Employers protest unpredictable and hostile business environment

Federation of Kenyan Employers President Dr Habil Olaka abnd Executive Director and CEO Jacqueline Mugo during a press briefing on the state of business operating environment. [Wilberforce Okwiri, Standard]

The Federation of Kenya Employers (FKE) has decried the country’s business environment, describing it as unfriendly and unpredictable amid additional tax measures the government is employing to raise revenue.

While the Federation expressed its support for President William Ruto’s administration’s efforts to generate more revenue, it warned on the expected adverse effects that may result from the measures.

“We are concerned about the adverse effects the initiatives have on the cost of doing business and on the citizens,” said FKE National President Dr Habil Olaka, adding that these revenue measures come on the backdrop of the Finance Act 2023, high electricity tariffs and a tight monetary policy.

He noted the effects as reduced take home for employees, shrinking profits for enterprises and an unfriendly business environment.

Particularly, the Federation wants the government to reconsider the proposed revenue raising measures as contained in National Treasury’s Draft Medium Term Revenue strategy for financial years 2024/2025 to 2026/2027.

Dr Olaka said the government should instead employ policies that will spur increased production and consumption, thereby increasing business activity while creating formal income opportunities.

As income increases, he said, so will majority of workers enter the tax-paying bracket. This will provide the government with the much needed revenue to fund its projects.

Otherwise, sharp increase in business operating costs will increase informal trade and shrink the formal wage bracket as enterprises, majority of them being micro, small and medium, will not be able to withstand the associated costs of the prevailing environment.  

“We are seeing more tax measures being proposed in order to raise the necessary revenue for the government to meet its development agenda. I think there is a need for that to be balanced by the fact that the disposable income for the common citizen and even the cost of doing business for enterprises is affected negatively,” said Dr Olaka.

Dr Olaka was speaking at a press conference after a management board meeting held to discuss the general state of the economy and its impact on business against the legislative changes.

The Federation came up with several proposals for the government on how to spur economic growth which include working on maintaining low tax rates for both individuals and corporates.

“The underpinning philosophy in tax management should not be taxing people and corporates into poverty. It should instead support many businesses and persons to increase their productivity and thereby enter into the tax bracket,” he said.

The FKE President said the challenge with the current administration is the desire to finance everything on their pledge. He insisted that sacrifices have to be made to attain the required balance.

He urged the government to make the business environment stable for employers to plan well.

“Employers are no longer able to plan their costs and inputs. Stability and predictability of the business environment is important for proper functioning of the business environment,” he noted.