Corporate executives in Kenya have raised a red flag over new taxes, high-interest rates, and cost of power that have worsened the business environment in the country, warning that the factors could constrain companies’ growth this year.
Chief executive officers in different sectors also note that the continued high inflation that has dwindled consumers’ purchasing power and poor performance of the shilling will continue to affect businesses, even as the cost of doing business remains high.
The Central Bank of Kenya’s (CBK) CEO survey for January 2023 shows that at least 11 per cent of CEOs consider increased taxation a key factor that will constrain their firms’ expansion, up from 10 per cent of the CEOs in November and September 2022.
“In terms of domestic factors that could constrain their growth, respondents continued to highlight the economic environment (high inflation and performance of the local currency), the business environment (cost of doing business), and reduced consumer demand,” the CBK’s CEO’s survey states.
The survey shows that at least 14 per cent of business executives in the Agriculture sector, 10 per cent in the services sector, and 9 per cent in the manufacturing sector have concerns with newly introduced taxes and consider they will affect their companies’ growth.
The findings come even as businesses in various sectors, including manufacturers under the Kenya Association of Manufacturers (KAM) and alcohol producers intensify complaints against the newly planned tax increase on excise duty, targeting excise stamps.
“The proposed increment up to levels of over 100percent and beyond the current market prices of producing the stamps shall have a detrimental effect on consumers and manufacturers due to increased cost of production and the cost of finished products which will be passed on to the consumer amidst the rising cost of living,” KAM Chairman Rajan Shah said this week.
The survey also observed that more than two-thirds of business executives are extremely or very concerned with current energy prices which have gone up after the removal of electricity subsidy last year, with only two per cent indicating that they are not concerned.
Also, 76 per cent of CEOs are either extremely or very concerned with global inflation trends, which have impacted domestic inflation.
“The Survey also sought to establish the top external (non-domestic) threats impacting businesses. Respondents were most concerned about global inflation, high energy prices, and recession fears. Agriculture sector firms were most concerned about energy prices and climate change while manufacturing and services sector firms were most concerned about global inflation and recession fears,” it stated.
The CBK survey noted that in services, manufacturing, and agriculture, the business environment is highlighted as the main constraint to the expansion of businesses, followed by increased taxation.