Kenya has lost 70,000 jobs or 3% of the opportunities in the formal private sector between October 2022 and November 2023, a survey by the Federation of Kenya Employers (FKE) has established.
FKE is a body established to give employers in the country a voice on various issues affecting them.
In a statement released on Friday, November 24, the Kenya employers lamented that the cost of doing business had become unsustainable due to implementation of the Finance Act 2023.
Thus, the FKE said that employers have resorted to declaring some positions redundant in a bid to remain afloat.
In addition, the federation reported that 40% of the employers had declared intentions to reduce the number of employees to meet the increasing costs of operating in Kenya.
“It shows that between October 2022 and November 2023, we have lost 3% (70,000) of the jobs in the formal private sector and 40% of employers have reported that they are planning to reduce the number of employees,” the statement read in part.
According to the statement, the changes introduced through the Finance Act have had an overall negative impact on cash flows and the financial wellbeing of enterprises in various ways.
Among the ways in which the new tax measures in the law has affected businesses include having a direct impact on the payroll.
As per the statement, policies introduced through in the period have also led to a necessity for wages review as well as posing the risk of business closure.
Also Read: Why Rwanda Is Attracting More Investors Than Kenya
Factors driving operating cost & loss of jobs
FKE reported that the high operating cost has been driven by, among others, the new tax measures and some external factors including wars in parts of the world.
In the statement, FKE noted that whilst it was not possible to control the external shocks including the wars, the government could work towards creating a friendly environment through reviewing the tax measures.
In its plea to the government, FKE asked for a review of the corporation tax stating that its desire was to have it capped at 25%.
Additionally, the Federation called upon the government to consider lowering the Housing Levy introduced in the Finance Act to a maximum of Ksh5,000.
Furthermore, the Federation cited the weakening of the shilling as another factor in the aggravated situation.
The weakening of the currency against the dollar, according to FKE, has adversely affected businesses that rely on imports, including imports of machinery and equipment necessary for our manufacturing industries.
“The exchange rate of the Kenya shilling against the USD has hit a high of 152.45 compared to 121.05 at the same time in 2022,” FKE stated.
“This has been largely attributed to capital flight and reduced inflow of foreign currency due to the low value of exports.”
FKE highlights cost of energy
What’s more, FKE in its statement mentioned high costs of energy as some of the factors aggravating the situation.
According to the body, high cost of energy in Kenya has been among the factors why Kenya is losing its attractiveness to investors.
Also Read: Salaried Kenyans Stare at Double Taxes Ahead of Finance Act Verdict
But the concerns about the cost of operating in Kenyan and investor friendliness are not new in the Ruto tenure.
A report by the KPMG in October, for instance, showed that 15% of the investors sampled in the survey expressed their preference for Tanzania as an investment destination with only 14% choosing Kenya.
Recent developments in the oil industry have also seen countries formerly using Kenya for transit of their oil ditch Kenya for Tanzania.
