Unemployment remains the biggest risk for businesses in Kenya, a newly published World Economic Forum (WEF) survey of business leaders showed.
The company executives put unemployment or underemployment as the top risk over the next 10 years, followed by terrorist raids and cyber-attacks, data from the WEF’s Executive Opinion Survey showed.
The leaders polled failure of regional and global governance as the fourth highest risk to business followed by food crises.
The WEF report published on Monday uses data from The Global Risks Report 2019 and the Regional Risks for Doing Business 2018 report to offer an overview of the risk environment in sub- Saharan Africa.
“The combined insights are necessary in a time of immense complexity when risks — particularly environmental and macroeconomic — are spanning national and regional boundaries” the WEF said.
Unemployment or underemployment?
Kenya has high unemployment rates. According to survey by the Kenya National Bureau of Statistics (KNBS) in 2018, unemployment rate stands at 7.4 per cent, with majority (85 per cent) of the unemployed persons aged below 35.
Former World Bank chief economist for Kenya Apurva Sanghi says Kenya’s high unemployment rate is mainly attributable to the fact that the country’s ability to create new jobs has lagged behind the population growth, thinning formal opportunities.
Official data reveals that the country registered a six-year fall in generation of formal jobs, worsening the plight of millions of job seekers.
Only 78,400 new formal jobs were created in the economy last year compared to 114,400 in 2017. This is the slowest pace of formal job growth since 2012 when the economy churned out 75,000 official jobs.
Recent layoffs have exacerbated the situation as 1,700 people lose jobs from just four companies, signalling a challenging environment for most business.
The four companies include Stanbic that announced a redundancy targeting 225 employees, Athi River-based cement maker EAPCC that said it would let go all its 800 workers, Telcom 575 and EABL 100 of its staff.
Other NSE listed companies that registered redundancy cost in 2018 include Britam (Sh664 million), Stanchart (Sh611 million), National Bank of Kenya (Sh541.3 million), Barclays (Sh 479 million), Kenya Commercial Bank (Sh175 million), Bamburi (Sh153 million), Shelter Afrique (Sh101 million) and British America Tobacco (Sh29.9 million).
Despite a series of counter measures, including deploying its troops in neighbouring Somalia where the Al-Qaeda linked Al-Shabaab militant group remains active, terror remains a threat in Kenya.
Kenyan troops are battling al-Shabaab in Somalia as part of an African Union (AU) peacekeeping force that has been deployed there for more than a decade.
The country has experienced nine major attacks and about 20 minor incidents of terrorist. The most recent is the DusitD2 complex that occurred in January this year that left more than 20 people dead.
The impact of Kenya’s recent terrorist attack is felt greatly by tourism industry. For instance, tourism sector made a comeback only in 2016 after registering a series of attacks between 2011 and 2015.
International tourist arrivals slumped from the highest peak ever recorded at 1,822,900 in 2011 to 1,180,500 in 2015 due to travel advisories during the period.
Consequently, tourism earnings also dropped from Sh97.9 billion in 2011 to 84.6 in 2015.
Digital technology in Kenya is increasingly becoming a threat to industries and organisations in the country. According to the latest edition of Microsoft's annual Security Intelligence Report (SIR), the country lost approximately Sh29.5 billion to cybercrime in 2018.These crimes include malware attacks, third party exposure and SIM Swap.
More worrying is that most companies (60 per cent) face talent shortage of cybersecurity professionals in 2019.
“Kenyan companies are reluctant to develop the skillsets of their security team through frequent trainings and certifications. This is due to the fact that information security is still seen as an expense rather t
han a return on investment” says the report.
The report reveals that the country has only 1,700 skilled cyber security professionals.
“Kenya not only has a shortage of highly technically skilled people, but also an even more desperate shortage of technicians who can design secure systems, write safe computer code, and create the ever more sophisticated tools needed to Anticipate, Detect, Respond and Contain cyber threat”, the reports adds.
However, the country has witnessed cyber vigilance particularly among financial institutions, where regulators released a number of guidelines such as the Sacco Societies Regulatory Authority (SASRA) guidelines on Cyber security and the Ministry of ICT’s Data Protection Bill-which is still under review in Kenya.
Failure of regional and global governance
Kenya has over the years borne the brunt of failed governance in several neighbouring nations such as South Sudan and Somalia which led to an inflow of refugees escaping violence back at home.
Apart from putting a strain on resources in Kenya, conflict in these countries have been blamed for the inflow of illegal firearms into Kenya resulting in increased insecurity.
More than 2.5 million residents in over 20 counties in arid and semi-arid areas are currently facing uncertainty due to prolonged drought conditions earlier in the year.
Unpredictable weather pattern, unreliable and insufficient rains have had a negative impact on farming calendar, consequently compromising the country’s food security.
Delayed and below average long rains (March-May) have had a negative impact on agriculture, which is the mainstay of the economy, leading to rising food prices.
The rate of undernourishment in Kenya stands at 24 percent, a slight improvement from 28 percent a decade ago, putting the country as the 24th most undernourished country in the world out of 167 surveyed and 18th out of 45 countries in Africa.