Business

Why thousands of jobless Kenyans will have to wait longer for employment

A Kenyan worker wears a dust mask as she works at the Hela intimates export processing zone (EPZ) limited factory in Athi River, Kenya, July 27, 2017. (Photo: REUTERS)

By Alfred Onyango | Wednesday, June 12, 2024

CEOs of private sector firms expressed the need to cut costs and improve efficiency as reasons for not hiring.

Most companies in Kenya are not planning to hire additional employees this year as they plan to rely on the present numbers to address the growing market demand, a Central Bank of Kenya survey has revealed.

Conducted in the first three weeks of May targeting CEOs and other senior officers of at least 354 private sector firms, the study reveals there are lower hiring expectations this year by bank and non-bank private firms.

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This could be a clear dent in the hopes of thousands of jobless Kenyans who are desperately searching for sources of income amidst the prevailing tough economy.

Although banks noted some likelihood of hiring this year to grow business, attract new talent and replace exiting staff, the non-bank respondents on the other hand expressed the need to cut costs and improve efficiency as reasons for not hiring.

They largely attribute the prospect of not hiring to the general industry decline in the past months as a result of the challenging business environment.

This is despite an improvement in business activity in the second quarter of this year.

Surveyed company heads noted there was an improvement in business activity in 2024 Q2 compared to 2024 Q1.

They reported increased demand orders, production volumes and growth in sales. However, the number of full-time employees remained largely the same, alluding to the prospect of firms not planning to hire more this year.

Cost of production

Firms in the agriculture sector reported stable demand, production, and sales supported by favourable weather conditions. However, the increased cost of production, especially during times of erratic weather, remains a challenge.

Respondents in the manufacturing sector reported subdued business activity, largely on account of the increased cost of doing business and constrained consumer demand.

In the services sectors, firms in the financial services, education and ICT reported increased activity supported by sector-specific opportunities.

On expectations of business activity in the third quarter of 2024 relative to the second quarter, the majority of respondents reported expectations of subdued business activity.

"This is largely on the back of the expected fiscal measures in the Finance Bill 2024," the CBK report reads.

Business activity in the manufacturing sector is expected to remain subdued as firms utilise their existing idle capacity to meet an unexpected increase in demand in the next 12 months.

The services sector on the other hand is expected to record enhanced activity in the next quarter, largely on account of seasonality and sector-specific growth in demand, driven by expansion strategies that firms are employing.

However, uncertainty around fiscal measures, liquidity challenges, high cost of doing business and geopolitical risks are constraining factors.