Job-seekers face a long spell without work after employers cited a tough economic environment for businesses on inflation and tax burden.
The Federation of Kenya Employers (FKE) says firms are battling flagging sales on eroded consumer purchasing power due to the recent drought, high energy costs and adverse global geopolitical actions such as the war in Ukraine.
This came days after fresh official data suggested Kenyans without jobs increased to 2.97 million persons in the quarter that ended last December from 2.89 million in the prior quarter, two-thirds of whom had given up the active search for work.
“Many businesses, especially the MSMEs cannot afford the costs associated with operating in the formal employment sector. This has led to the growth in the number of unemployed Kenyans as many employers try to manage their costs,” FKE executive director Jacqueline Mugo told the Business Daily.
The number of graduates or retrenched workers who have given up looking for work has increased from 1.33 million in the quarter to June 2020 when businesses shed jobs and froze hiring at the peak of Covid-19 economic hardships to 2.01 million in the quarter to December 2022.
The majority of those who have given up on employment are aged between 20 and 24 at 580,281, followed by 25 to 29-year-olds at 351,125, according to findings of the Quarterly Labour Force survey by the Kenya National Bureau of Statistics.
The 20-24 demographic consists mostly of fresh graduates whose job-seeking is hurt by a lack of experience and a skills mismatch.
“The structure of our economy is such that only 15 percent of wage employment is in the formal sector. About 84 percent is in the informal economy; these numbers continue to rise as many youths opt to not look for jobs after several failed attempts,” Ms Mugo said.
Kenya’s economic activity is estimated to have decelerated further in the fourth quarter after President William Ruto’s administration dropped consumption subsidies that curbed inflation.
The price rises, partly fuelled by the war in Ukraine, have deepened economic problems triggered by the Covid-19 pandemic, including stagnant wages and growing youth unemployment.
The situation is compounded by a confluence of growing mismatch between supply and demand for US dollars which hurts the timely acquisition of raw materials from abroad for factories and weakening of the shilling against the greenback which has raised the cost of imports.
“Employers have borne the brunt of this tough economic environment as we continue to witness businesses in Kenya struggle with many of them either closing shop or on the verge of closing shop,” Ms Mugo said.
“For example, the flower sector has reported eight companies closed shop in the last two years due to the high cost of doing business. We also have many empty retail business spaces, while more than 11 companies listed on the Nairobi Securities Exchange have issued profit warnings in the last two years.”