Kenyan businesses faced mounting operating expenses in January, with higher taxes, import charges and technology costs driving a solid increase in input prices — even as overall business growth moderated.
- •The latest Purchasing Managers’ Index (PMI) survey shows that while private-sector activity remained in expansion territory for a fifth straight month, cost pressures are emerging as the dominant theme shaping corporate strategy at the start of 2026.
- •The headline PMI eased to 51.9 in January from 53.7 in December, signalling continued growth but at a slower pace.
- •The divergence between rising operating expenses and modest output price increases points to a tightening of corporate margins.
“Higher input prices, purchase costs, staff costs and output were likely due to higher taxes and rising technology costs,” Christopher Legilisho, economist at Standard Bank, noted in the latest Stanbic PMI.
Companies cited higher raw material prices as a primary source of cost inflation. But beyond commodities, firms also pointed to increased tax charges, elevated import fees and rising technology expenses as key contributors to higher operating bills.
The increase in purchase costs was described as solid, underscoring persistent structural pressures facing Kenyan enterprises, particularly those reliant on imported inputs or digital infrastructure. Despite this, firms were cautious about passing the full burden to consumers. Output prices rose only marginally in January, as market competition and concerns over slowing demand forced companies to temper markups.
Several businesses reported easing back on price hikes due to market saturation and softer sales momentum in sectors such as construction and wholesale & retail. This restraint in pricing aligns with headline inflation easing to 4.4% year-on-year in January, suggesting that while cost pressures are building internally, consumer prices remain relatively contained for now.
At the same time, firms increased employment and purchasing at slower rates, partly reflecting efforts to manage inventories and avoid excess inputs. Backlogs of work fell at the fastest pace since April 2021, signalling improved operational efficiency but also reducing pressure to scale up staffing aggressively.
Improved access to credit helped sustain output growth, and supplier delivery times shortened for the twelfth consecutive month, offering some relief on the logistics front.
Business expectations for the year ahead improved to a five-month high, with firms planning expansion through marketing, diversification and new contract bids.
However, January’s data suggests that 2026 may be defined less by demand recovery and more by cost management.
