Kenya keeps rates on hold

Kenya's Monetary Policy Committee has, for the second time, decided to keep the central bank rate at 10%, citing moderate inflationary pressures and continued uncertainty in the global macroeconomic environment. The Central Bank of Kenya has projected a 5.7% growth in the country's economy, down from an initial forecast of 5.9%. Additionally, Uchumi Supermarket, a listed chain, has announced a 17% reduction in net loss for the financial year ending June 30th, 2016, bringing it to approximately 2.8 billion Kenyan shillings. These developments in the economy were discussed by John Do, an investment analyst at Cytonn Investments, in a recent interview with CNBC Africa. One of the focal points of the discussion was Uchumi Supermarket's financial performance. Do highlighted the struggles faced by the supermarket chain and noted that their decision to close operations in Uganda and Tanzania had a significant impact on their overall turnover, resulting in a halving of revenue for the current year. Despite the challenges, he acknowledged Uchumi's efforts to consolidate their existing business but emphasized the need for more proactive measures to address their cash flow issues and seek a strategic investor to ensure sustainability. Regarding the Central Bank's decision to maintain the rate at 10%, Do pointed out that this move would likely impact private sector growth in Kenya due to constraints faced by banks in extending credit to consumers. He attributed the rate freeze to stable macroeconomic indicators and expressed confidence in the central bank's projections for the upcoming months. However, concerns were raised about the impact of interest rate caps on commercial banks and the potential limitations on monetary policy effectiveness. In a separate discussion, the positive performance of Kenya Airways was highlighted, with a 4.8% increase in passenger numbers towards the end of the previous year. The national carrier, which recently appointed a new chairman and is set to undergo changes in its executive leadership, has seen a rise in cabin factor by 4%, signaling a gradual recovery supported by the growth in local tourism. Do emphasized the importance for Kenya Airways to leverage this momentum by capitalizing on the government's marketing initiatives aimed at attracting tourists from key foreign markets like the US, UK, and India. Overall, the economic landscape in Kenya reflects a mix of challenges and opportunities across different sectors. While Uchumi Supermarket grapples with financial difficulties and seeks a turnaround strategy, the Central Bank's decision to hold rates reflects a cautious approach amidst global uncertainties. On the other hand, Kenya Airways' positive passenger numbers indicate a potential upturn in the aviation industry, with strategic initiatives to tap into the recovering tourism sector for sustained growth.