survey nonetheless noted that Kenya's economy is yet to recover due to the prevailing business climate and policies introduced by the government.
In particular, the PMI identified the weakening of the shilling against major currencies as one of the reasons many businesses were struggling.
Other reasons burdening businesses in Kenya include; increased fuel prices and higher taxation occasioned by the Finance Act, 2023.
"Tough business conditions and inflation pressures remain a pressing concern," Stanbic Bank Economist Christopher Legilisho said in the statement.
Currently, the shilling is trading at 145.7 against the dollar which is an all-time record low.
The weakening of the shilling has affected private businesses due to more expensive imports and also exposed the government to debt servicing distress.
