Job creation slows down ahead of polls

The number of jobs created by new foreign and domestic investments more than halved last year as investors delayed projects ahead of the March 4 General Election.

Data from the Kenya Investment Authority (KenInvest) shows that Kenyan and foreign firms created a total of 6,093 jobs in new projects last year compared to 13,289 jobs in 2011.

The number of new projects also declined to 103 from 130 as their value declined 61.2 per cent to Sh60.7 billion.

The value of investments does not include expansion initiatives by existing companies, but the data tends to follow the overall job numbers provided by the Kenya National Bureau of Statistics in June.

Analysts attribute the decline in investments last year to a wait-and-see attitude among some investors worried about political risks should the upcoming elections turn violent like in 2008.

“A lot of investors are delaying their projects waiting to see the outcome of the elections,” said Sammy Onyango, the chief executive of Deloitte East Africa.

“Fundamentals attracting investors to Kenya remain strong and we should see an upsurge in new investments if there is a peaceful election and transition to a new government.”

Out of the 6,093 new jobs created last year, 5,670 (93 per cent) were taken up by Kenyans as the rest went to expatriates. In 2011, Kenyans accounted for 12,695 or 95.5 per cent of the 13,289 new jobs created.  

The major slowdown is a blow to the labour market, which has seen the private sector slow down hiring to preserve cash and boost profits on uncertain economic outlook and a higher political risk profile.

New private sector jobs stood at 47,000 in 2011 compared to 56,000 the year before, mainly driven by a sharp decline in the agricultural sector that accounts for the bulk of economic activity.

Investors also cut back in the labour-intensive construction and manufacturing sectors by large margins. The manufacturing sector created 3,012 new jobs last year compared to 4,386 in 2011 as the number of new projects in the sector dropped to 32 from 37.

The value of investments in manufacturing dropped 61 per cent to Sh10.2 billion last year. New jobs in the construction industry dropped from 1,508 to 280 in the same period as the number of projects more than halved to four from nine.

This saw the value of new projects in the sector drop to Sh2.3 billion from 50.6 billion.

New employment in the retail sector fell sharply to 176 last year from 2,060 in 2011, with the number of projects in the industry dropping to six from 19.

Analysts say a peaceful election and installation of a government with pro-investment policies will help boost foreign investment for job creation, technology transfer and foreign exchange earnings.

However, the country will have to work hard to attract international investors as foreign direct investment has slowed down on a global level in the wake of uncertainties in the world economy.