Employers warn of mass layoffs due to rising costs

Habil Olaka

Dr Habil Olaka, the national president of the Federation of Kenya Employers, addresses journalists at Waajiri House in Nairobi on Friday, November 24. 

Photo credit: Billy Ogada | Nation Media Group

What you need to know:

  • The employers want Kenya Kwanza government to think long-term and eschew short-term revenue targets.

Thousands of Kenyans will be rendered jobless should the government’s policies on taxes and the increased value added tax on fuel are not reviewed, employers have cautioned.

This alarm was sounded by the Federation of Kenya Employers (FKE) which decried the increasing cost of production in the country.

This, the lobby said, will leave 40 per cent of employers with no option but to send their workers home. FKE believes that the Finance Act 2023 is the genesis of their woes, saying it has had a negative impact on cash flows.

Frequent changes in government policies and regulations not only create uncertainty for business but also give an upper hand to cheaper imports from other countries due to unpredictable fiscal and regulatory policies, the FKE said.

It added that most companies are now feeling the direct impact of the new policies on the payroll. With the demand for wages, they said, the consequence will be closure of business and increased laying off of employees.

Speaking during a press briefing at the FKE headquarters in Nairobi yesterday, the federation’s President, Dr Habil Olaka, called on the government to stabilise the business environment through better coordination in the formulation, introduction and implementation of new policies.

Dr Olaka said the employment state in the country is still fragile, saying it is not yet back on its feet after the Covid-19 pandemic.

He also revealed that FKE is conducting a survey on employers to determine the increased costs of jobs and delivered the early findings.

“Preliminary results show that it is significant. It shows that between October 2022 and November 2023, we have lost three per cent (70,000) jobs in the formal private sector and 40 per cent of employers have reported that they are planning to reduce the number of employees to meet increasing costs of operating in Kenya,” he said.

Currently, the Kenyan shilling has weakened against global currencies. It has jumped to a high of 152.45 against the US dollar, compared to 121 last year.

This situation, the employers said, is largely attributed to capital flight and reduced inflow of foreign currency due to the low value of exports.

High interest rates, unpredictable market conditions and government policies further push the cost of capital in Kenya high, making it difficult for the private sector to operate, the FKE chief said.

“If private sector growth fails to happen, then economic development shall remain stunted because of the numerous taxes they have to pay. Kenya needs to focus on long-term prosperity, as opposed to short-term ambitious revenue collection targets,” Dr Olaka said.

The employers also asked that corporation tax be reverted to the initial 25 per cent.

“This will help in attracting investment and allowing the corporates to have money to plough back to their business thus creating more employment,” Dr Olaka said.

The employers also want the affordable housing levy to be capped at Sh5,000 per month as was originally proposed.

“We are currently in a situation where businesses are not able to meet their operational costs and at the same time, employees are not being able to make ends meet,” noted the FKE president.