Employers predict jobs loss bombshell this year

Federation of Kenya Employers (FKE) Executive Director Jacqueline Mugo addresses the press on the survey findings on the impact of Covid- 19 on enterprises at Waajiri House in Nairobi yesterday. The survey established that more than half of the private sector enterprises do not have enough resources to meet their staff costs over next six months. 


 

Photo credit: Lucy Wanjiru | Nation Media Group

What you need to know:

  • FKE said the 8.3 percent job losses that occurred between March to July portend more trouble if nothing is done to reverse the trend.
  • FKE executive director Jacqueline Mugo said the government must re-open the economy to allow free movement of goods and services saying the cost of closing down the economy was more punitive than re-opening.
  • Over 69 percent of those interviewed felt measures taken only worsened Covid-19 effect on their cash flows and had served to further hurt their operations.

Employers say Kenya will have lost over a million formal jobs to Covid-19 come December this year.

The Federation of Kenya Employers (FKE) said the pandemic wiped out 173,743 positions following imposition of a raft of restrictive measures to tame infections.

Releasing survey findings yesterday, FKE said the 8.3 percent job losses that occurred between March to July portend more trouble if nothing is done to reverse the trend.

FKE executive director Jacqueline Mugo said the government must re-open the economy to allow free movement of goods and services saying the cost of closing down the economy was more punitive than re-opening.

“Rwanda has shown us that putting the right measures in place can facilitate economic recovery and reduce suffering among our people. The cost of the curfew among raft of measures now in place is costlier than the risk of more infections,” she said.

Currently, Kenya has an active 9pm to 4am curfew during which only transport and essential services providers are allowed to move on public roads. Pubs, restaurants, discos, theatres and cinema halls as well as public gatherings remain shut.

FKE said corporation tax should be reduced with the planned one percent revenue tax expected to come into effect next January done away with.

Ms Mugo said a wage subsidy fund should also be formed to help companies meet salary demands until the situation improves.

Policy shift

“If the government does not intervene in helping enterprises improve their cashflows, then a million formal sector workers are at risk of losing their current incomes (jobs) as 51 percent of enterprises we interviewed indicated having plans to downsize within the next six months,” she said.

Over 69 percent of those interviewed felt measures taken only worsened Covid-19 effect on their cash flows and had served to further hurt their operations.

With most firms reporting diminishing revenues, FKE said labour costs and employment entitlements made 71 percent of FKE members freeze future hirings.

Ms Mugo said lenders and Central Bank of Kenya (CBK) should consider a policy shift on loan repayment terms from the traditional fixed rate terms to one based on cashflow projections.

“When a company’s sales rise, they should pay more but when sales fall, lenders should exhibit patience with borrowers,” said Ms Mugo.

The current unprecedented times, she said, should also see employers, unions and worker representatives hold meetings to plan mitigative measures including salary cut commitments to help companies improve their cashflows as well as generate opportunities for hiring of youth.

FKE said next week’s Covid-19 conference should concentrate on formulating a recovery strategy that facilitates smooth business operations via dialogue and building of trust as well as promotion of a buy Kenya build Kenya culture, expansion of regional and Africa wide markets .

-jkariuki@ke.nationmedia.com