The Federation of Kenya Employers (FKE) has recently unveiled a distressing revelation regarding Kenya’s formal private sector, indicating a substantial loss of 70,000 jobs between October 2022 and November 2023.
In an official statement from FKE National President Habil Olaka and Executive Director Jacqueline Mugo, it was underscored that a staggering 40% of employers in the sector are considering downsizing to cope with a significant surge in operational costs within the country.
FKE has expressed deep concern about the fragile state of employment in Kenya, still grappling with the aftermath of the COVID-19 pandemic. Adding to the challenge, the organization criticized government policies, particularly the recently enacted Finance Act of 2023, which introduced numerous taxes, rendering the cost of doing business in Kenya unsustainable.
The Federation pointed out the decline of the Kenyan shilling, which lost 21% of its value between September 13, 2022, and November 22, 2023, reaching an exchange rate of 152.45 against the USD. This depreciation was attributed to capital flight and reduced foreign currency inflow, exacerbated by low export values.
FKE emphasized the excessively high cost of capital in Kenya as a major obstacle for the private sector. The Central Bank of Kenya (CBK) raised its benchmark rate by 100 basis points to 10.5% on June 26, 2023, marking the highest level since August 2016. Consequently, borrowing costs surged, making credit inaccessible for businesses and hindering overall growth.
The federation lamented the current economic landscape, citing a concerning inflation rate of 6.9% in October 2023, as measured by the Consumer Price Index (CPI). Additionally, the Gross Non-Performing Loans (NPLs) to Gross Loans Ratio stood at 15% at the end of the third quarter of 2023, signifying a notable increase from the 13.3% recorded at the beginning of the year.
