Focus should be on jobs and peace in 2017

The World Bank estimates Kenya’s unemployment rate at 40 per cent.

This is a deep concern in light of the fact that the vast majority of the jobless are the youth.

With 2017 being an election year, the last thing we want is a large pool of disgruntled and jobless youth who can be easily manipulated into backing nefarious political agendas.

This could cause instability and dampen economic growth.

Fortunately, Kenya does not have to reinvent the wheel to spur job creation.

The SME sector is replete with potential and can absorb many of the youth who have commendable skills but no jobs.

SMEs account for about 45 per cent of Kenya’s GDP and employ up to 85 per cent of the country’s workforce.

Consequently, SMEs need to be viewed within the greater context of the instrumental role they play in job creation.

It is, therefore, imperative that we not only highlight and understand the issues facing SMEs, but more importantly, address them.

One is their high failure rate. Seventy per cent of SMEs fail within the first three years, according to a study by Invest in Africa and Strathmore Business School.

This means that although SMEs create jobs, those jobs are not sustainable.

WHAT TO WORK ON
Efforts to make the SME sector more robust and stable, therefore, need to be intensified in 2017.

A good starting point would be ensuring that SMEs have access to markets and affordable financing.

At the same time, the firms should be apprised of the benefits of joining business lobby groups that can help them engage in a more persuasive and professional fashion.

Another area where we can leverage to create more jobs is agriculture.

According to the World Bank, agriculture is 2.5 times more effective in eradicating poverty than any other sector.

Nevertheless, to tap this potential, we should move past our fixation with primary produce and explore value-addition such as food processing.

Food processing has become particularly lucrative due to prevailing changes in the domestic consumer market.

Food processing and textiles account for 60 per cent of the manufacturing work force in Kenya.

We must actively strive to consolidate the gains we have made in improving manufacturing and the broader business environment.

For instance, the standard gauge railway, which is expected to be launched this year, will substantially reduce transport costs for businesses.

The beneficiaries should translate these cost saving into growth and employment opportunities.

Other reforms aimed at improving the business environment — such as lowering the cost of energy and simplifying the business registration process — also need to be sustained.

PEACE

Kenya has made tremendous strides in the World Bank Ease of Doing Business survey because of these reforms.

Kenya has investment needs of about 25 per cent of GDP against local savings of around 16 per cent.

This highlights the need to plug the deficit through foreign direct investment.

Kenya must, therefore, sustain the gains it has made by enhancing its appeal to international investors, to keep investments flowing in.

This can be achieved by leveraging on economic diplomacy.

Through this, Kenya has in a few years managed to shift its existing diplomatic relations to a more commercial footing.

Going forward, it is imperative that we assess the agreements we have signed to ensure that they advance our interests.

It is also important to remember that our foreign relations could improve or deteriorate this year depending on how peaceful the elections are.

All leaders across the spectrum — business, political, and religious — must, therefore, reiterate the need for peace in the lead-up to the polls.

Mr Kittony is chairman, Kenya National Chamber of Commerce and Industry. [email protected]