NAIROBI,JUNE 23 — Kenya is likely to record strong economic growth with companies operating in the country expected to increase their investments in the East Africa financial power house, a study has revealed.
Global publishing, research and consultancy firm Oxford Business Group (OBG) through a survey of over 100 C-Suite executives from across Kenya’s industries has noted bullishness on the country’s economic prospects for the coming year in the inaugural Business Barometer Survey Report.
Under the banner ‘Facts and Numbers’, OBG has released the first edition of the business barometer: Kenya CEO Survey in partnership with the Kenya Investment Authority (Keninvest), designed to assess business sentiment amongst business leaders (Chief Executives or equivalent) for the next 12 months.
From the 136 CEO’s interviewed, 95 per cent felt either positive or very positive about local business conditions for the coming year as 75 per cent of respondents say that it is likely or very likely that their company will make significant investment within the next 12 months.
A sizeable majority (89%) of respondents noted that the decision to cap commercial interest rates at four percentage points above the Central Bank of Kenya’s benchmark rate had improved the cost of borrowing but it made borrowing either more difficult or much more difficult.
Commenting on the results, Souhir Mzali,OBG’s regional editor for Africa noted that 2017 was undoubtedly a challenging year for Kenya, especially its small businesses due to the tighter risk management tools implemented by lenders.
“Establishing an enabling environment for Kenya’s private sector and SME’s to grow and carry out their investment and development plans in the years to come will play a crucial role in the success of President Uhuru Kenyatta’s Big Four agenda, which targets four key pillars, manufacturing, affordable housing, healthcare and food security over the next five years,’’ She noted.
Ann Kirima Muchoki, chairperson of KenInvest, noted that while the factors such as credit capping, drought and protracted elections had combined to keep Gross Domestic Product (GDP) growth in Kenya below five per cent in 2017, the strong business sentiment evident in OBG’s survey reflected an improving outlook.
“Positive developments in key areas of the economy, including the tourism industry and significant rainfall in the latter part of 2017, are among the positives noted by both a nalysts and business community,” She said.
The launch included a panel discussion in which panelists including Nick Nesbitt, chairman Kenya Private Sector Alliance, Vimal Shah chairman Bidco, Corine Mbiaketcha Nana managing director Oracle Kenya and Jeremy Awori, managing director Barclays took part in to try to make sense of the survey.
2017 was a challenging one for Kenya’s economy, which reported a GDP growth rate of 4.9 per cent – its lowest since 2013 – according to the Kenya National Bureau of Statistics.
Dropping from 5.9 per cent in 2016, the slowdown of GDP growth can be attributed to a number of factors, including protracted elections, severe droughts, as well as a deterioration of credit growth in the private sector.
The government has in recent times been mulling over the revision of the interest rate cap law.
The cap was initially intended to lower the cost of credit and increase access for both businesses and individuals.
However almost 18 months after its implementation, private sector credit growth slowed to 2.1 per cent in February 2018, its lowest since 2005.
“Though concerns surrounding credit growth to the private sector are likely to continue throughout 2018, a recovery in the tourism sector and abundant rainfall in the second half of 2017 point to bright prospects for overall economic growth,” Mzali noted.
