Grim outlook as factories freeze hiring, signal layoffs

The majority of Kenyan factories have frozen fresh recruitment amid uncertainty in regulatory and trade environments, an industry survey suggests.

The findings paint a grim outlook in the sector expected to generate 800,000 new decent jobs under President Uhuru Kenyatta’s ambitious socio-economic transformation strategy, the Big Four agenda.

A Kenya Association of Manufacturers (KAM) quarterly research showed slightly more than three-quarters of manufacturers surveyed did not plan to hire new staff in the next six months.

Some 43 percent of the firms said they plan to retain their present workforce, while 33 percent are looking at trimming staff to protect profit margins.

Factories, which plan to recruit more staff (24 percent), said they are largely targeting semi-skilled and unskilled workers.

“The most sought after employees by companies planning to hire in the next six months are: blue-collar workers (semi-skilled or unskilled workers) at 63 percent, white-collar workers (skilled/specialised workers) at 16 percent and professionals (technology/engineering) at 16 percent,” KAM said in quarterly manufacturing barometer released last Friday.

The findings come barely a month after the Kenya Private Sector Alliance (Kepsa) warned of a new wave of layoffs.

The umbrella body for businesses indicated companies, which suspended new investments, hiring of new employees and cutting budgets for corporate sponsorships in the last three years to protect jobs, are increasingly running out of options.

“Normally, companies try to cushion their employees during hard economic times albeit in the short-term,” Kepsa head of policy research analysis and public-private dialogue Victor Ogalo told the Business Daily early last month.

“However if the situation persists, they are forced to make the hard decisions including downsizing, restructuring of operations, job cuts, suspending some projects, or closure and relocation. This is the risk we are staring at as a country,” he said.

About 61 percent of managers of the factories surveyed listed cost of raw materials as the main threat to business growth followed by wage increment pressures (57 percent), falling profitability (54 percent), taxation (48 percent), energy costs (43 percent) and unhealthy competition from cheap imports (43 percent).

As a result, 52 percent of the factories do not plan to deploy new capital into their businesses in the next six months.

“With the current regulatory environment and uncertainty in the trade environment, shareholders are not willing to invest; investors have been deferring their planned investments over the past two years,” KAM said.