Start-ups registration surges on Covid job cuts

New business registrations at the Attorney-General’s office for the first time crossed then 100,000 mark in the year to June as the economic fallout from the pandemic pushed many Kenyans to seek State tenders or venture into entrepreneurship in the wake of layoffs and job cuts.

Data from the Registrar of Companies shows the business names registered in the year to June rose 38.7 percent to 101,674 compared to 73,302 in a similar period last year.

Business name registrations have been rising by single digits in recent years, including 3.1 percent in 2019 and 8.9 percent in 2018.

The listings were driven by Kenyans seeking to start small businesses, with the majority targeting supplying the national government, county governments and State corporations with goods and services.

“We have not completely appreciated what happened last year where Kenya National Bureau of Statistics released quarter two figures that showed that nearly 1.7 million Kenyans lost their jobs and some of them opened new businesses,” Kwame Owino, the CEO of the Institute of Economic Affairs, said.

Trading in government is now viewed as the shortest route to fortunes in Kenya’s economy over building enterprises, sparking the rush for business names—which are a requirement for those seeking State tenders.

The increased registration of single-owned businesses and small partnerships underlines the struggle to eke out a living for thousands of people displaced in the jobs market.

Many Kenyans started to operate small businesses out of the boots of their cars to make ends meet as the coronavirus crisis hit jobs and the economy.

Analysts reckon that layoffs and fears of losing jobs triggered the avalanche of business name registrations, adding that the majority of those registering new business names eyeing government tenders.

July saw 10,551 businesses being registered — the highest in a single month — and coincided with the month Kenya started a phased reopening of the country from a coronavirus-induced lockdown, lifting restrictions in and out of Nairobi and Mombasa.

Kenya has confirmed 215,730 cases of Covid-19 infections and 4,241 fatalities, with the disease devastating crucial sectors such as tourism and hospitality.

Industries and other businesses cut down on their activities in response to the infectious disease, leading to job cuts and unpaid leave for retained staff as profitable firms moved into losses.

Thousands of workers lost jobs amid the Covid-19 economic fallout that led to business closures and firms dipping into losses.

Young people were the hardest hit by the job cuts compared to their counterparts aged above 35.

A hiring freeze on the back of sluggish corporate earnings is a major blow to jobseekers, especially the close to one million who graduate from various educational institutions every year.

Now, Kenya seeks to introduce an unemployment benefits scheme under which salaried employees who become jobless will get a fraction of their pay for six months from a State-backed fund.

The Ministry of Labour says workers will be required to contribute to the yet to be formed Unemployment Insurance Fund (UIF).

Employees will contribute one percent of their pay that will be matched by employers towards the fund that aims at generating at least Sh45 billion annually upon implementation.

While offering relief to sacked workers, it looks set to add to the cost of doing business in an economic setting where employers pay mandatory fees monthly to staff health and pension schemes.

The monthly stipend will be offered for six months in a period when the State hopes workers affected by job cuts would have tapped new work or entered business.

The fund is part of the post-Covid recovery blueprint to ease the pain of loss of income, put money in people’s pockets and spur demand for firms’ goods and services. The State targets implementing the fund within the next financial year starting July 2022.

The unemployment fund, to be managed by the Social Protection Department under the Labour ministry, mirrors that of South Africa -- which has so far disbursed huge amounts of money to support of millions of workers and businesses affected by the vagaries of the Covid-19 pandemic.

The South African scheme, which was established in 2002, also involves employees contributing one percent of their pay, which is matched by employers.

South Africa had by February disbursed 58.15 billion rand (Sh376.97 billion) through its Covid-19 Temporary Employer-Employee Relief Scheme (Covid-19 TERS) to help millions of workers hit by the national lockdowns to stem the spread of Covid.