The level of optimism among German firms operating in the country has dipped to new lows owing to the harsh operating environment.
This as many other firms also grapple with high operational costs and reduced demands for products, according to a new survey.
Other factors that have resulted in reduced optimism by German companies include difficulties in accessing financing and shortage of skills, which appear to have worsened over the last six months.
Employee base
According to the survey, 62 per cent of the firms expect to get higher returns over the next 12 months.
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This is lower when compared to 71 per cent in the Spring 2019 survey results.
“Interest in the expansion of existing employee base has fallen to 38 per cent, down from 45 per cent,” said the Autumn 2019 World Business Outlook Survey.
The study was released by the Delegation of German Industry and Commerce for Eastern Africa (AHK Eastern Africa) in cooperation with the German Business Association in Kenya (GBA).
The survey results noted that major risks within the Kenyan economy included “declining demand for products and services (47 per cent up from 41 per cent), shortage of skilled labour (38.1 per cent up from 25 per cent) and lack of access to financing (38.1 per cent up from 16 per cent).
The report, however, noted that the German business community in Kenya still sees many opportunities for bilateral trade relations and economic growth, including in employment.
Over 57 per cent of responding companies, up from 42 per cent indicated that their current situation is likely to remain constant.
Besides, 33 per cent, up from 19 per cent, still maintain constant positive business expectation for the next 12 months. “The Kenyan market has demonstrated a great propensity for trade relations,” said Thomas Wimmer, Deputy Ambassador and Head of Economic Affairs at the German Embassy in Nairobi.
“We continue to witness an eagerness to find and establish strong links locally and abroad from this market.”
In compiling the Autumn 2019 report, the survey collected feedback from around 3,700 German companies, branches and subsidiaries abroad. Of these, 338 were responses from German firms operating in Africa, with 21 respondents in Kenya.
“Despite the challenges, Kenya continues to be a very attractive partner for German companies looking to form business relations abroad,” says Maren Diale-Schellschmidt, Delegate of German Industry for Eastern Africa.
“In the past year, we as AHK Eastern Africa have seen increased frequency in business delegations and fact-finding missions seeking to explore the country.”
