FKE says 604 firms sent workers home over Covid shocks

Every modern sector company in Kenya has lost at least 33 jobs on average due to the Covid-19 pandemic, according to the Federation of Kenya Employers (FKE).

What is worse, at the National level, Ministry of Labour and Social Protection data, shared with FKE, shows that 604 companies countrywide have let go of some of their employees due to the negative effects of Covid -19 on businesses. 

At least 60 FKE members – who are modern sector employers – have declared Covid-19 triggered redundancies.

Ms Jacqueline Mugo, the FKE executive director, said a survey on impact of covid-19 on its members shows that on average each organisation lost 33 jobs between March and August 2020.

The federation says at the national level, the 1.7million jobs lost estimate by the Kenya National Bureau of Statistics (KNBS) is a conservative figure.

The KNBS report shows that 83.6 per cent of the total workforce in Kenya comprises nformal workers, who are the most exposed in the pandemic.  "The reality is far worse than this," Ms Mugo said in an email interview with the Nation as her organisation reacted to the shocking Sh410 billion new debt Kenya accumulated in the Covid-19 season.

Firms under stress

The FKE says that even before Covid-19, it had already raised an alarm that companies were under stress and jobs were being lost. Covid-19 aggravated the situation.

“The reality however is that the worst is yet to come, as workers continue to grapple with the impact of the pandemic, especially the consequences of the abrupt shutting down of economic activities,” Ms Mugo said.

Ms Mugo says last year alone FKE member companies declared 7,000 employees redundant, arising from various issues, among them mergers and acquisitions, change in regulatory environment in the transport and education sector.

The most recent FKE survey shows that the mean number of employees per organisation was 405 as of February 29, 2020. This dropped to 372 employees as of August 1, 2020.

"In addition, we are seeing a spike in the trade disputes reported in the Industrial Court and the Ministry of Labour and Social Protection arising from the measures employers have taken to mitigate from the impact of the pandemic on businesses," she said.

The courts have, however, urged employers and employees to dialogue.

"To date, 60 of our member companies have declared redundancies because of poor business performance occasioned by the effects of Covid-19. For instance, reduced demand for goods and services," she said.

The world of work has been impacted severely by the imposition of lockdown measures, which include various forms of workplace closures.

"In addition to rising unemployment, global underemployment has also seen a substantial increase as businesses are forced to reduce work for their employees in order to minimise costs or losses as well as to observe government directives," said Ms Mugo.

Pre-crisis working hours

The International Labour Organization estimates that the global working hours in the second quarter of 2020 will be 10.5 per cent lower than in the last pre-crisis quarter.

In Africa, the estimates indicate that by quarter two of 2020, the continent will be 9.6 percent away from its pre-crisis working hours.

The Regional Economic Outlook for East Africa Report 2020 by the African Union shows that with Covid- 19 shocks the regions real GDP growth is projected to decline sharply in 2020 from 5.1 percent pre Covid to 1.2 percent (baseline) and 0.2 percent (worst case).

The service sectors, particularly hospitality, tourism, travel and aviation, trade and logistics are most susceptible to the Covid- 19 crisis restrictive measures and lockdowns enforced in the country.

Reacting to revelations that the government borrowed Sh 4.5 billion every 24 hours in the first 90 days of coronavirus in Kenya, FKE said if such money were to be used in the labour sector, the job crisis could be addressed for good.

The government could set up a wage relief fund to support employers in covering a proportion of their payroll costs during this period or in future.

Social protection policy

"Furthermore, the monies could also be useful in the development of a comprehensive social protection policy to support the unemployed, the vulnerable and strategic programmes to boost enterprise recovery,” Mugo said.

She adds that Sh4.5 billion can support salaries for 5,783 workers for one year at the current average wages of Sh778,248 per year or 22,670 workers for one year at the current average minimum wage of Sh16,541.

FKE welcomed various initiatives in place, such as tax rebates and initiatives to increase liquidity for firms. Mugo said the gradual easing of restrictions and allowing international and local travel have helped some businesses to slowly resume operations. Protecting the vulnerable, especially women and the youth must be prioritised, she adds.

“Further supporting hard hit groups like the SME’s through stimulus programs on financing will shape the outcome of a fast recovery.”

FKE wants the government to continue with prudent fiscal and accommodative monetary policies that would stimulate aggregate demand and create more jobs.