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Kenya staring at second wave of unemployment crisis

Kenya's unemployment rate was 2.64 percent in 2019. This represents a steady decline from the increase after the financial crisis.

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By Steve Umidha

Kenya is on the brink of unemployment crisis with as many as one in three Kenyan workers staring at a possibility of losing their jobs. This as the country continues to be rattled with the second wave of the pandemic.

A new report by the World Bank (WB) christened, Navigating the Pandemic has painted a disturbing picture which shows that most employed Kenyans could soon lose their daily source of income as a majority of companies face a high risk of temporary or permanent closure and reduced revenues.

Kenyan labor force, particularly young people are disproportionately employed in restaurants, entertainment joints, tourism sector which were largely shut down on March and remained closed through the three-month dry spell and beyond when the country went into a lockdown – with retail, another popular source of jobs for young people, also hit hard.

As a result, the WB report now says the country should prepare for tougher period ahead as more companies look to close shop owing to the ongoing pandemic.

“Many wage workers who are still employed face reduced working hours, with average hours decreasing from 50 to 38 hours per week. Almost 1 in 3 household run businesses are not currently operating, and between February and June average revenue from household run businesses decreased by almost 50 percent,” reads the report released on Wednesday.

The report also found that as a result of the pandemic, poverty levels by Kenyan households jumped by 4 percentage points, an equivalent of 2 million additional households that were impacted by Covid-19 leading to sharp decreases in incomes and employment.

The unemployment rate increased sharply, approximately doubling to 10.4 percent in the second quarter as measured by the Kenya National Bureau of Statistics (KNBS) Quarterly Labor Force Survey.

Kenya’s economy has been hit hard by COVID-19, severely affecting incomes and jobs. The economy has been exposed through the dampening effects on domestic activity of the containment measures and behavioral responses.

A total of 604 firms in Kenya sent workers home due to the coronavirus fallout, according to Federation of Kenya Employers (FKE) which said that at least 33 jobs were lost in every modern sector company between March and August 2020 – that number is expected to swell if estimates by WB are anything to go by.

The Kenya National Bureau of Statistics estimated that around 1.7 million people had been made redundant due to the outbreak during this time, a figure that FKE had termed as ‘conservative.’

WB’s predictions go against recent Stanbic Bank Kenya Purchasing Managers Index (PMI) Survey which showed that Kenya’s private sector recorded a fourth straight month of growth in October, with output and new orders rising solidly amid second phased re-opening of the economy.

In October the PMI report also showed that firms raised their input buying during the month, with the rate of expansion the sharpest in the series so far. Subsequently, the same report indicate that pre-production inventories had increased noticeably with respondents, acknowledging that stocks increased in tandem with favorable predictions for future demand.

Last month’s PMI Survey stood at 59.1 which bettered September’s 56.3 the best since the survey began in January 2014 – a six year spell with readings above 50 signaling an improvement in business conditions on the previous month, while readings below 50 show a deterioration.

The PMI index rose from 53 in August from 54.2 a month earlier – a consistent steady growth since the downturn caused by the Coronavirus (Covid-19) outbreak.

The pandemic, the WB noted, had aggravated food insecurity, and elevated pain and human suffering with tax revenue dropping below target, due to the marked slowdown in economic activity, as well as tax relief as part of the government’s fiscal response package.

The National Treasury in its post COVID-19 economic recovery strategy has also suggested that Kenyans holding jobs to pay a two percent tax from their incomes to cushion the unemployed as part of new government plans in the next two years – a controversial pronouncement that is already evoking a cocktail of retorts.

National Treasury wants proceeds from the tax to be partly contributed by employers at the rate of one percent are expected to go into the soon to be set up unemployment insurance fund (UIF).

“The government will establish a UIF to cushion workers in financial distress by providing them with short-term relief when they become unemployed, or are on unpaid leave or unable to work because of illness,” the National Treasury said.

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