Half of key sectors yet to regain jobs lost to Covid

Federation of Kenya Employers (FKE) executive director, Jacqueline Mugo. FILE PHOTO | FRANCIS NDERITU | NMG

The number of jobs in nearly half of the private sector in Kenya have not recovered from Covid-induced shocks, an analysis of employment data shows, dimming the hopes of millions of skilled youth joining the labour market.

The latest official sectoral distribution of wage employment for private firms suggests that jobs in eight out of 18 key sectors are yet to return to pre-Covid levels, with employers warning of further pressure as a result of a rise in labour costs.

Federation of Kenya Employers (FKE) has cited stubbornly high inflation, a weakening shilling and new taxation measures to raise business operation costs and slow creation of decent job opportunities in the post-Covid period.

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The Kenya National Bureau of Statistics data suggests that it took the private sector two years to broadly recover the 205,200 formal jobs it shed in the pandemic year following a spate of layoffs, pay cuts, and unpaid leave policies.

This was after formal private sector jobs hit nearly 2.08 million last year, surpassing 2.06 million workers in 2019 for the first time.

However, the data suggests not all sectors have realised a full rebound in workers to pre-pandemic levels.

“Kenya has continued to witness a rise in inflation, which has ultimately increased the cost of doing business, led to the high cost of living and an increase in interest rates,” FKE executive director Jacqueline Mugo recently told the Business Daily, explaining the slow recovery in formal employment.

“This [price growth] pressure is driven by a combination of local, regional and global factors such as climate change, prolonged drought food insecurity, high energy costs and adverse global geopolitical actions that continue to adversely affect the economic activity in our country.”

Firms operating in the transport and storage sector are yet to recover the largest share of jobs lost during the pandemic, followed by accommodation and food service, mining and quarrying as well as electricity, gas and air conditioning supply services.

The jobs in the transport sector are 10.96 percent, or 8,100 workers, short of their 73,900 levels in 2019, the data shows, implying the sector is yet to fully recover from debilitating travel restrictions in the pandemic year.

It is followed by the accommodation and food service sector—the hardest hit by the closure of restaurants and hotels at the height of the pandemic infections — which supported 75,900 formal workers in 2022, 6.53 percent less than 81,200 in 2019.

Firms in mining and quarrying activities had 5.92 percent less workers than 15,200 in 2019, while the payroll for electricity, gas, steam and air conditioning supply services was trailing the 2019 levels by 3.77 percent.

Large sectors whose jobs were yet to fully go back to 2019 levels include wholesale and retail trade, which was short of 267,700 employees in the pre-Covid era by 0.75 percent, or 2,000 employees, and private education facilities which had 1,400, or 0.61 percent, less workers than 228,700 workers before the pandemic struck.

“The increase in business operating costs, has led to a shrink in the formal wage employment opportunities,” said Ms Mugo.

“Many retail stores have closed down including the small businesses; we have many empty retail business spaces; the drought has brought our agriculture sector to its knees; the weak shilling and high costs of imports of raw materials have adversely affected our manufacturing.”

The sectors which supported a full rebound in private sector jobs, on the other hand, include information and communication, financial services, construction, water supply and waste management as well as professional services.

Construction, ICT and financial services were the first sectors whose jobs bounced back to pre-Covid levels in 2021, while employment in manufacturing, agriculture and professional services, amongst others, recovered fully last year.

With most of the new revenue-raising measures coming to force in July, employers have warned the full recovery could be under renewed threat.

Business lobbies have cited the 1.5 percent housing levy, proposed raising of National Health Insurance Fund (NHIF) deductions to 2.75 percent of basic salaries from the current ceiling of Sh1,700 in addition to increased contribution to the National Social Security Fund (NSSF) as well doubling of value added tax on fuel as likely to increase labour costs across the sectors, slowing creation of new job opportunities.

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“When you add it all up, the cost of maintaining employees goes up by as much as five percent. It will force companies to rework the numbers [and], in some cases, companies may start reducing the workforce to manage their headcount,” Antony Mwangi, the chief executive of Kenya Association of Manufacturers, was quoted by the Daily Nation last week.