Protesters march in Nairobi urging the government to lift a ban on
labour export, especially to the Middle East. PHOTO | FILE | NMG
Summary
- Gloomy jobs outlook comes on the back of one of the worst corporate earnings season that has already seen five NSE-listed firms issue profit warnings.
- FKE, citing economic paralysis brought by the recent poll and a virtual shutdown of the plastics manufacturing industry in the wake of an official ban on use of carrier bags, says labour market recovery is likely to be prolonged.
- Official statistics show that employment momentum loses steam at electoral cycles, underlining the pernicious effect of combative politics and the attendant private sector risk aversion.
Kenya’s unemployment crisis is set to worsen in the near term as
the fallout from a protracted electioneering and recent policies that
have upended the economy becomes clear.
With thousands
of jobs having been lost so far this year in the banking and
manufacturing sectors, analysts said the private sector will at best
freeze new hiring, but could well embark on a new round of retrenchments
to survive the storm.
The gloomy jobs outlook comes on
the back of one of the worst corporate earnings season that has already
seen five Nairobi Securities Exchange-listed firms issue profit
warnings.
Bamburi Cement
, Standard Chartered Bank (Kenya) , Family Bank, Standard Group and BOC Kenya
have announced that their earnings for the full year ending this month
will be lower by at least a quarter compared to the year before.
Scores of other firms are in losses, including publicly traded East African Cables
, Unga Group , Mumias Sugar
and the privately-held retailer Nakumatt Holdings, which is fighting bankruptcy proceedings in court.
“A
few factors have ganged up to make it very hard for companies to retain
the people they have or even review their terms,” said Jacqueline Mugo,
executive director of the Federation of Kenya Employers (FKE).
Ms
Mugo, citing economic paralysis brought by the recent poll and a
virtual shutdown of the plastics manufacturing industry in the wake of
an official ban on use of carrier bags, says labour market recovery is
likely to be prolonged.
She said FKE has noted significant job cuts in agriculture, service and tourism among other sectors.
With
an estimated one in every five Kenyan youth of working age unemployed,
the soft jobs market signals a worsening of a crisis that can only feed
back into the overall economy through weaker demand for goods and
services.
Combative politics
Official
statistics show that employment momentum loses steam at electoral
cycles, underlining the pernicious effect of combative politics and the
attendant private sector risk aversion.
The total
number of new jobs created, for instance, surged to a record 1.2 million
in 2012 but tapered off to 755,800 the next year when Kenya held a
General Election.
A similar slump is expected this year once national employment
statistics are compiled. In addition to the impact of political
uncertainty, the weaker jobs market has been harmed further by policies
that have hit banks and some manufacturers.
Formal
motor vehicle dealers shed at least 300 jobs this year in the wake of
sales declines that saw the industry’s total order book shrink 18.7 per
cent to 8,427 units in the nine months ended September.
Hundreds
of jobs have been lost at manufacturers of plastic bags which were
banned in a move the government said was meant to protect the
environment.
Banks
Banks,
reeling from a rising tide of bad debt and narrower lending margins
thanks to the capping of interest rates, have let go of at least 1,000
employees.
Family Bank, which slipped into a net loss
of Sh743 million in the nine months ended September, expects to end the
year in the red having booked a net profit of Sh352.2 million in 2016.
StanChart
now expects to make a maximum net profit of Sh6.7 billion this year
compared to net earnings of Sh9 billion the year before.
Both
lenders, reflecting reduced profitability in the wider banking
industry, attributed the anticipated lower earnings on the rate cap and
reduced economic activities.
Bamburi says its net profit this year will fall by more than 25 per cent compared to Sh5.8 billion in 2016.
Standard
Group, which made a net profit of Sh198.5 million last year, now
expects to post maximum net earnings of Sh148.8 million.
BOC Kenya also expects a lower earnings ceiling of Sh95 million this year, having made a net profit of Sh126 million in 2016.
The
three companies also cited general economic slowdown in their forecast
though BOC’s results will also take a hit from accounting changes.
The task of creating more jobs has become even harder amid adverse long-term structural changes in the economy.
The
labour-intensive agricultural and manufacturing sectors are growing at a
slower pace compared to service industries which are riding on
automation to eliminate the need to hire more people.
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