13 profit warnings, PMI and the business environment
With 13 listed firms having already made profit warning announcements for the current year, the PMI (Purchasing Managers index), the index that measures prevailing business environment, has been below the 50-point mark for the better part of this year.
Businesses blamed what has been a tough year on high input costs, taxation, a weakened local currency and scarce dollars.
The survey conducted by Stanbic Bank found that only two out of the 11 complete full months experienced expansion in business activities. July recorded the biggest contraction at 45.5, the worst since since August last year.
Inflation above target for 6 months
Coming from the worst inflation in over five years in 2022, this year has also witnessed high inflation averaging 7.7 percent. Primarily pushed by the cost of food and fuel, the cost of living remained above the Central Bank target of 2.5-7.5 percent in the first half of the year before easing slightly on monetary policy interventions by the apex bank.
NSE falls to lowest level in 11 years
Listed equities were on the receiving end of sub-par economic performance having so far shed Sh562.2 billion since the beginning of the year. Market capitalisation fell to Sh1.3 trillion at the beginning of November taking the value of listed equities to the worst since January 2013, despite the loss, equities have held up slightly better than they did a year ago when they bleed a combined Sh606.8 billion.
The rout has been worse on big stocks such as Safaricom, Equity, KCB and EABL that have experienced massive foreign flight in pursuit of better returns offered by assets overseas.
In the 11 months to November, foreigners had withdrawn a net of Sh20 billion down from a net flow of Sh22bn recorded over the same period last year.
Public debt crosses Sh10trn mark
The alarm bells on public debt got louder as the country’s debt level crossed the Sh10 trillion mark in June finish the 2022/23 financial year at Sh10.28 trillion representing 70.8 percent of the country’s GDP and soared further to Sh10.59 trillion at the end of September.
Official data revealed that by September external debt accounted for 54 percent of total owings from 51 percent in January. The steeper rise in external debt has been fueled by the depreciating currency.
Foreign reserves falls to 10-year low
Kenya’s reserves plunged to the lowest level since 2014 due to repayments to bilateral and commercial lenders and the CBK’s intervention to try and slow down the shilling’s depreciation against the US dollar. In May reserves stood at $6.29 billion (Sh943 billion) only covering imports equivalent to 3.5 months.
Runaway interest rates
Interest charged by banks soared throughout the year as lenders implemented the risk-based pricing method, the rise in rates were also fueled by high rates offered by government papers compounded by upward revision of the benchmark rate by the Central bank.
The average reference rate asked offered by lenders rose to 14.16 percent in October the highest August 2016 when the rates averaged 17.66 percent. Scarce credit also pushed the governments return on T-bills and bonds to new highs.
Return on the one-year T-bill currently stands at 15.9 percent- the highest in eight years while long-term papers offered highest returns in history nearing 18 percent annually.
Return on term deposits on the other hand soared to 9.11 percent in October marking the highest return in 23 years.
By TIMOTHY ODINGA