Why Uhuru jobs promise will not be easy to realise

When President Uhuru Kenyatta started his first term in 2013, one of his key promises was creation of one million new jobs a year. This was music to the ears of thousands of youth who roamed the streets seeking gainful employment. 

Five years down the line, unemployment still persists, with the goal of creating one million jobs a year not yet fulfilled. Of the about one million youth joining the labour force every year, only about one in five is likely to get formal employment. The rest are either unemployed or engage in non-wage earning occupations.

A number of factors have contributed to this situation, chief among them an unfavourable business environment, decline in credit extended to small and medium sized enterprise, disruptive technologies and harsh weather.

Employers say joblessness among the youth is worsened by the fact that many of them are not prepared for the job market after graduating from college. This assertion is supported by a recent study commissioned by the British Council: “The Universities, Employability and Inclusive Development Project (2013–16)”. The study shows that as many as 49 per cent of new university graduates are not adequately prepared for the labour market.

Similarly, a World Bank report — “Country Economic Memorandum: From Economic Growth to Jobs and Shared Prosperity” — shows that the fastest growing sectors in Kenya are increasingly struggling to find suitable employees.

This means the government needs to focus not only on performance of the economy and creation of jobs but also on the education offered in colleges and universities.

READ: World Bank links poor education to Kenya's high unemployment

During his swearing-in on Tuesday, President Kenyatta said creating jobs and opportunities for the youth was still a top priority, and that this time his administration would target the manufacturing sector.

“Our manufacturing sector is the primary vehicle for creation of decent jobs. We will build on ongoing efforts, such as VW and Peugeot motor vehicle assembly plants; fertiliser blending factories; and Wrigleys in the confectionery industry. Similarly, we will target the creation of 1,000 small and medium scale enterprises in agro-processing,” said President Kenyatta.

At the centre of this ambition is the Ministry of Industrialisation, which for the past five years has been led by Mr Adan Mohamed, a banker turned public servant.

The secretary says his ministry has in the past five years been laying the foundation for job creation objectives. He cites ease of doing business and key infrastructure projects as key in achieving accelerated economic development and employment.

In its 10-year transformation agenda released recently, the ministry is banking on foreign direct investment, expansion of export zones, creation of industrial parks, promotion of exports and elimination of non-tariff barriers to trade. 

For instance, the Kenya Leather Park in Machakos is expected to generate up to 50,000 jobs once it is completed in three years, while the Sh15 billion East African Breweries plant in Kisumu, whose construction has started, will create 110,000 jobs.

“Since 2013, the first ever government industrial development was launched. The initial focus areas were leather, textile, ease of doing business, investment attraction, special economic zones and industrial parks. By December 2016, over 1,500 companies had set up shop in Kenya,” the report says.

The ministry has already rolled out a plan to increase exports by 20 per cent. All these, the ministry report says, will lead to a vibrant manufacturing sector that will translate into a healthy economy with accruing benefits to citizens.

Mr Kenyatta said his administration would grow and sustain the manufacturing sector and raise its share of the national cake from nine to 15 per cent.

Meeting the job pledges made by the President will not be a walk in the park, taking into account the tough economic challenges witnessed in the past five years.

For starters, the pledges come on the backdrop of revelations that the Banking (Amendment) Act 2016, which introduced interest rate capping, has largely failed to achieve its desired objectives, key of which was stimulation of the economy.

Commercial banks have become very risk sensitive and are moving away from households and other economic agents that lack dependable collateral.

The government has been challenged to resolve the issue of credit availability to SMEs, since employment opportunities and much of the gross domestic product in many countries come from this sector.

“At the moment there are limitations that commercials banks have in lending — because of the interest rate capping law. Review of the law could benefit the economy as more SMEs get access to funds,” said Mr Michael Armstrong, regional director of the Institute of Chartered Accountants in England and Wales (ICAEW), in Nairobi.

Data from the Kenya National Bureau of Statistics Economic Survey 2017 show that loans advanced to the manufacturing sector by industrial financial institutions and commercial banks shrank for the first time in five years by 4.6 per cent.

The total loans advanced decreased from Sh290.9 billion in 2015 to Sh277.4 billion last year. Commercial banks advanced Sh289.727 billion in 2015 compared with Sh276.359 billion last year.

And a survey by the Kenya Bankers Association showed that the regulation had promoted adjustments in banking in the form of staff and network rationalisation.

The survey says there have been 1,933 job losses, with the number of management and non-management staff reducing from 28,009 as at August 2016 to 26,076 by June 2017. Bank branches have also reduced from 1,106 to 1,102.

Political uncertainty has also dampened the prospects of creating sufficient jobs, with a section of the country boycotting the repeat presidential polls on October 26.