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The Nairobian

Jobs and peace key focus areas for Kenya in 2017

Commentary

By Kiprono Kittony | Jan 18, 2017

Kenya National Chambers of Commerce and Industry Chair Kiprono Kittony

The World Bank estimates the rate of unemployment in Kenya to be at 40 per cent; the vast majority being the youth. This being an election year, the last thing we want is a large pool of disgruntled and jobless youths who can easily be manipulated into backing nefarious political agendas.

The small and medium-sized enterprises (SME) sector is replete with potential and can absorb many of the youths who have commendable skills. SMEs account for about 45 per cent of Kenya’s GDP and employ up to 85 percent of the country’s workforce.

Consequently, SMEs need to be viewed within the greater context of the instrumental role they play in job creation.
It is therefore imperative that we not only highlight and understand the issues facing SMEs but more importantly, address them.

One is their high failure rate relative to bigger businesses.
Seventy per cent of SMEs fail within the first three years of existence, according to a study by Invest in Africa and Strathmore Business School. This high failure rate means although SMEs create jobs, those jobs are not sustainable.

Efforts to make the SME sector more robust and stable need to be intensified. A good starting point would be ensuring SMEs have access to markets and affordable financing. At the same time, they should be apprised on the benefits of joining influential business lobby groups such as the Kenya Chamber of Commerce, which can help them engage their players in a more persuasive and professional fashion.

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Another area where we can leverage on in creating more jobs is agriculture. According to the World Bank, agriculture is 2.5 times more effective in eradicating poverty than any other sector. Nevertheless, to tap into this potential, we should move past our fixation with primary produce and explore value addition such as food processing.

Food processing and textiles - which also have linkages to agriculture through cotton - account for 60 per cent of the manufacturing work force in Kenya. Meanwhile, we must actively strive to consolidate the gains we have made in improving manufacturing and the broader business environment.

For instance, the standard gauge railway, to be launched this year, will substantially reduce transport costs for businesses, especially those in manufacturing. Beneficiaries should translate these cost savings into growth and employment opportunities.

Other reforms aimed at improving the overall business environment like lowering the cost of energy and simplifying the business registration process, also need to be sustained. Kenya has made tremendous strides in the World Bank Ease of Doing Business survey because of these reforms.

In the past two years, the country has moved up 44 positions in the rankings to the position 92 out of 189 economies worldwide in the 2017 rankings.
Kenya has investment needs of about 25 per cent of GDP against local savings of around 16 percent of GDP. This highlights the need to plug the deficit using foreign direct investment. Kenya must therefore sustain the gains it has made by enhancing its appeal to international investors in order to keep investments flowing.

Through economic diplomacy, Kenya has in a few years managed to shift its existing diplomatic relations to a more commercial footing. Going forward, it is imperative that we assess the agreements we have signed to ensure they advance our interests.

It is also important to remember that our foreign relations could improve or deteriorate this year depending on how peaceful the elections are. All leaders must therefore reiterate the need for peaceful elections in the lead up to the polls.