The harsh reality of the depressed economic growth is hitting home, with more than 10,000 workers losing their jobs in the last four months.This represents just 458 companies. However, if the rate of job losses, at six per cent, were to be replicated across the membership of the Federation of Kenya Employers (FKE), the situation is indeed grave.
A survey by FKE indicates that companies are laying off staff at an alarming rate to stay afloat.
The survey titled Effect of the Economic Crisis on Labour Industry 2009, says the transport and communication industry, and the manufacturing sectors were the hardest hit.
More retrenchment
“With an economic growth of 1.7 per cent, we are likely to see more of this (retrenchments) happening,” FKE boss Jacqueline Mugo said yesterday.
FKE warned that if the situation persists, their members would have to lay off staff to stay afloat. Most companies who responded to the survey said they registered a sales turnover growth of below 70 per cent in the last fiscal year.
In terms of profitability, more than 75 per cent of the surveyed companies made losses. Productivity also dropped by more than 69 per cent. In the fourth quarter of last year the Government froze employment, and admitted a budget deficit of Sh127 billion. The companies surveyed attributed the poor performance to the global recession, high fuel prices, poor infrastructure, corruption in Government and unfair competition practices.
“Retrenchment is usually an employers last option. We are not sure if the situation is coming to an end any time soon. We have to look into ways of retaining employees,” Mugo said in a press conference in Nairobi yesterday.
“Job losses are likely to continue if the situation does not change. That is why we decided to seek solutions. The Government has responded by forming a team to look into this situation,” she said.
As a result of the job losses, Kenyas economic, employment, and exports growth decreased by 69 per cent while investment by over 56 per cent. The effect is that Kenya will take longer to recover given the political and economic situation.
Poor infrastructure
The cost of production increased by over 47 per cent due to the high fuel and energy prices experienced early in the year. The infrastructure has not improved, pushing the hope of recovery further down.
The survey found that the financial crisis saw the number of tourists to Kenya reduce, earnings have fallen by 30 per cent from Sh49.3 billion to Sh34.5 billion.
With reduced remittances from the Diaspora, donors have been unable to meet their pledges.
The survey indicates that lending institutions have shied off from Kenyans who cannot show ability to pay back, making it difficult for the economy to recover. The employers suggested reduction in taxation as the current Kenyan tax rate is among the highest in the world. To mitigate job losses, FKE asked Government to stabilise the political environment and stem high-level corruption to attract investors.
FKE said investors are yearning for a sense of stability and predictability.
They proposed interventions to ensure companies not only stop the planned redundancies but also guard the country against anti- social elements.
– Additional reporting by John Oyuke
The Standard
Post published in: Zimbabwe News