A preliminary assessment by the Federation of Kenya Employers (FKE) of
labour turnover also cites the enactment of new labour laws as an
additional factor that has contributed to the downturn in various
companies in the last fiscal year.
In addition to retrenching staff, several companies are planning to
freeze business projects, renegotiate salaries of top management and
put off hiring new workers until conditions improve, the Sunday Nation
has learnt.
The sector worst affected is the building and construction industry
that has reported massive redundancies as early as mid last year.
Other hard-hit sub-sectors include manufacturing, agriculture and
finance. The layoffs will be an additional burden to bear for Kenyans
already struggling with double-digit inflation that has seen prices of
the national staple foods — maize and maize flour — go through the
roof over the past year.
They will also confound efforts by the government to grapple with a
growing food shortage that threatens millions of Kenyans across the
country.
Given that every working Kenyan has several dependants, it means that
the layoffs could set off a ripple effect that could see the number of
people seeking relief food from the government and donor agencies
skyrocket.
Shedding
The number of unemployed youth is also expected to rise since most
students graduating from institutions of higher learning are finding it
especially difficult to find jobs in a market already shedding its
present work force.
We anticipate the situation to worsen this year due to the current
unfavourable business climate. Companies are doing everything possible
to cut operational costs and, unfortunately, workers will become
victims, said FKE chairperson Jackline Mugo.
The 2,700-member federation says that at least 70 per cent of the
companies interviewed so far reported a decline in profitability last
year while 17 per cent had managed to break even. A mere two per cent
managed to surpass their profitability projections.
The federation is yet to complete the survey and determine the exact
number of workers to be affected as companies are still working through
their individual assessments before giving their final numbers.
Fifty-five per cent of the companies reported a decline in growth and
sales turnover compared to 22 per cent that barely managed to hold on
to their margin lines. Only five per cent reported registering
above-target growth.
Fifty-three per cent of the companies, mainly in the agricultural and
manufacturing sectors, reported sharp declines in their productivity,
while 47 per cent indicated that they barely managed to be in line.
Fifty-six per cent of the companies cited the downturn in economic
growth and enactment of new labour laws as the principal factors
contributing to the declines, while 40 per cent cited the post-election
violence as the cause.
However, the Central Organisation of Trade Unions (Cotu) has strongly
criticised Kenyan employers for adopting an escapist attitude toward
the economic outlook. The union accused employers of looking for
scapegoats.
The belief by employers that the economy might not improve soon is a
big fallacy given that global fuel prices have gone down and the cost
of electricity reduced, thus pushing down the cost of doing business,
said Cotu secretary general Francis Atwoli.
The violence that rocked the country early last year led to serious
disruptions in the labour market. Thousands of workers were displaced
during the mayhem, forcing firms to scale down their operations or shut
down altogether for several weeks.
The violence also paralysed transport services, making it difficult for
several companies to access their markets. Roadblocks in the Rfit
Valley area caused severe shortages that forced up the prices of basic
commodities and raw materials.
The most significant increase, which affected nearly all sectors, was
the sharp rise in the price of oil. This translated into higher
production and electricity costs that significantly slashed profit
margins of most companies.
Paternity
But before local companies could recover, they were hit again by the
on-going global recession that was set off by the failure of major
financial institutions in the United States.
A survey conducted by FKE last year reported that the average
additional cost expected per company as a result of enhanced maternity
leave would be Sh9.2 million, while that arising from the new paternity
leave would be Sh2.1 million.
As a result of a combination of these factors, the country's economic
growth rate slumped from 7.2 per cent in 2007 to 2.2 per cent in 2008.
Several analysts led by AIG Investments estimate that this year's growth will be between 3 and 3.5 per cent.
Sunday Nation
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