Kenya: Foreign firms cut new jobs 60pc
Wednesday, November 21, 2012
Rioters engage police in running battles along Juja road on November 19, 2012. PHOTO / JENNIFER MUIRURI
The number of jobs created by foreign companies dropped 60.4 per cent in the nine months to September on reduced foreign direct investments in the country.
Data from the Kenya Investment Authority (KenInvest) show that jobs created by foreign direct investments (FDI) stood at 3,957 employees in the review period compared to 10,017 the year before.
This came as the value of FDI fell to Sh51.2 billion from Sh102.7 last year in what has been linked to a weak global economy and heightened political risks in Kenya ahead of the March 2013 General Elections.
The major slowdown in new jobs growth is a blow to the labour market, which last year saw the private sector slow down hiring to preserve cash and boost profits on uncertain economic outlook and a higher political risk profile.
New private sector jobs stood at 47,000 last year compared to 56,000 in 2010, mainly driven by a sharp decline in the agricultural sector that accounts for the bulk of economic activity.
“Kenya still remains a strong investment destination and FDI is likely to rebound after the elections,” said Mr Sammy Onyango, the chief executive of Deloitte East Africa.
FDI in the manufacturing sector dropped to Sh6 billion in the period to September from Sh18.4 billion in similar period last year, creating 2,456 new jobs compared to 2,907 jobs.
Foreign investments targeted at the construction sector dropped from Sh50 billion to Sh1.1 billion, a drop that saw new jobs in the sector shrink to 58 from 1,386.
A surge in global commodity prices, investor appetite for new frontier markets and oil finds in Kenya have increased investor’s appetite in Kenya’s natural resources and this interest is set to shape future FDI flows.
A recent report by the United Nations Conference on Trade and Development (UNCTAD) says FDI has slowed down on a global level, attributing the trend to cash-preservation strategies by multinationals in the wake of uncertainties in the world economy.
The trade organisation says global FDI stood at $1.5 trillion last year and expects it to grow marginally to $1.6 trillion this year — 23 per cent lower than the pre-crisis FDI levels.
“Despite record cash holdings, transnational corporations have yet to convert available cash into new and sustained FDI, and are unlikely to do so while instability remains in international financial markets,” UNCTAD said.
Kenya’s rising risk profile has also been worsened by increased terror attacks. Rating agencies used by Lloyds of London have raised Kenya’s risk rating to 4.5, just 0.5 points shy of the maximum rating of five, giving the country a high political risk perception similar to that accorded to war-torn nations like Somalia.