FKE warns of job losses as firms face uncertainty

A man walks along the Temple Road in Nyeri hawking his wares to eke a living. [Kibata Kihu, Standard]

Employers are warning of runaway youth unemployment amid the high cost of doing business.

The Federation Of Kenya Employers (FKE) yesterday said the high cost of living, rising interest rates, shocks from the war in Ukraine, and the prolonged dry weather continue to hurt business.

FKE President Habil Olaka said over 11 companies listed on the Nairobi Securities Exchange have issued profit warnings in the last two years.

"The weak shilling and high costs of imports of raw materials are affecting our manufacturing. We have also seen several multinationals closing shop in Kenya while others continue to scale down their presence in Kenya as they opt for better production locations."

The Federation said the high cost of living remains the greatest challenge Kenya faces "and may morph into a social crisis of monumental level" but the involvement of all stakeholders in the process of developing policies that reduce poverty and enhance economic growth could generate a solution.

"Businesses in Kenya are struggling and many of them are either closing shop or on the verge of closing shop in Kenya," said Olaka during a press briefing on the status of the labour market in Nairobi.

"For example, the flower sector has reported that eight companies closed shop in Kenya in the last two years due to the high cost of doing business. Many retail stores have closed down including the small businesses.

"We have many empty retail business spaces and the drought has brought our agriculture sector to its knees."

He asked the government "to embrace social dialogue in a bid to create an enabling environment for foreign direct investment (FDI), which is critical in easing the growing youth unemployment in the country".

FKE is also asking for "meaningful dialogue" with the government on the full implementation of the NSSF Act, 2013, which increased the monthly contributions from a flat rate of Sh200 to Sh1,080 for employers and employees each, for workers who earn above Sh6,000, bringing that to a new monthly total of Sh2,160.

Employers say that some of the pertinent issues that have derailed the implementation of the Act remain unclear.

"The employers need clarity on what pensionable earnings are, on clarity on how to treat gratuity, and on automatic opting out from tier II for employers with private pensions schemes that are licensed and regulated by RBA to avoid the two months waiting period and clarity on taxing pension benefits," said FKE Executive Director Jacqueline Mugo.

"Why save for the worker then take 30 per cent away from them when they access their benefits? This defeats the purpose of saving for a pension."

Whether NSSF contribution is mandatory by employees above 60 years of age, whether employers are expected to remit Tier II for employees who are paid gratuity instead of joining the company pensions scheme at end of their contract, and if Tier 1 amount must be contributed to NSSF will increase within the years which employers have the option to contract-out are some of the issues FKE feels remain unanswered.

FKE says that unwillingness to meaningful engagement in good faith has been lacking from the government, hampering all efforts to implement the Act. But in a fortnight, a hurdle could be jumped.

"We have raised these issues with both the Ministry of Labour and the NSSF Board since 2014. On Wednesday, February 22, 2023, we met the Cabinet Secretary for Labour, the PS, and senior ministry officials and we raised these issues and proposed a way forward on them," said Mrs Mugo.