Captains of Industry Anxious about Business Activities during August Poll:CBK Report

Chief Executive Officers(CEOs)of various firms continue to be concerned that business performance will be affected by increased political activity as investors adopt a ‘wait and see’ approach to investments.

According to the latest Monetary Policy Committee CEO’s Survey, published in January 2022,on the brighter side, most CEO’s expect business activity to quickly pickup shortly after the conclusion of the elections.

CEO’s Responses;

CEO’s surveyed continue to be optimistic about business activity in 2022 and expect this to mirror the years  Q1 performance

Consistent with previous surveys, CEOs indicated that diversification, improved efficiency/ innovation, sustainable business growth were key internal factors that could strengthen their outlook.

Externally, respondents indicated that political stability, a stable macroeconomic environment, an enabling business environment and stability of the Kenya shilling are factors that could strengthen firms’ outlook in 2022.

CEOs expect that increased political activity will leave business activity at largely the same level as that in 2022 Q1.

Despite the recent reduction in electricity costs by the Government, respondents expect higher input prices to persist especially for imports where supply chain constraints will
continue.

The Survey interrogated CEOs on business activity in 2022 quarter one (Q1) compared to 2021 quarter four (Q4), and their expectations for economic activity in the second quarter of 2022 (Q2).

The Survey also sought to obtain the significant factors likely to affect business expansion/growth in the next one year (January 2022 – December 2022), as well as
the strategic directions and solutions to address their key constraining factors over the medium term (January 2022 – December 2024).

According to CBK Market Perception Survey for January 2022, respondents expected moderate demand for credit by borrowers in January and February, driven by the need for working capital to restock and build inventories upon reopening after the festive period, increasing economic activities, resumption of businesses to full capacity, need to safeguard against constrained global supply chains caused by logistical issues, and the fast spreading Omicron variant (74 percent respondents). In addition, 21 percent of respondents expected higher demand for credit to arise from the need to settle school related financial obligations.

However, about 58 percent of CEOs expected the cautious wait and see approach
by investors due to possible political risk in an election year to slow down demand for credit in the next 2 months.

Approximately 60 percent of CEOs expected the easing of COVID-19 restrictions
locally and globally, declining infections, and notable increase in uptake of vaccines to boost economic activity in January and February.

Back to school activities and spending, and front loading by businesses to achieve high
performance in a bid to safeguard against any election disruptions later in the year were cited by 35 percent of respondents as factors that would support economic activity in January and February.