Kenyan companies have slammed the brakes on new recruitment, citing a toxic cocktail of spiraling staff costs and a sharp decline in consumer demand that is strangling growth across the private sector.

The latest data from the Stanbic Bank Kenya Purchasing Managers’ Index (PMI) paints a grim picture of an economy under siege. For the first time in months, private sector activity has begun to wobble, with business confidence taking a hit as operational expenses skyrocket. The hesitation to hire is not merely a pause; it is a defensive crouch by captains of industry who are seeing their margins eroded by tax hikes and inflationary pressures.

The Cost of Doing Business

According to the January 2026 PMI report, input costs have risen at their fastest pace in over a year. This surge is driven largely by increased staff costs—likely a ripple effect of recent statutory deductions—and the rising price of raw materials. "We are seeing a scenario where businesses are choosing survival over expansion," notes a senior economist at Standard Bank. "When demand is weak, the first casualty is almost always the payroll."

• Weak Demand: New orders have slowed significantly, forcing companies to clear backlogs rather than ramp up production.
• Koko Networks Exit: The gloom is punctuated by the high-profile collapse of Koko Networks, a clean energy firm that has placed its Kenyan operations under administration, leaving hundreds jobless and signaling a broader crisis in the tech and energy sectors.
• Tax Burden: Recent fiscal policies have increased the cost of labor, making it more expensive for firms to retain, let alone hire, new talent.

A Sector-Wide Slowdown

The freeze is not isolated to one industry. From manufacturing to services, the trend is uniform: do more with less. In Nairobi's industrial area, factory floors are running below capacity, and in the central business district, service firms are freezing promotions and replacement hiring. The spectre of "jobless growth"—where GDP numbers tick up but employment stagnates—looms large over the economy.

For the average job seeker, the door is effectively shutting. The youth unemployment crisis, already a ticking time bomb, is set to worsen as entry-level positions evaporate. As companies retrench and restructure to stay afloat, the government's promise of job creation faces its stiffest test yet. Unless the cost of doing business is addressed, the private sector's engine will continue to sputter.