FKE fears potential job loses, operational reductions as Finance Act takes effect

Steven Obiro, a representative of Federation of Kenya Employers (FKE) during during a panel discussion on KTN News on Monday, July 3. [Standard, file]

The Finance Act 2023 has sparked concerns from the Federation of Kenya Employers (FKE), who express worry over its potential consequences on employers and businesses.

The Act was assented to by President William Ruto on Monday, June 25, after it was passed by the National Assembly.

Some of the sections of the Act that have been implemented include the 16 percent value-added tax on fuel, which has now led to an increase in fuel prices to Sh195 per litre.

Speaking on KTN News' broadcast dubbed The Impact on Monday, July 3, the FKE representative, Steven Obiro, noted that the Finance Act was likely to have repercussions, including the closure of businesses, unemployment, and a hindered pace of economic growth.

"There are taxes introduced in the Finance Act that will affect employers in different ways. One such tax is the introduction of VAT on petroleum. Employers often rely on vehicles to transport their productions from the production place to the market, and these vehicles consume petrol. As a result, the cost of transportation has increased," said Obiro.

This increase in cost, he said, is likely to affect both the direct and indirect expenses, as even the inputs that are transported on the roads will also become more expensive.

He said employers, who are already facing financial challenges, are not able to easily add to their employees' salaries.

"In order to cope with these financial pressures, employers will be forced to scale down their operations and adopt automation. Furthermore, small and medium-sized enterprises (SMEs) are likely to operate informally in an attempt to avoid the burden of high taxes," he added.

"It is important to question where employers will find the additional funds required for their contributions. Therefore, there is a need for employers and the government to engage in dialogue and find mechanisms that will enhance productivity and improve the quality of our products, thereby enabling access to better and higher-paying markets. By achieving these improvements, we can expect to witness an increase in income and economic growth for the people."

Obiro's sentiments were echoed by Johnson Mbugua, Managing Director of Moov Cafe & Bistro, who says the implementation of the Finance Act will not only have a financial impact on his employees but also come with psychological effects.

"We anticipate challenging times ahead. As a restaurant, we contribute to employment by supporting suppliers and entertainers. Our monthly electricity expenses have increased from around Sh26,000 to Sh27,000 to 45,000, even though our business has declined due to people having less disposable income," said Mbugua.

"This will translate to job losses, but we need to ask ourselves what this will mean for the country in the long run," he added.

According to Eric Omondi, a content creator, the Kenya Kwanza government lied to Kenyans during their campaigns.

"Kenyans are feeling abandoned and left to fend for themselves. I am giving the Kenya Kwanza government 90 days, or else we will constitutionally initiate a recall process," he said.