Job losses loom for Kenyan workers as firms face uncertaintySaturday April 29 2017
As Kenyans celebrate Labour Day tomorrow, uncertainty over job security looms as more companies plan to reduce staff in the next six months, citing an unfavourable business environment.
Decline in credit extended to goods makers also points to lean times for the Kenyan worker. Lenders are citing the law putting a ceiling on interest rates as the reason they are opting for government paper (debt securities that are issued or guaranteed by State).
Financial, manufacturing, agriculture and transport sectors are expected to be hard hit due to disruptive technologies arising from advances in Information Technology (IT), completion of the Standard Gauge Railway (SGR) and harsh weather conditions.
With the new railway expected to drive a number of trucks off the roads, there are fears that a number of people will find themselves jobless.
Experts in financial and manufacturing sectors have also been criticising Parliament for passing the interest rate capping law.
However, Central Bank of Kenya (CBK) is currently conducting a study on the law and its impact on the economy with the outcome expected next month.
The survey follows concerns of slow growth in credit advance following the enactment of the law in September last year.
“That study is meant to assist lawmakers to make a decision on whether that law should remain or whether it is affecting the economy and whether it should be changed,” said CBK chairman Mohammed Nyaoga in Nairobi at a meeting hosted by Creditinfo Credit Bureau for bank executives.
Banks have warned that they will divert more funds to Treasury Bills and other investments in the forex market rather than lending to traditional borrowers as they consider government debt less risky and more profitable.
CBK data shows that private sector credit growth fell to 4.3 per cent in December last year compared to more than 17 per cent in 2015.
And the Economic Survey 2017 report by Kenya National Bureau of Statistics (KNBS) indicates that loans advanced to manufacturing sector by industrial financial institutions and commercial banksshrank for the first time in five years by 4.6 per cent.
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From the report, 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 to Sh276.359 billion last year.
In 2015 there were 251 approved projects compared to 365 last year, mainly due to the rise in the number of micro and small enterprises financed by Kenya Industrial Estates (KIE).
The financing of projects approved by industrial financial institutions decreased by 4.6 per cent from Sh1.135 million in 2015 to Sh1.083 million in 2016.
Industrial Development Bank (IDB) Capital Ltd approved Sh129.8 million last year compared to Sh252 million the previous year.
“The loans advanced to manufacturing projects in 2016 were for expansion of existing projects and one start-up,” the Economic Survey 2017 states.
Development Bank of Kenya (DBK) approved six manufacturing projects in food, textiles, plastics and polythene bags activities.
The value of the approved projects reduced from Sh341 million in 2015 to Sh292.3 million last year.
The Industrial and Commercial Development Corporation (ICDC) approved loans and equity worth Sh495.6 million for four manufacturing projects.
The Kenya Investment Authority approved 43 manufacturing projects worth Sh11.1 billion last year, a reduction from 48 projects worth Sh8.8 billion approved in the previous year.
In the transport sector, KNBS data shows that registration of lorries/trucks declined by 30.1 per cent from 13,785 units in 2015 to 9,632 units last year.
“Similarly, new registration of buses and coaches decreased by 24.6 per cent from 2,342 units to 1,765 units during the review period,” Economic Survey 2017 says.
The number of newly registered trailers fell by 27.6 per cent to 2,829 units while those of other vehicles reduced by 35.8 per cent from 2,522 units to 1,618 units during the review period.
In addition, newly registered mini buses/matatus dropped by 10.7 per cent from 581 units in 2015 to 519 units last year.
From the above, indications are that less and less jobs are going to be created going forward.