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Kenya: Employment recovery sparks optimism for banks, but caution remains

Tuesday, 12 October 2021 19:42
Kenya: Employment recovery sparks optimism for banks, but caution remains

(Ecofin Agency) - Rising payroll taxes in Kenya and the details of the Producer Price Index for businesses reflect an employment recovery in the country. Although this is good news for banking activity, some businessmen are cautious about the future.

Various indicators suggest that jobs will continue to grow in Kenya through Q3 2021. According to the Kenya Revenue Authority, payroll taxes or PAYE (Pay As You Earn) for the first fiscal quarter from July to September reached KSh107.7 billion, or about $97 million. This is KSh4.4 billion more than expected.

The Purchasing Managers' Index published by Stanbic bank, the local subsidiary of South Africa's Standard Bank Group, showed that the index of jobs that are burdensome to companies saw its biggest increase in five months in September. Sectors included in the analysis, such as agriculture, manufacturing, construction, wholesale and retail trade, services, and mining, all recorded increases in hiring.

This is positive news for the banking sector, which is doubly exposed to the worker situation. First, banks lend directly to individuals. According to data from the Central Bank of Kenya, the decline in outstanding bad loans from households accelerated to -24% at the end of June this year from -17% in the three months to March 2021. The report also notes a strong decline in outstanding loans in consumer sectors such as real estate and trade, which are indirect banking loans to individuals.

These employment dynamics have been reinforced by the authorities' decision to pursue pump fuel subsidies.  Authorities hope to reduce price increases and restore purchasing power to workers. These good employment prospects are not, however, in a stable outlook for all sectors.

The Central Bank’s business confidence index reported that agricultural and industrial companies that employ between 100 and 500 people or more are quite pessimistic about the outlook. Some fear climate risks while others fear the socio-political instability that could come with the 2022 elections.





 
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ECOFIN AGENCY offers a selection of articles translated from AGENCE ECOFIN. Founded in 2011, Agence Ecofin is a leader in Francophone Pan-African economic news, particularly in West and Central Africa. The agency publishes daily news on nine African economic sectors: Public Management, Finance, ICT, Agribusiness, Energy, Mining, Transport & Logistics, Communication, and Training.

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