Jobs growth slows down as poll jitters hit foreign investors
Posted Wednesday, July 11 2012 at 20:18
- Data from the Kenya Investment Authority (KenInvest) show that 59 new firms made investments in the country in the six months to June, down from 76 in the same period last year.
The number of companies setting up shop in Kenya dropped 22.3 per cent in the first half on election jitters—halving new jobs created by foreign firms.
Data from the Kenya Investment Authority (KenInvest) show that 59 new firms made investments in the country in the six months to June, down from 76 in the same period last year—cutting the flow of foreign direct investments (FDI) to Sh40.3 billion from Sh55.4 billion.
This saw the companies create 3,872 jobs (3,565 openings for Kenyans), representing a 50.3 per cent drop from 7,805 (7,454 for Kenyans) created last year.
This is a blow to job market that last year saw the private sector slow down hiring to preserve cash and boost profits on uncertain economic outlook and higher political risk profile.
“The upcoming elections are driving a wait-and-see stance among investors,” said Sammy Onyango, the chief executive of Deloitte East Africa, adding that the country remains a favourite investment destination in the long term.
The reduced investment risk appetite affected labour-intensive sectors the most, with the overall value of FDI dropping to Sh40.3 billion from Sh55.4 billion.
The foreign investors’ anxiety has been linked to the March 2013 General Election that is expected to delay new major projects into the second half of next year.
Kenya’s rising risk profile has also been worsened by increased terror attacks from suspected Al-Shabaab sympathisers in response to the country’s war against the terror group in Somalia, prompting the US to issue a travel advisory.
Rating agencies used by Lloyds of London — the dominant re-insurer of big-ticket risks in Kenya —have raised Kenya’s risk rating to 4.5 just 0.5 points shy of the maximum rating of five.
This has given the country a high political risk perception similar to that accorded to war-torn nations like Somalia.
Investors are also watching how the country handles the International Criminal Court (ICC) prosecution of four prominent Kenyans accused of perpetrating crimes against humanity during the 2008 post-poll chaos.
FDI is important in fuelling economic growth by supplementing investments from the government and local companies as well as facilitating technology transfer.
Foreign investments targeted at the construction sector dropped from Sh49.6 billion to Sh1.1 billion, a drop that saw new jobs for Kenyans in the sector shrink to 44 from 1,321.
This has been linked to the completion of major infrastructure projects such as the multi-billion shilling Thika Super Highway constructed by Chinese firm China Wuyi.
Rapid growth of building construction, roads, and other infrastructure projects have employed thousands of people, including engineers, architects, and unskilled workers.