Delayed Payment Of Arrears Hampers Private Sector Activities

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The Private Sector in Kenya has been very consistent in contributing to the National Income and job creation. A Purchasing Managers’ Index survey conducted by Stanbic Bank Kenya has revealed that in the month of October, the private sector economy remained healthy, with improved business conditions.

New business received by Kenyan firms was up sharply during the month, despite a slower rate of growth compared to September. The surveyed businesses experienced a growth in the inflow of new clients, often from referrals from previous customers. Improve marketing strategies and service quality helped to increase demand as sales to foreign clients equally rose at a sharp, and faster, pace.

However, cash circulation issues continued to restrain business activity. Input price inflation slowed to a two-year low, allowing firms to reduce their selling charges for the first time since April, while output expectations weakened to a ten-month low amid reduced optimism for the future.

“Private sector activity was softer in October as firms again lament what they term as ‘cashflow’ issues. We have in the recent past linked this to the combination of delayed payments of arrears owed to the private sector which was also compounded by the interest rate capping law,” said Jibran Qureishi, Regional Economist E.A at Stanbic
Bank.

To ease the pressure, firms raised employment at a solid rate in the month. They also increased their stocks of purchases while competition among suppliers remained steadfast.

“Other issues that have restrained aggregate demand continue to persist and ought to be addressed as well in order to bring down banking sector NPL levels and further supplement the improvement of private sector cash flows,” he added.

Despite expectations for future activity falling notably in October, posting the weakest optimism in the year so far, there are still expectations that the output will rise over the coming 12 months, pegged on continued sales growth.

 

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