The Management Board of the Federation of Kenya Employers (FKE) on Friday issued a statement noting that the organisation is committed to work with the Government and other stakeholders to address the challenges facing the country such as drought, high cost of living and unemployment.
The federation’s President Habil Olaka noted that Kenya currently faces several challenges that continue to dampen prospects of the country’s economic recovery from the Covid-19 pandemic key among them being food insecurity brought about by the ongoing severe drought and increased commodity prices.
“We continue to see a rise in inflation month on month, driven by runaway costs of consumer products, including cooking gas, fuel, food and cooking oil. The war in Ukraine and other global geopolitical developments continue to worsen the situation.” said Dr Habil in a statement.
Kenya is experiencing the worst drought in 40 years and has so far affected an estimated 4.5 million Kenyans who have witnessed four consecutive seasons of failed rains. As a result, this has led to severe food shortages due to crop failure and loss of livestock.
Dr Habil also noted that the federation supports the Government’s agenda to establish a universal social protection system that encompasses Universal Health Coverage (UHC), and Universal Social Security Coverage (pension, occupational hazard and unemployment insurance).
“The challenge lies in establishing a viable funding mechanism that will not be detrimental to the competitiveness of our labour market. The financing requires a shared approach where no party is overburdened. It is not practical to expect the formal employers and workers to bear the burden of Universal Social Protection System, as only 15% of the country’s wage employment is in the formal sector.” said Habil Olaka.
FKE notes that financing of NSSF, NHIF and Affordable Housing Scheme should be live to this reality.
“FKE supports the enhancement of NSSF contribution to secure Kenyans in old age. However, employers pointed out issues with the now nullified NSSF Act 2013 that needed to be addressed for the new rates to be implemented. The recent decision by the Court now gives all stakeholders the opportunity to go back to the drawing board by holding consultative engagements to reach win-win proposals.” added Dr Habil Olaka.
Federation of Employers’ views on unemployment
According to the Federation, Kenya’s employment situation is a ticking time bomb with about 85% of Kenyans being underemployed in low-income low quality informal sector.
More than 2 million workers lost their jobs in 2020 and 2021 due to covid-19 pandemic and many are not yet back to work. In addition, every year, 800,000 young Kenyans join the labour market after completing school, college and university.
“A nation with majority of its highly energetic and educated population idle is a country courting social crises. This is the situation that the nation needs to be focused on changing. It is a ticking time bomb that requires close collaboration between the employers and government to defuse.” says Dr Habil.
The federation has advised the Government that in order to create jobs in the country, there should be a deliberate focus to bring down labour costs and improve productivity.
“The continued piecemeal amendments to the Labour Laws and introduction of various social protection initiatives that all require employers to finance are raising the cost of labour in Kenya to a level that is unsustainable. The cost of Labour in Kenya has increased significantly from 2018. Some of the policies that have increased the cost of labour include the NHIF (Amendment) Act 2022, the NITA (Amendment) Act 2021, and various amendments to the Employment Act, among other policy initiatives.” says Dr Habil.
The federation also noted that the cost of labour had already pushed some companies to close shop in Kenya and move their operations to other countries.
The federation also noted the decline in Kenya’s productivity despite operating in a global market environment.
“Our products compete with products from countries such as China, Japan, India and the West among others. For example, in 2021, while the output per employed person in South Africa and Egypt was 49,250 and 57,628 US Dollars respectively, it was 12,340 US Dollars in Kenya. Kenya’s productivity is not only low, it is also decreasing. While in 2021, the South Africa and Egypt labour productivity grew by 3.4% and 1.6% respectively, it fell by 2.0% in Kenya. We cannot effectively compete with this low level and type of productivity.” noted Habil Olaka.
The federation has advised increased investment into measures that improve productivity such us skills development, adoption of modern technology, embracing productivity improvement practices, and inculcation of productivity work attitude, ethics, and culture.
In conclusion, the federation is optimistic about Kenya’s economic recovery and its committed to work with the Government and other stakeholders to create a friendly and competitive business environment, while eradicating barriers that hamper business development and growth.
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