The Central Bank of Kenya (CBK) recently released the Chief Executive and the Market Perception Surveys for the month of July, 2024. Floods, high cost of doing business and the impact of protests in June, 2024 protests are some of the issues causing concerns among the respondents.
The surveys seek to understand perceptions on certain economic indicators such as business confidence and optimism, current business activity, and expectations for business activity in the near term. They are administered to chief executives in different industries, among them, real estate, hospitality and construction.
Impact of Protests and Heavy Rains
The hospitality industry which cuts across the commercial arm of real estate seems to have taken a downturn, in contrast to the optimism registered in the previous quarter.
In the hospitality sector, key indicators which include bed occupancy, restaurant services and conference services, recorded between March and June 2024 were similar to levels of hotel activity in 2023.
Low spending power in the economy, heavy rains and flooding experienced in December, 2023 and April, 2024 affected travel, leading to low activity in this industry. In addition, cancellations in June following street protests, and other seasonal factors further impacted hospitality negatively.
Pending Bills
The Market Perception Survey also requested hotel respondents for forward bookings received so far for the period of July to October 2024. The survey revealed, lower bookings for July and August 2024 compared with 2023 forward bookings.
June 18th
The 2024 anti-tax protests in Kenya began on 18th June 2024 and ceased on 8th August, 2024. The protests were sparked by the Finance Bill 2024 which introduced a raft of changes to the tax regime. These tax changes were deemed as extrmely unfavourable to businesses and professionals in the country.
The lower forward bookings were attributed to low business due to low purchasing power among locals, high competition and most clients not making prior bookings. Hotel executives also cited challenges such as delayed payments by central and county governments and numerous levies by county governments, as reasons affecting business during the period. Both national and county governments make up a big percentage of local clients for the hospitality industry as they host numerous confererences, workshops and retreats.
Slow business in Real Estate
Chief executives in the real estate, building and construction sectors also expect low activity in the coming months. This is a stack contrast to the optimism seen in the previous quarter where chief executives in real estate expected business to peak in the second quarter.
Related:
Report: Hospitality, Real Estate to Perform Better in Quarter 2 2024
The construction industry is however still experiencing a boom of activity (compared to previous years), due to affordable housing projects launched in various counties. Though chief executives in construction expect lower activity in the coming months, most of them are still optimistic about economic growth, while only a few are pessimistic. Most firms expect their business activities to remain the same as what they experienced in quarter two 2024.
“Majority of firms have temporarily put on hold planned expansion of activities due to the uncertainties from the recent protests in the country,” reads a part of the report.
Cost of doing business
Besides the protests, the top three biggest challenges affecting business as of July, 2024 are the cost of doing business, increased taxation and the economic environment. Reduced consumer demand and purchasing power which are often a concern for a lot of businesses have become less and less of a challenge over the last few months. As of July, 2024, only 9.5% of respondents were worried about reduced consumer demand, compared to 15% in November, 2023.
Meanwhile, the banking sector, which is experiencing a high rate of defaults in home loans (according to previous reports), wishes to see loan recovery cases moved from the land and environment court to the commercial court in order to speed things up.
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