Cheaper power boosts Kenya’s private sector
What you need to know:
- About 400 private sector companies from manufacturing, construction and retail were surveyed.
- The decline in international oil prices and power tariffs after the geothermal component was added to the national grid will lower cost for most firms in Kenya and probably lead to higher output in the coming months.
Cheaper power and the falling cost of fuel are among the reasons making Kenya’s private sector expand rapidly and gain stability, a survey has said.
Findings from the study depict an overall improvement in the country’s business environment over the past 14 months.
The first Purchasing Manager index (PMI) report in the country was conducted by global financial information service provider Markit and CfC Stanbic.
CFC Bank Kenya economist Jibran Qureishi Wednesday said there was increased confidence in the private sector as most businesses show rapid recovery from the January lows in purchasing.
“The PMI index recovered in February after a slower pace recorded in January primarily driven by rises in output and new orders. The decline in international oil prices and power tariffs after the geothermal component was added to the national grid will lower cost for most firms in Kenya and probably lead to higher output in the coming months,” he said.
PMI index will be released monthly. It measures private sector operating conditions through a calculated weighted average of five individual components: New orders (30 per cent), output (25 per cent), and employment (20 per cent) suppliers’ delivery times (15 per cent) and stocks of the purchases (10 per cent).
The current report card says the country’s new export businesses grew rapidly since January as more companies continued to hire extra staff to satisfy increased production demands.
GROWTH TO RISE
It adds to the optimism created by the World Bank’s Kenya economic update that recently projected the country’s growth to rise from 5.4 per cent in 2014 to seven per cent between 2015 and 2017.
About 400 private sector companies from manufacturing, construction and retail were surveyed.
Markit Economist Philip Lake said the full benefits of cheaper power and lower oil prices would slowly trickle down to the common consumers over time.
The data is gathered through interviews based on business experiences for the previous month and will be released every third day of the month.
So far, six countries in Africa have embraced the report that seeks to provide an economic outlook for businessmen, banks, foreign investors and policy makers.
