Kenya Firms Struggle Despite GDP Growth

Kenya’s impressive economic growth amid reports of struggling companies and job losses is raising concerns about the overall health of the economy.

The gross domestic product has grown impressively rising from $55 billion in 2013 to $63 billion now, AllAfrica reported.

Last year, Kenya National Bureau of Statistics said the economy grew by 5.6% and the World Bank has predicted it would grow by 5.9% this year. East Africa’s largest economy remains robust.

But reports continue to emerge of companies struggling to get by as others resort to job cuts to survive, citing a difficult operating environment.

The government, which is supposed to be the single largest employer, froze employment in 2013 to tame the rising wage bill that was reported to have hit Sh568 billion ($5.51 billion) a year with only crucial areas such as the security sector exempted.

The fate of recommendations of the Intergovernmental Steering Committee for Capacity Assessment and Rationalization of Public Service that were made in 2014 is also not clear. The plan, which had proposed to retrench 40,000 civil servants by the end of this year, is said to be waiting for the “appropriate time” for action as the country enters election cycle.

Prof Margaret Kobia, the head of the Public Service Commission, says this freeze in employment is as a result of devolution.

“The only way government can increase jobs is by facilitating economic growth and it should not be looked at as an employer of the future because the reason devolution is here with us is to decentralize jobs,” she told the Nation newspaper.

 Mass Layoffs

This now leaves the private and informal sectors with the burden of creating jobs, but a string of recent job losses especially among listed companies and the shutting down of some companies is raising concern.

Last week, Royal Media Services and Sidian Bank became the latest companies to be caught up in the web of mass layoffs citing difficult operating environments. But while RMS chose to directly retrench part of its staff, Sidian Bank opted to give its employees a softer landing through an early retirement scheme. Family Bank has also asked staff to apply for voluntary early retirement.

Economic experts, however, argue that Kenya has over the years gotten it wrong in development priorities and regulations, ignoring potential job creation avenues and leaving the country a net importer of finished products.