CEOs express optimism about growth prospects
Captains of industry are optimistic about last month’s improvement in the economy for the first time in January after five months of consecutive decline, a new study shows.
A survey of CEOS conducted by Central Bank of Kenya (CBK) shows that 24 per cent of the chief executives were optimistic about the economic outlook in the next 12 months, up from 18 per cent of CEOs surveyed in November 2022.
Close to half of CEOs interviewed also expect to see a growth in orders in the first quarter of the year.
“Nonetheless, respondents highlighted concerns over newly introduced taxes, high-interest rates, the rising cost of electricity, and the weakening Kenya Shilling which could dampen the country’s growth prospects,” the survey shows.
The survey assessed the CEOs' optimism in the growth prospects for their companies, sectors, and the Kenyan and global economies over the next 12 months. Respondents were more optimistic about the growth prospects for their own companies and sectors.
Business activity
Optimism was mainly attributed to increased business activity during the festive season, government focus on specific sectors notably agriculture, building and construction, and ICT and growth opportunities, especially in the financial services sector.
Firms also reported increased opportunities for business especially in tourism, education, financial services and building and construction sectors.
The CBK survey shows demand/orders, production volumes and sales are all expected to improve for the majority of respondents as economic conditions remain largely unchanged.
Externally, firms highlighted global inflation, global recession and high energy prices as threats to their expansion.
Firms expect to mitigate these constraining factors through the management of costs and risks, diversification of their businesses, increased sales and marketing and digitisation of their operations.
The survey targeted CEOs of over 1,000 private sector firms through questionnaires administered through a direct online survey.
Businesses in the wholesale and retail trade, financial services and education sectors expect to be supported by seasonal factors. Though demand and sales are expected to increase, respondents envisage that the inflationary pressures, though easing, are likely to impact purchase prices.
Additionally, although global inflation is easing and energy costs have recently been reduced, electricity costs are on the rise and the future of the war in Ukraine remains uncertain. “In terms of operating capacity, most respondents were operating below capacity and could increase production if there was an unexpected increase in orders,” the report points out.
Firms reported having sufficiently invested in infrastructure hence being continuously ahead of demand pressures.
Respondents who reported possible difficulty in expanding their operations cited the high cost of doing business, lack of a conducive business environment, difficulties in recruitment and supply chain difficulties as the main reasons constraining their ability to expand.
Other reasons cited included reduced market activity; financing challenges; internal operational constraints; and limited freight capacity.
Unlike in the past when optimism was higher in the services sector, the agriculture sector reported higher optimism in the latest Survey compared to other sectors.
Export orders
Respondents attributed their optimism to increased government support for the sector and increased export orders.
Sector players expect continued growth, with global demand for food on an upward trajectory, especially with the falling inflation in export markets and the reducing effects of the Covid-19 pandemic. Nevertheless, respondents remained cautious about the high cost of inputs and the weather conditions which could affect agricultural production, according to the CBK survey.
