Employers call for action as Kenya’s private sector faces growing challenges

Kenya’s private sector is under pressure as rising costs, regulatory unpredictability, and falling investor confidence create an increasingly difficult business environment, the Federation of Kenya Employers (FKE) warned at its 66th annual general meeting.

FKE President Dr. Gilda Odera said Kenya is facing unprecedented challenges, with the 2024 World Citizenship Report ranking Rwanda, Uganda, and Tanzania above Kenya as preferred destinations for wealthy investors.

"Notably, the 2024 World Citizenship Report ranked Rwanda, Uganda, and Tanzania as more attractive destinations for high-net-worth individuals than Kenya, highlighting growing concerns about our investment climate, and this is unprecedented," Dr. Odera said.

The main issues weigh heavily on employers, who face growing operational expenses caused by statutory levies such as the housing fund and contributions to the Social Health Insurance Fund (SHIF).

These costs, coupled with frequent changes in rules, have undermined business stability, resulting in layoffs in many industries.

The Kenya National Bureau of Statistics reports that formal sector job creation dropped to 75,500 in 2024, down from 123,000 the previous year.

FKE CEO Jacqueline Mugo expressed alarm at this trend, pointing out that Kenya’s labor market is not keeping pace with the swelling numbers of young job seekers.

"This decline comes at a time when between 800,000 and 1.2 million new job seekers enter the labour market annually, while more than 5 million people remain unemployed. This stark mismatch between job creation and labour market demand illustrates a harsh reality that Kenya is educating its youth for a lifetime of unemployment unless something changes," she explained.

Despite welcoming certain aspects of the 2025 Finance Bill, the Federation raised concerns over new policies that may further disrupt business operations.

These include a clause allowing the Kenya Revenue Authority to access confidential business information and prolonged delays of up to 180 days for tax refunds.

"Policy unpredictability and frequent regulatory changes have made long-term business planning challenging," Dr. Odera added.

The Federation is urging the government to pursue targeted reforms that support the private sector’s growth, create jobs, and boost investor confidence.

These measures are seen as critical to helping Kenya regain its competitive edge in the region.