Kenyan businesses are facing potential layoffs as CEOs plan to reduce their workforce by January 1, 2024, which could bring economic hardship during the upcoming festive season. A recent survey by the Central Bank of Kenya (CBK) conducted between September 4 and 15 revealed that approximately 26.3% of company leaders intend to downsize in the last quarter of 2023.
The CBK’s survey encompassed 1,000 CEOs across various sectors, including manufacturing, financial services, professional services, healthcare, agriculture, tourism, transport, and storage. At the same time, 635 employers indicated they had no intentions of hiring new employees, which poses a challenge for job seekers in Kenya. Only 102 CEOs expressed plans to increase their workforce before the end of 2023.
The reasons cited for downsizing included challenges stemming from high taxation, increased operating costs, reduced consumer demand, and unfavorably exchange rates, creating a difficult business environment for many firms. Following the enactment of the Finance Act 2023, employers have had to shoulder additional responsibilities, such as matching the 1.5% employee housing fund contribution, alongside heightened rates for the National Social Security Fund (NSSF) and select VAT increases.
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The CBK survey highlighted that concerns regarding the business environment and taxation were particularly pronounced in the services and manufacturing sectors, while firms in the agriculture sector were equally apprehensive about the economy and business conditions. Exchange rate fluctuations and diminished consumer demand were also pressing issues. For agriculture sector firms, supply chain disruptions and weather conditions also weighed heavily on their minds.
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In the previous year, significant job cuts occurred in Q4 due to an economic downturn. According to data from the Kenya National Bureau of Statistics (KNBS), the number of unemployed Kenyans rose to 2.97 million at the end of 2022, marking a 2.94% increase from Q3 of that year. These losses were attributed to reduced business activity, primarily driven by political instability and uncertainty related to the 2022 elections.
