TRALAC - Trade Law Centre

Kenya: Country needs to move fast on job creation

Wednesday, 04 June 2008

Source: Business Daily (Nairobi)

The Kenyan government has developed a noble target of creating 500,000 jobs as stipulated in the Vision 2030. The question that comes to mind is, how did it arrive at the magical 500,000 jobs and not one million?

While it may be appropriate to set targets, I think the real question is whether we are creating these jobs and if not, what the Government can do to encourage faster growth in employment.

Job creation is on the decline

Statistics show that job creation is on the decline. This is why in this year's budget, I expect Finance Minister Amos Kimunya to come up with some interesting strategies for reversing the declining trend. While employment is being created, it is at a slow pace. Over the last five years, employment grew to 9.5 million jobs in 2007 , up from 7.5 million in 2003. (See graph 1)

While the numbers indicate that an average of 485,000 jobs have been created a year in the last four years, I believe that this reality may not resonate with most Kenyans.

Most of these jobs were created in the informal sector, a sector that is relatively difficult to measure. Job creation in the formal sector has been on the decline - down to 2.5 per cent in 2007. (See graph 2)

As shown, the new employment creation is also on the decline with 5.3 per cent in 2007. (See graph 3)

As can be observed from the above statistics, all is not well and the Government in its budgets needs to come up with specific strategies for job creation and employment.

More thinking and effort is required to increase and reverse the declining trends in the employment rates.

Muscle to create the jobs

The Government has taken a back seat in devising and encouraging specific strategies to create targeted jobs. Much of this seems to be driven and led by the private and informal sector.

The private sector growth has, however, taken place in an environment where the cost of doing business is high, access to bank credit is low and there is general red tape.

Government interventions are wanting in a number of specific initiatives to spur growth of various sectors and create an enabling environment for the private sector to flourish. There is no concerted effort by the government ministries to specifically focus on job creation. If its there, the effects are not be visible.

Hence, there is need for some radical strategic initiatives to encourage employment growth especially in the modern establishments categories. Once implemented, we should be able to target a growth of one million jobs a year for both the formal and informal sectors.

Government to get specific

Our Government needs to get real and shun the present smoke screen approach to job creation and hiding behind the numbers. Examples from Korea, Singapore, India and more recently, Dubai show how governments played an instrumental role in creating near perfect environments for doing business.

As a result, the private sector follows governments initiative and continues the marathon of development and job creation. One could argue that all the ministers should be fit to run the marathon as key criteria to become a minister - some of the fitter ones will survive most will not reach the finish line.

I urge Mr Kimunya to reset the target to one million jobs for the next five years and follow the strategies below.

A number of industries need strong Government support at policy level in funding and direct subsidies to help them revamp.

The sugar industry reports good earnings if well run. This sector needs to be better organised and old factories privatised and restructured. The Government should use some of the privatisation proceeds from Mumias to restructure this sector.

Ailing companies should be shut down altogether and auctioned off to private investors who can run the companies with the disciplines of the private sector.

Miwani and Muhoroni have already been sold. Just these two factories should improve the welfare and livelihoods of over 100,000 residents in that Sugar belt.

Private sector initiatives to acquire such factories should be provided with development lending at concessional rates to encourage longer term growth. More Tana Delta sugar projects should be encouraged as this can yield high quality cane in 12 months as opposed to the 18 months for the Western Kenya cane.

The cotton industry is basically in the grave and so is cotton growing. Cotton is the most important resource in cloth making. China and India import bulk of the cotton from the East African region. Local companies should be encouraged to make value added products as the business case is currently strong.

Kenyan products are likely to be competitive, enjoy preferential duty structures from Europe and Agoa as the investment in this industry is relatively high.

Soft lending and development lending initiatives would encourage local companies to review this, including those in the EPZA in a bid to create employment

Similar initiatives could be implemented for milk, coffee and tea. Milk processing companies such as KCC, Brookside and Spin Knit should be encouraged to expand operations rapidly and even for exports. The Government should encourage farmers with direct subsidies or grants to revert to cattle and milk farming.

Just as we get grants for HIV, Kenyans could get grants for a cow for each farmer earning below the dollar line. Remember, cow milk proceeds were instrumental in sending most children to school.

I have only touched on agriculture but I believe that other industry sectors will benefit from the multiplier and ripple effects of a bigger workforce. Hopefully, this workforce will create a strong middle class population who will in turn jump start growth in middle class consumerism.

Companies in FMCG are doing well and should therefore grow with this impetus. As we have more people getting into formal employment, we need 24 hour cities which will double employment.

Runners are the fastest

Kenyan runners from the days of Kipchoge Keino to the more recent stars are some of the fastest long distance runners in the world.

What we need is for our ministers to run marathons. They need patience, stamina, strength and lastly, that last minute Kenyan killer instinct to win races. They need to develop and implement deep rooted strategies to encourage longer term growth.

As we all know, a 100 metre runner cannot run a marathon at the same speed so we need ministers who take a bird's eye view and develop appropriate strategies for long term gain.



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