Manufacturers scratch their heads over low spending power

Up to 64% of industrial manufacturers forecast zero or negative revenue growth, with only 2% expecting a positive revenue growth in the next six months according to the Kenya Association of Manufacturers (KAM) Barometer Report for the 3^rdquarter – a publication used to measure the pulse of the Kenyan industrial sector using a number of indices.

53% of Kenyan manufacturers surveyed believe that Kenya’s economy has declined since the 2^nd quarter of the year with a further 25% stating that the economy was stagnant. Only 22% believed the economy was growing.

The economic outlook for the next six months was equally dispiriting with 47% of manufacturers maintaining a pessimistic stance and a further 39% stating they were uncertain. Only 14% of the manufacturers surveyed were optimistic about the economic performance of the country in the near future.

This predominantly pessimistic view of the economy is also reflected at a company level with 50% of industrial manufacturers maintaining a negative outlook for the next 3 months while 23% of their counterparts maintained a positive outlook.

The report shows that new orders are expected to take a dive with 56% of the manufacturers forecasting a decline in the 3^rd quarter.

“The confectionaries industry as a whole has felt the impact of the slowing down economy primarily driven by a significant reduction in consumer spending on non-essential goods and services, the availability of cheap imports and the higher prices of raw materials used for manufacturing. Operations have been scaled down across the manufacturing sector to reduce overheads while meeting declining consumer demand,’’ said Britania Foods Limited CEO Robert Kagundah.

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Consequently, in the next three months 75% of the manufacturers surveyed anticipate a downward trend in their profits, while 8% are hopeful of an increase. 17% are optimistic that their profits will remain constant.

“As Britania Foods however, we remain bullish about the prospects of the economy and have adopted a longer-term broader view on consumer demand as we strive to be more innovative in pricing and packaging options, harness operational efficiencies in manufacturing and procurement and ensure that our labor force has the right skills and enabling technology to meet and exceed consumer demand and aggressively grow our market share,’’ added Mr Kagundah.

The KAM report also indicated that up to 47% of the manufacturers plan to reduce their work force in the next six months with 31% expected to maintain their workforce. Only 22% are expected to increase their labor force, primarily hiring sales and marketing professionals as well as skilled and semi-skilled workers.