2024: Year of layoffs as businesses struggle to stay afloat

 David Ndii, Economic Advisor to President William Ruto during a cabinet meeting at State House, Nairobi. [Courtesy]

When Tile & Carpet Centre announced in November plans to downsize, David Ndii, chairperson of President William Ruto’s Council of Economic Advisors, came out strongly to defend the economy’s performance.

He argued that the government’s policies were working exactly as planned—favouring the small-scale economies.

While this may be true, which he defended using data on soft drink production—a metric Ndii said denotes that the middle class is growing—it may be counterproductive considering that Tile & Carpet Centre is not the only business that has been forced to downsize or close down.

This year, redundancy notices from businesses have been a norm as employers struggle to protect their bottom line amid the increased operating costs as a result of taxes either through employees or transactions with other enterprises.

A harsh economic environment became the common phrase in the redundancy notices.

“Due to the reduction in business trading occasioned by the effects of the harsh economic challenges, that have occasioned the reduction of revenue and high cost of running our business, we regret to advise the Ministry of Labour and Social Protection of the organisation’s intention to declare several positions redundant,” read a letter from security company G4S dated November 4, 2024, addressed to the ministry.

The letter said the redundancy would affect at least 400 jobs.

The notice by Tile & Carpet also had the same reason for downsizing its production department based at Athi River.

“Due to a decline in production demand, economic challenges and strategic realignment, it has become necessary to downsize operations at our production plant to maintain the company’s long-term viability,” read the notice.

Local automobile maker Mobius also announced plans to close its doors in August before a mystery investor stepped in to salvage the company that has struggled for years to break even.

Twiga Foods, an e-commerce platform with ties to the United States, and always featured in former US Ambassador to Kenya Meg Whitman’s presentations as testimony of how Kenya is hospitable to foreign investors, also announced letting go of 1,000 staff and sale of its assets as it exits the Kenyan market.

These incidents tell of a different narrative when compared to the “Kenya is open for business” mantra by President Ruto whenever he meets potential investors.

This is even as Ndii has remained adamant that the policies pegged on the Bottom-Up Economic Transformational Agenda (BETA) are working.

“Tile & Carpet Centre is an upper deck business. That is why its flagship outlet is in Lavington. And as I have told you, the debt binge economy will shrink.

“The soft drink business, a bell weather indicator for the mwananchi economy, is up 18 per cent year to August. Bottom-up is working,” he said while responding to news that Tile & Carpet was reducing its production workforce.

This Robin Hood type of approach to growing the economy is also documented in the Kenya Kwanza manifesto.

“Re-organisation of manufacturing and job creation to bring down the big companies that profit from hustlers. It is time for small hustlers to access 80 per cent of the funding and policy attention,” reads the manifesto.

But just last week, the government set up a task force to investigate why businesses are exiting the Kenyan market, which points to the possibility that the Kenya Kwanza administration might have shot itself in the foot with the BETA agenda.

Legislative reforms

The task force comes just weeks after the government through the Ministry of Industry, Trade and Investment concluded an almost similar exercise that brought together private sector and development partners to share their views on the kind of legislative reforms they would like to see to improve the business environment.

During the session, Cabinet Secretary Salim Mvurya said he was aware of previous consultations and confirmed that he had matrices from the European Union and private sector on the issues raised.

“Most of the issues that have been raised now and before are not necessarily resting within the ministry in terms of providing solutions,” he said.

“But because this is the host ministry for trade and industry, I want to tell you that we commit to providing leadership to bring all the other agencies together so that we can get an amicable solution.”

Mvurya has since been moved to the Sports ministry in a Cabinet reshuffle.

Kenya’s economy is projected to grow by 5.2 per cent in 2024, above the 2.6 per cent global average according to the World Bank.

But businesses are not enjoying this expansion as they grapple with high interest rates, increased cost of compliance as the taxman seeks to meet its targets and reduced sales due to taxes that have reduced disposable income for consumers.

While some of the key indicators have stabilised—such as the foreign exchange with shilling now at 129 to the US dollar, inflation rate at 2.8 per cent and Central Bank Rate at 11.25 per cent from a high of 13 per cent earlier in the year—businesses are yet to realise relief.

At the recent Kenya Private Sector Alliance 20th anniversary celebrations, President Ruto said by removing barriers and fostering a more predictable and supportive investment environment, Kenya is attracting both local and foreign investors, driving economic growth and creating jobs.

He said the target is to grow foreign direct investment inflows to $10 billion (Sh1.3 trillion) annually by 2027 with target supported by strategic initiatives, including the establishment of special economic zones, enhanced infrastructure, and policies designed to boost investor confidence.

“These efforts are already bearing fruit, with over Sh230 billion in investments secured through improved ease of doing business reforms.

“Kenya is now well-positioned as a regional investment hub, leveraging its strategic location, robust innovation ecosystem, and strong public-private partnerships to unlock opportunities and drive shared prosperity,” said the President.