The Huge Job Gap in Kenya Needs Innovation, Not Taxation

Kenya is a youthful country. According to the latest census report, 73 percent of Kenya’s population is below 35. For a country to be youthful it is a good thing, but for it to have a huge unemployed youthful population, it loses the meaning and the pride of being “youthful.”

The truth is there is a huge job gap in Kenya. The job market in the country is saturated with young men and women looking for jobs that are hard to come by. Every year, institutions of higher learning in Kenya are emitting thousands of graduates in a saturated market with minimum hope of new jobs coming up. The worry of every Kenyan graduate is how to find a job.

It gets worse when you consider the vast majority of the youth have not attained post-high school qualifications.

Unemployment has been the reason so many young people in Kenya have been running into depression. In 2017, the World Health Organization (WHO) put Kenya at number 88 in terms of depression.

The overall suicide rate came in at 10.28 in every 100,00 people each year. Male suicide rate stood at 16.65 per 100,000 while women suicide rate was at 4.40 per 100,000 people.

The unemployment rate was cited as the main reason behind the rising cases of depression and suicides.

The World Bank, in its report in 2019, said that Kenya should create at least 900,000 jobs annually to deal with the unemployment crisis between 2019 and 2025. The report indicated that the rate of unemployment is likely to rise as youthful individuals are entering a squeezed job market every year.

By the year 2025, the World Bank projected that at least 9,000,000 Kenyans would have joined the job market. The rise of such magnitude would put too much pressure on the already saturated market. Sadly, the government is doing little to put in place mechanisms and programs that are tailored towards creating more job opportunities for Kenyans.

Many young people who come out of institutions of learning in Kenya often choose to try their luck in small-medium enterprises (SME). The SME sector has, for years, been the backbone of Kenya’s economy. The sector employs 86 percent of Kenyans and contributes about 45.5 percent to Kenya’s gross domestic product (GDP).

Despite the fact that the whole economy of Kenya has been thriving on the wheels of SME, the sector faces a myriad of challenges that have led to millions of them shutting down. In a period of five years to 2016, at least 2.2 million SMEs had shut down according to statistics from the Kenya National Bureau of Statistics (KNBS).

This means that at least 450,000 SMEs were shutting down businesses in Kenya each year, translating to 30,000 monthly and 1,000 daily. Ironically, an average of 1,000 businesses are registering in Kenya daily too. But there lacks the sustainability of the same.

Covid-19 has made things worse for the SME sector in Kenya. Most of them have shut down and millions of Kenyans have been rendered jobless. Stats by KNBS showed that Kenya’s unemployment rate had grown two times between the month of April and that of June with 1,716,604 Kenyans losing their jobs in the face of the Covid-19.

During the same period, the number of the employed in the country according to the data agency shrunk to 15.9 million Kenyans from a higher 17.8 million Kenyans in March. Kenya’s unemployment rate stands at 10.4 percent from 5.2 percent in March with the employment to population ratio sliding to 57.7 percent from 64.4 percent.

The number of unemployed grew by 58.6 percent to 1.8 million Kenyans from 961,666 in the first quarter of 2020. The unemployment picture is however further exacerbated by a rise in the number of the long-term unemployed and individuals outside the labor force which masks the unemployed statistics. With the unemployment rates continue to rise, one would expect that the government and other stakeholders would do everything possible to ensure that the little that we have as a country in terms of businesses and employees are protected and secured.

At one point, President Uhuru Kenyatta said that the “government of the day cannot determine the success or the failure of a business.” The president said this when he was asked why so many SMEs were shutting down under his watch. The President was wrong to believe that the government has nothing to do with influencing the success or the failure of an SME. The government of the day has everything to do with the success or the failure of a business. The policies that the government puts in place, especially the tax regimes, play a role in either watering the growth of a business or leading to its demise.

With the changing technology around the world, it is important to acknowledge that the majority of SMEs, in an effort to remain afloat and survive and strive through the pandemic, has moved to utilize online platforms to reach both existing and new customers. The majority of SMEs have decided to start online shops to cut down on rent, reach more customers, and to amplify their products and services towards the right niche.

The Kenya Revenue Authority (KRA) organized an online session to explain to journalists and stakeholders the planned rollout of the controversial Digital Services Tax (DST). For those who might not be aware, DST is expected to come to life in January 2021. The government, through KRA, is set to impose a 1.5 percent tax on online platforms such as marketplaces. The move already elicited sharp reactions from the players in the sector who feel the 1.5 percent imposed on online marketplaces and digital platforms will hit-hard on the already struggling sector.

Asked whether there was room for consultations and consensus, a KRA official said; “Our work is to implement the law the way it is. The law is already there and comes January, we are rolling it out the way it is.” So, who says that laws and policies set by a government cannot affect a business?

It should be incumbent on KRA officials to advise and influence its parent ministry on the need to keep businesses sustainable so that the Government can yield more taxes or simply put so that we do not kill the goose that lays the golden eggs.