Move fast to forestall further job losses in private sector

We have often debated whether Kenya’s youth bulge will be a blessing or a curse. The general consensus, so far at least, has been that we have the opportunity to turn it into a blessing. But there is a worrying trend in the formal sector that will affect our youths; the anticipated job cuts in the private sector.

Already, close to a dozen multinationals have revealed plans to lay off hundreds of workers this year. Another 21,000 employees have lost their jobs in the hotel industry after more than 20 hotels closed shop over unsustainably low tourist numbers.

The loss of jobs as companies downsize to lower costs has far-reaching consequences. For instance, when a plant in the manufacturing sector closes its doors to relocate to a cheaper destination — like Eveready did — it takes down with it a long supply chain of associated enterprises. Hundreds of other people aside from the company staff suffer. From those who supply the ubiquitous office stationery, to those who offer more specialised services like server maintenance or research, all feel the heat.

The effect of these job cuts trickles down to mama mbogas and local kiosks. An unemployed person will cut down on spending and operate on a tight budget. Discretionary spending on products like beef and alcoholic beverages will inevitably decrease. Therefore, the loss of 200 jobs due to the closure of, say, the Cadbury factory could translate to 3,000 jobs lost in the economy. Equally, the closure of hotels will have a knock-on effect on several critical sectors of the economy, including transport, agriculture and retail.

Resolving the reasons behind the job losses across the various sectors requires a multi-pronged approach. First, Kenya cannot continue to rely on its traditional markets for tourists. Government agencies and private sector players in the sector must do more to reach out to the largely underexploited African, Asian and Caribbean markets. An elaborate plan to market Kenya and its unique tourist attractions should feature prominently this year. These efforts must begin to be rolled out today — any more dithering will sound the death knell for a sector with the potential to return to being Kenya’s top foreign exchange earner.

Second, we need to deal with the root cause of the travel advisories imposed on the country that have not only affected tourism, but also compromised investor confidence. The Uhuru administration has to decisively deal with insecurity. There are no two ways about it.

Third, we need to offer investors incentives to create jobs and secure future economic growth. The Government has to become more discerning about its application of tax regimes, and pursue policies that encourage compliance. The tourism and manufacturing sectors, which have the potential for high job opportunities, offer particularly apt examples of tax regimes that have hurt more than helped.

We also have to do something about the high cost of doing business in the country. The State is rolling out commendable initiatives to reduce the cost of power and make what is available more reliable, but the effect of these efforts are yet to be felt. Currently, the cost of power in Kenya is six times more expensive than in Ethiopia.

Warehousing and rental rates are extremely high and without good reason. Global businesses are struggling to make sense of long-term investment in the country where the cost of doing business is inordinately high. Still, in our pursuit for multinational investors, we must not leave behind local entrepreneurs.

For Kenya to achieve its ambitious growth targets and offer its citizens a better life, the Government must create an environment that allows businesses in all sectors to thrive. A regulatory affront on one sector does not portend well for others, and investors will be quick to pull out before they get affected.

It is not too late to lift the sense of doom spreading across the formal sector, but it will require quick, well-thought-out action on the part of policy makers.