According to the Federation of Kenya Employers (FKE), the Kenya lost 70,000 jobs in the formal private sector between October 2022 and November 2023.
Despite this, FKE reported that 40% of employers in the sector are still considering downsizing in order to cope with the country’s drastic rise in operating costs.
In a statement to newsrooms signed by National President Habil Olaka and Executive Director Jacqueline Mugo on Friday, the federation noted that the country’s employment situationremains fragile, as it has yet to find a recovery path following the impact of the COVID-19 pandemic.
Further, FKE argues that the cost of doing business in Kenya is now deemed unsustainable following the government’s recent enactment and implementation of the Finance Act, 2023 that brought with it a multitude of taxes.
Caught in the crossfire of a weakening shilling and a dilapidated economy, the FKE has now strongly criticized government policies, citing their adverse effects on businesses reliant on imports.
“The Kenyan shilling has experienced a sharp decline, losing 21% of its value between September 13, 2022, and November 22, 2023. The exchange rate against the USD has soared to 152.45, a significant jump from the 121.05 recorded during the same period in 2022,” read the statement.
According to FKE, this depreciation is attributed to capital flight and a reduced inflow of foreign currency, exacerbated by the low value of exports.
The employers’ body further notes that the cost of capital in Kenya remains prohibitively high, posing a formidable obstacle for the private sector.
Influenced by factors such as interest rates, inflation, market conditions, and government policies – FKE adds – the Central Bank of Kenya (CBK) raised its benchmark rate by 100 basis points to 10.5% on June 26, 2023, the highest since August 2016.
Consequently, borrowing costs have skyrocketed, rendering credit inaccessible for businesses and hindering overall growth.
The federation further decries the state of the economic landscape which it says is currently marred by a concerning inflation rate.
“As measured by the Consumer Price Index (CPI), the year-on-year inflation rate reached 6.9% in October 2023. Simultaneously, credit risk looms large, with the Gross Non-Performing Loans (NPLs) to Gross Loans Ratio standing at 15% at the end of the third quarter of 2023, a notable increase from the 13.3% recorded at the beginning of the year,” the report noted.
