The Central Bank of Kenya headquarters in Nairobi in this picture taken on March 31, 2024.
Raging wars in the Middle East and European regions are among the biggest external risks for businesses in Kenya, a new survey shows, amid concerns that the conflicts could trigger supply disruptions and raise prices.
The Central Bank of Kenya (CBK) study has revealed that company executives consider geopolitical tensions the biggest external threat to business operations. These tensions have so far affected Gaza, Lebanon, Iran, Israel, Ukraine, and Russia.
“The major external (non-domestic) threats to business expansion growth include geopolitical tensions given their impact on global supply chains, energy prices, and macroeconomic volatility,” says the CBK in its September CEOs survey.
It asked company executives to highlight factors they consider threats to their expansion.
At least 61 percent of the CEOs indicated that they were either extremely concerned or very concerned by the geopolitical tensions.
The tension emerged as the top concern for company executives across different sectors, with only four percent of the executives indicating they were not concerned.
The CBK noted that company executives fear that a further escalation of the conflicts risks affecting the shipping of commodities and raw materials, and rising fuel and gas prices.
At least 57 percent of the CEOs indicated they were extremely/very concerned about energy prices, as the second biggest external factor that could hinder their growth.
“Sustained optimism for global growth prospects is largely attributed to lower global inflation, interest rates cut in major economies, and expected conclusion of elections in major advanced economies. However, increasing geopolitical tensions continue to pose a threat,” the survey notes.
On the domestic front, the CBK highlighted that the high cost of doing business, high-interest loans have raised the cost of credit, reduced consumer demand, and political interruptions remain the main factors constraining firms’ growth.
“However, firms will employ strategies such as managing costs and risks, diversification of operations, and lobbying with relevant stakeholders in order to mitigate their constraining factors,” the survey notes.
Most companies in the agriculture, manufacturing, and services sectors plan to manage costs, lobby stakeholders, and diversify their operations, as their key proposed solutions to the threats they face, the study says.
