In what is being termed as a significant blow to Kenya’s economic stability, the Federation of Kenya Employers (FKE) has disclosed a troubling statistic: approximately 70,000 jobs have been lost in the country’s formal private sector between October 2022 and November 2023. This revelation comes amidst growing concerns over the nation’s economic direction.
The Deteriorating Job Market
Jacqueline Mugo, the FKE’s Executive Director and CEO, addressed the media, outlining the grim reality of Kenya’s job market. Alongside National President Habil Olaka, Mugo emphasized the fragility of the employment sector, which has yet to recover from the impact of the COVID-19 pandemic. “The situation is dire,” Mugo stated. “Our workforce is facing unprecedented challenges.”
A Cascade of Economic Hardships
FKE’s report highlights a confluence of factors exacerbating these challenges. Notably, 40% of employers are contemplating further downsizing due to soaring operational costs. This troubling trend is compounded by recent government enactments, including the Finance Act, 2023, which introduced a multitude of new taxes, rendering the cost of doing business in Kenya increasingly unsustainable.
Currency Devaluation and Inflation
The Kenyan shilling’s sharp decline in value against the USD – a staggering 21% drop since September 2022 – is another critical factor cited by FKE. This depreciation, driven by capital flight and reduced foreign currency inflow, has adversely affected businesses, especially those reliant on imports. The exchange rate turmoil, coupled with an inflation rate that reached 6.9% in October 2023, paints a bleak economic picture for the country.
Rising Borrowing Costs
The Central Bank of Kenya’s decision to raise its benchmark rate to 10.5% in June 2023, the highest since August 2016, is also highlighted as a contributing factor. This move has significantly increased borrowing costs, making credit less accessible to businesses and stifling economic growth. Furthermore, the Gross Non-Performing Loans (NPLs) to Gross Loans Ratio has alarmingly risen to 15% by the end of the third quarter of 2023.
The Road Ahead
As Kenya grapples with these economic challenges, the FKE calls for urgent and collaborative efforts between the government, private sector, and international community to mitigate the crisis. The federation urges for economic reforms and supportive policies to revitalize the job market and bolster economic growth.
In conclusion, the loss of 70,000 jobs in just over a year is more than a statistic; it’s a stark reminder of the hardships faced by countless Kenyans and a call to action for decisive and compassionate leadership to navigate these turbulent economic waters.