CEOs bet on cost-cutting, diversity to drive growth

The Central Bank of Kenya headquarters in Nairobi. 

Photo credit: File | Nation Media Group

What you need to know:

  • Study by CBK found that business executives intend to undertake cost management to curb threats to expansion.
  • Survey also established that CEOs plan to diversify, grow their businesses sustainably and invest in talent development.

A majority of company chief executives in Kenya will prioritise cost-cutting and diversification over the next 12 months amid threats of high cost of doing business and political noise ahead of the August 2022 General Elections, a survey says

The study by Central Bank of Kenya (CBK) found that most business executives in three main economic sectors including services, manufacturing, and agriculture would undertake cost management and diversification to curb threats to expansion.

A majority of them believe the rising cost of doing business and political noise will negatively affect the performance of their companies most in the next year.

“The CEOs reported that uncertainty created by increased political activity has become a significant risk, which inhibits their ability to deliver projects in key service areas. Additionally, increased political activity may result in many clients adopting a ‘wait/see’ attitude on investment decisions,” the CBK said.

Business environment and supply chain disruptions were the main constraining factors for respondents in the manufacturing and services sectors. Increased taxation and political uncertainty ranked equally for respondents in the manufacturing sector while firms in the energy sector highlighted challenges in the business environment as being particularly constraining.

“To mitigate the factors constraining growth or expansion, firms proposed various solutions: management of costs and risks, diversification as well as lobbying with relevant stakeholders,” the survey said.

The study said digitisation and innovation, and increased sales and marketing were important factors for the manufacturing and services sectors while lobbying with relevant stakeholders was also an important solution for manufacturing and agricultural sectors.

The CEOs were polled by the banking regulator between November 1 and 15, 2021. The survey targets CEOs of key private sector organisations including members of the Kenya Association of Manufacturers and the Kenya Private Sector Alliance.

The sectors covered by the survey include agriculture, mining, and energy, manufacturing, wholesale and retail trade, tourism, hotels and restaurants, information and communications technology (ICT), media, transport and storage, real estate, pharmaceuticals, building, and construction, and finance and insurance.

The survey established that CEOs plan to diversify, grow their businesses sustainably, and invest in talent development over the next three years.

“Cost optimisation and sustainable business growth were important priorities for the manufacturing sector while for the agricultural sector, top priorities included improved efficiency, cost optimisation, and diversification,” the survey said.

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