New data from Stanbic Bank Kenya’s Purchasing Managers’ Index (PMI) showed companies reduced staffing levels during the month, ending a stretch of continuous job creation that had lasted since the start of 2025. 

Many businesses said the reductions mainly affected temporary workers as lower demand eased pressure on capacity.

The PMI fell to 46.6 in May from 49.4 in April, the steepest deterioration in business conditions since July 2024. A reading below 50 signals a contraction in activity.

The downturn reveals a strong slowdown across the private sector. New orders declined for a third consecutive month and at their fastest pace since mid-2025 as customers cut spending and tightened household budgets. 

Business activity also weakened further, with firms linking the decline to lower sales and softer demand.

Construction and services companies reported falls in both output and new orders during the month. Manufacturing was the only sector to record growth in production, while declines were recorded elsewhere. Agriculture and retail businesses were among those that reduced staff numbers.

Private sector employment fell after firms reported they had enough capacity to handle current workloads. Backlogs of work also declined for a third straight month, reducing the need for additional hiring.

Christopher Legilisho, economist at Standard Bank, said: “The Stanbic Bank PMI data for May reflects a deterioration of business activity by private sector firms. Inventory purchases slowed, from being expansive, because of weakening sales, cash flow concerns, and rising costs. 

“Consumer resistance to spend, alongside rising costs, contributed to contractions in new orders and output. These declines may stem from the week-long disruption to business activity because of nationwide protests by transportation sector players that constrained movement.”

High costs added to the challenges facing businesses and, ultimately, jobs in Kenya. The survey showed overall input price inflation accelerated to its strongest level since November 2023, driven largely by higher purchase costs, fuel expenses and transportation charges.

Although wage costs continually increase, businesses kept salary growth moderate. Many firms also slowed inventory purchases and held back spending as they sought to preserve cash due to weaker sales and tighter margins.

At the same time, companies passed part of the higher costs on to customers. Selling prices rose at the fastest pace in two and a half years, with all five monitored sectors reporting increases.

The weaker business conditions will likely lead to concerns about employment prospects, particularly as thousands of young Kenyans enter the labour market every month. Consumer-facing businesses, including startups and technology firms that depend on household spending, could also face softer demand if spending remains subdued.

Despite the difficult operating environment, firms were optimistic about the year ahead. Business confidence climbed to its highest level since February 2023, supported by plans to increase advertising, introduce new products and expand digital sales channels.

Legilisho added: “Inflationary pressures have intensified, constraining demand conditions, with input prices, purchase costs and output prices driven up by higher fuel and transportation costs. Still, despite subdued business momentum, firms remain optimistic about future conditions.”

Under the Finance Bill 2026 before parliament, the government wants to introduce a 15% capital gains tax on gains made by non-resident investors selling shares abroad when those shares derive value from Kenyan assets or operations.

If passed, the amendment to Kenya’s Income Tax Act would allow the Kenya Revenue Authority (KRA) to tax transactions completed outside the country, even when the companies involved are registered in foreign jurisdictions such as Mauritius, Delaware, London or the Cayman Islands.

The proposal targets a long-standing structure used by venture capital and private equity firms investing in African startups. Many Kenyan startups operate locally but are incorporated abroad because foreign investors prefer offshore holding companies that simplify fundraising, offer stronger legal protection and make acquisitions easier.

Kenya now wants a share of the profits when those investors exit.

The bill states that gains arising from “the alienation of shares by a non-resident person where the shares derive their value from Kenya” would become taxable locally, regardless of where the transaction happens.

Treasury officials are also seeking powers to tax deals involving “a change of the group membership of a company resident in Kenya” as well as changes in ownership tied to Kenyan property.

The proposed law could impact investor exits in sectors including technology, energy and infrastructure, where offshore ownership structures are common.

For founders and investors in Kenya’s startup ecosystem, the changes may create fresh tax exposure during acquisitions, secondary sales and restructuring exercises carried out at the holding-company level.

The Institute of Certified Public Accountants of Kenya (ICPAK) warned lawmakers that the amendment may go beyond standard asset sales.

“As drafted, the provision may create Kenyan CGT exposure for offshore investor exits, capital raising transactions, group restructurings and internal reorganisations undertaken at holding company level,” the body said.

Kenya’s move follows a string of high-profile disputes over offshore transactions linked to local assets.

Last year, Tullow Oil agreed to sell its Kenyan subsidiary, Tullow Kenya BV, to Gulf Energy in a deal connected to the Lokichar oil project in Turkana. Although the transaction was structured offshore, the KRA issued a KES 21 billion ($161.7 million) tax demand, arguing that the transferred shares drew their value from Kenyan oil resources.

The tax authority took a similar position in the 2017 sale of Java House by Emerging Capital Partners to Dubai-based Abraaj Group. Kenya’s Tax Appeals Tribunal later upheld a KES 773.8 million ($5.9 million) tax assessment after rejecting arguments that the transaction fell outside Kenya’s jurisdiction.

The Finance Bill 2026 also includes other tax measures. Kenya plans to raise rental income tax from 7.5% to 10%, introduce a 20% tax on gambling winnings and impose a 1.5% withholding tax on scrap metal sales.

Most provisions in the bill are expected to take effect from July 1, 2026, if parliament approves them.

Kenya is not alone in strengthening tax rules around offshore deals. Uganda already taxes some offshore transactions linked to local assets, while governments across emerging markets are increasing pressure on multinational investors to pay taxes where economic value is created.

For foreign investors already dealing with a slow funding market across Africa, the proposed tax could complicate and increase the cost of Kenyan startup exits.

The project, announced in May 2024 during President William Ruto’s visit to Washington, was expected to become one of the biggest digital infrastructure investments in East Africa. 

Microsoft and Abu Dhabi-based G42 planned to build the facility in Olkaria, near Naivasha, using geothermal power. It was also meant to host Microsoft’s first Azure cloud region in East Africa.

However, negotiations later became difficult after Microsoft and G42 asked the Kenyan government to guarantee annual payments for part of the data centre’s computing capacity. 

According to reports from Bloomberg, Kenya could not provide guarantees at the level the companies requested, and discussions on the Microsoft data centre project stalled.

The delay has now raised wider concerns about whether Kenya’s current infrastructure can support hyperscale data centres and growing artificial intelligence workloads.

At full scale, the facility was expected to require around 1 gigawatt of electricity. That is close to one-third of Kenya’s current installed power capacity, which stands between 3,000 and 3,200 megawatts.

President Ruto had earlier warned about the pressure such a facility could place on the country’s grid.

“To switch on that one data centre, we would need to shut off power for half the country.”

Kenyan officials say the project has not been abandoned. John Tanui, principal secretary at Kenya’s Ministry of Information, said discussions are still ongoing, although the structure and scale of the project is still under review.

“The scale of the data centre they wanted to do still requires some structuring,” he said, while adding that power requirements are still under discussion.

The government now wants to expand Kenya’s electricity capacity to 10,000 megawatts by 2030 as it pushes to attract more large-scale technology investments.

Officials are also considering a phased rollout, beginning with a smaller 100-megawatt facility before expanding gradually. That approach could reduce immediate stress on the national grid while allowing Kenya to continue negotiations with Microsoft and G42.

The uncertainty around the project also reveals a bigger challenge facing African countries trying to attract global cloud and AI investments. 

While demand for digital infrastructure is growing with speed, many countries still lack the power generation and transmission capacity needed to support energy-intensive facilities.

The delay could also affect the rollout of Microsoft Azure services across East Africa, including cloud tools tied to products such as OneDrive and Copilot.

Neither Microsoft nor G42 immediately responded to requests for comment on the reported Kenya data centre dispute.

The approvals came in quick succession. First, the Central Bank of Kenya (CBK) signed off on the deal on April 4. Then, six days later, Kenya’s Treasury gave its nod. With these cleared, Access Bank is now the outright owner of NBK, having secured all of KCB Group’s shares in the institution.

This is not a merger of equals. Access Bank didn’t just walk into Kenya’s banking space yesterday. Back in 2020, it snapped up Transnational Bank, and now, with NBK under its belt, it’s laying down roots in one of East Africa’s most competitive markets. I’ve been following Access for years, and this move doesn’t surprise me—it’s the kind of daring expansion they’ve made a habit of.

The structure of the deal? Straightforward enough. KCB Group, which acquired NBK in 2019, is now exiting. But before stepping out, KCB will shift certain NBK assets and liabilities to its own subsidiary, KCB Bank Kenya. Both CBK and the Treasury signed off on that too. It’s all part of a bigger clean-up—make the books neat, get out, hand it over.

No word yet on the final deal value, but industry estimates put it around $100 million, based on NBK’s 2023 book value. That figure could still change. For context, KCB had spent over $63 million propping NBK up since it took over. Now, with Access stepping in, the expectation is fresh capital injections and possibly a strategic overhaul.

Kamau Thugge, the CBK Governor, made the announcement official in a government notice: “Pursuant to section 13 (4) of the Banking Act, the Central Bank of Kenya on 4th April, 2025, approved the acquisition of 100 percent of the issued share capital of National Bank of Kenya Limited by Access Bank PLC.”

The Finance Cabinet Secretary, John Mbadi, followed with his own approval on April 10. It’s all above board, legally watertight.

But what does this really mean for Kenyans?

NBK has been around since 1968. It was built as a fully government-owned lender—its mission was to give Kenyans more financial control in the years following independence. That mission eventually got muddled, and by 2019, it was bleeding badly. KCB took it in, tried to revive it, and now Access is taking on the burden—and opportunity.

For Access Bank, this is about scale and reach. NBK has an extensive branch network. That infrastructure—combined with Access’s digital playbook—could unlock serious potential. Think retail banking expansion, fintech innovation, and cross-border offerings. The CBK, for one, sees it as a win. “This transaction will ensure continued stability and enhance the resilience of the Kenyan banking sector,” it said.

Access Holdings, the parent company, has been eyeing pan-African dominance for a while. With a presence in over a dozen African countries and beyond—from Ghana to Zambia, London to Dubai—it’s been building quietly but steadily. The Kenya move is just the latest in a pattern that shows no signs of slowing.

Of course, the deal isn’t sealed until Nigeria’s regulators give their go-ahead. But with approvals on the Kenyan side sorted, it’s hard to see this falling through.

Bottom line? This is a power play. Access Bank is not here to play small. Kenya, it seems, is just the next frontier.