Free Access | 2024-04-12

Business environment significantly deteriorated as unrests erupted in Kenya

Authors/Editors: Rehema Kahunde ,  Emmanuel Erem (PhD) ,  Corti Paul Lakuma ,  Joab Wamani

Abstract:

The Business Climate Index (BCI) declined significantly from 92 basis points in the previous quarter to 78 in the current quarter (July to September 2023). In the quarter under review, the agriculture sector witnessed a decline of 6 percentage points, dropping from 95 in the previous quarter to 89. The manufacturing and service sectors experienced declines of 13 and 14.8 percentage points, falling from 93.4 and 91.8 to 80.4 and 77 respectively. The decline in the sentiments of the business environment is attributed to insufficient demand, less favourable product prices, unfavourable macroeconomic factors, slowing regional markets, inadequate electricity supply, and unfavourable tax policy. The same challenges prevailed in the previous quarters, January-March and April-June 2023, indicating that business challenges in Uganda are persistent. The projections indicate that conditions for doing business in the next quarter are expected to marginally decline from 106 to 105. Current rising fuel prices, the depreciation of the exchange rate consequently increasing the costs of imported inputs, pessimistic global economic outlook and the monetary policy tightening in most developed countries account for the expected drop in the index to 105. 34.7 percent of the businesses surveyed were affected by the high cost of living induced protests in Kenya.