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FKE urges government to reopen economy, save jobs

By Lewis Njoka
Monday, September 28th, 2020
Workers at an Export Processing Zone (EPZ) factory work on garments. Manufacturing units will have to implement Covid-19 measures on reopening.
In summary
    • Only 30 per cent of the companies studied indicated that they had enough resources to meet their wage obligations in the next six months..
    • Government urged to assist the private sector access finance to strengthen cash flow, internal markets and help them access regional markets..
    • Kenya has an active 9pm to 4am curfew during which only transport and essential services providers are allowed to move on public roads.
    • Employers federation had said earlier that 2.3 million workers could lose medical cover should Covid-19-related closures persist.

Lewis Njoka @LewisNjoka

The Federation of Kenya Employers (FKE) has urged the government to re-open economy and cushion the private sector further to prevent the potential lose of a million jobs by December.

Speaking in Nairobi during the launch of a survey last week, FKE chief executive Jacqueline Mugo said the government must re-open the economy to allow free movement of goods and services.

Mugo urged the government to set up a wage subsidy fund to cushion firms from their financial obligations in the meantime, warning that already, the formal private sector has lost 173,743 jobs, which is 80 per cent of the 218,800 jobs created in the sub-sector since 2015.

Intervention

“51 per cent of the companies which participated in the study indicated that they were planning to reduce staff costs over the next six months after the survey.

Only 30 per cent of the companies studied indicated that they had enough resources to meet their wage obligations in the next six months,” Mugo said.

She said the government should also reduce corporation tax and shelve a planned one per cent revenue tax which is expected to come into effect next year.

She said as of 2019, the total number of employees in the formal private sector stood at 2.06 million and growing at a rate of 2.3 per cent, warning that a million people could lose their jobs in the near future, unless the government intervenes. 

“From the survey, the average number of employees in respondent companies reduced from 406 to 372. This is 8.3 per cent reduction in the total number of employees,” said Mugo.

The survey established that more than half of the private sector enterprises do not have enough resources to meet their staff costs in the next six months. 

It also revealed that 84 per cent of enterprises said the pandemic adversely affected their cash flow.

The chief excutive said since businesses are in dire need of support to help them access and generate finances, lenders should consider linking loans repayment and credit facilities to cashflow projections.

She urged Central Bank of Kenya (CBK) to consider a policy shift on loan repayment terms from fixed rate terms to one based on cashflow projections.

Mugo further called on the government to assist the private sector access finance to strengthen cash flow and internal markets and help them access regional markets.

KNBS survey

FKE’s report seems to corroborate Kenya National Bureau of Statistics (KNBS) reports which estimated that Kenya lost 1.7 million jobs within the first three months after the country recorded its first Covid-19 case on March 13 this year.

KNBS reported that the number of unemployed Kenyans surged to 4,637,164 between April and June, up from 2,944,724 in the January-March period.

Similarly, the number of economically inactive Kenyans, including the sick, students and retirees rose by 1 million to stand at 9,774,700.

The FKE survey noted that 69 per cent of those interviewed said they felt that the government did not do enough to cushion them from the impact of the pandemic on finances and cash flow.

Further, 79 per cent of the respondents said their operations were adversely affected while 75 per cent indicated their supply chains were adversely affected.

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