600 firms fire staff over Covid-19 challenges

Some city dwellers have relocated to the village. More than 600 companies have shed jobs since the onset of the Covid-19 crisis in March. FILE PHOTO | NMG 

By CONSTANT MUNDA
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Summary

• The Federation of Kenya Employers (FKE) says the current level of strain on corporate earnings could “possibly the worst since 1992-1997” period, and that it is difficult to ascertain how long the coronavirus-triggered damage will last.
• In the 1990s, the country’s macroeconomic fundamentals — such as inflation, exchange rate, debt sustainability and balance of payments — were routed by massive corruption, insecurity and political instability that resulted in investors fleeing the country.
• This prompted the International Monetary Fund (IMF) to prescribe painful structural economic reforms that included, among others, voluntary retrenchment in public sector in what was later to be known as “golden handshake”.

More than 600 companies have shed jobs since the onset of the Covid-19 crisis in March, a staggering number that employers say could be the worst since economic downturn of the early to mid-1990s.

The Federation of Kenya Employers (FKE) says the current level of strain on corporate earnings could “possibly the worst since 1992-1997” period, and that it is difficult to ascertain how long the coronavirus-triggered damage will last.

In the 1990s, the country’s macroeconomic fundamentals — such as inflation, exchange rate, debt sustainability and balance of payments — were routed by massive corruption, insecurity and political instability that resulted in investors fleeing the country.

This prompted the International Monetary Fund (IMF) to prescribe painful structural economic reforms that included, among others, voluntary retrenchment in public sector in what was later to be known as “golden handshake”.

“Covid-19 has caused an untold human suffering globally and it will leave an unforgettable impact on enterprises,” FKE executive director Jacqueline Mugo told the Business Daily.

Quoting statistics from the Labour Ministry, Ms Mugo added: “We have seen the adverse psychological effect of Covid-19 on employers and employees, which has altered behaviour and the culture system at the workplace.”

The result is that some 604 companies have rendered some of their workers redundant and declared the job cuts to the Ministry of Labour in line with the law. This raises the possibility that the firms could be more given not all companies complied with the legal requirement.

The Covid-19 containment measures, enforced on March 25, and its uncertainty saw companies scale down operating hours which in turn hit their sales resulting in reduced earnings.

The firms, as a result, have kept a tight lid on operating costs by cutting their workforce, slashing salaries and adopting unpaid leave policies.

The crisis in the job market has, however, been around for some years now despite the economy growing above five percent on average in the past decade.

FKE, for instance, says more than 7,000 workers amongst its members alone were laid off in 2019, largely on mergers and acquisitions, ban on timber logging and fresh regulations in the education sector. “High labour costs, competition and technological advancement in the manufacturing further led to job losses and closure of companies in the sector,” Ms Mugo said. “There could be more unreported cases.”

A quarterly labour force survey by the Kenya National Bureau of Statistics (KNBS) published early in June suggested that some 287,481 Kenyans lost their jobs in the first three months of the year, with the situation worsening from April due to partial trade lockdowns and travel restrictions.

WORSENING CRISIS

This came on the back of formal jobs created in 2019 falling to 78,400 last year from 80,800 in 2018, the lowest in seven years, according to the Economic Survey 2020.

The crisis is seen worsening this year with the economic fallout as a result of the pandemic wreaking havoc in most of the sectors, and economic growth projected at about 1.0 percent.

“In this changing working environment and work culture, employers will be looking for employees who are agile and can perform more than one job function,” Ms Mugo said.

“This calls for a workforce that is flexible and ready to embrace technology in delivering sales and overall goals for enterprises.”