Nairobi: The private sector lost its jobs creation momentum last year as economic growth decelerated for the first time since the 2008 post-election crisis dip, official data released on Tuesday indicates. Though it maintained its position as the second largest source of new jobs, a drastic drop in the growth of agriculture output capped the private sectors ability to create new jobs at 47,000 or 3.4 per cent compared to 56,000 the previous year reflecting 2011’s slowdown in the pace of economic activity to 4.4 per cent from 5.8 per cent the previous year.
Economic Survey 2012, whose result Planning minister Wycliffe Oparanya released on Tuesday indicate that the decline in agriculture’s output growth to 1.5 per cent from 6.4 per cent the previous year was the single largest contributor to the private sector’s inability to create employment.
Agriculture remains the single largest contributor (24 per cent) to Kenya’s total annual output or gross domestic product (GDP), whose performance is tightly linked with the overall performance of the economy.
At 4.4 per cent, Kenya’s economic growth stands at below half the 10 per cent target that the country needs to achieve and sustain in the next 18 years to realise the goal of becoming a middle income state by the year 2030.
Official data that Mr Oparanya released indicates that the government created 21,000 new jobs taking the formal sector’s tally to 68,000 out of the total 520,100 new jobs that the economy generated last year.
That means the informal sector, mainly made up of micro-enterprises, retained its position as the leading source of new employment having generated more than 85 per cent of the new jobs last year -4.7 percentage points more than the previous year.
More than 700,000 high school and college graduates enter the labour market every year and the creation of 520,100 jobs means the ranks of the jobless rose by more than 200,000 deepening the Kenya’s bourgeoning unemployment crisis.
Unemployment, especially among the youth, estimated at 35 per cent, tops the list of Kenya’s leading social and economic challenges that has also been described as a time-bomb waiting to explode.
Last year, the building and construction industry – mainly associated with the mega infrastructure and housing projects – was the biggest contributor to employment creation having grown by 9.5 per cent.
The total value of reported private buildings works completed in selected towns rose by 12.4 per cent to stand at Sh43 billion in 2011 opening thousands of new temporary jobs that helped cut down overall unemployment in the country.
Cement consumption, a key indicator of the performance of building and construction sector, increased by 10.6 per cent to 3.1 million tonnes as credit, the main driver of activity in the sector, rose by 56 per cent to Sh50.8 billion, the survey said.
The robust growth in public sector employment is linked to recruitment of thousands of teachers, police officers and other civil servants.
“The Teachers Service Commission registered the highest rise of 6.4 per cent in the review period to stand at 258,700 thousand,” the report says. “Employment in the central government also rose by 7,900 thousand as a result of recruitment of police officers and other civil servants needed to cover for the increased demand for their services.”
State corporations however expanded the number of their employees by only a small margin of 1.5 per cent while employment opportunities shrank in local authorities by a margin of 4.9 per cent.
It was a difficult year for the private sector employees – both old and new – as wages (having risen by an average of 3.9 per cent) trailed inflation rate which stood at 14 per cent leaving real earnings down by about 10 per cent.
Public sector earnings however rose by 8.4 per cent, reflecting the increasing power of unions that won higher wages for their members.
Mr Oparanya said that both public and the private sector wages rose at an average rate of 5.4 per cent, trailing inflation by 8.6 percentage points.
The highest increments were recorded in local government agencies where earnings rose by 14.5 per cent, followed by central government employees who earned 9.8 per cent more and teachers who got 8.9 per cent more during the year.
Mr Oparanya said that growth is expected to remain constrained at between 3.5 and 4.5 per cent this year citing high oil prices, a decline in credit growth in the wake of high interest rates and a slowdown in investments related to the coming General Election.
“The slump in demand from developed countries will affect the current accounts of emerging and developing economies leading to subdued growth,” said the minister.
Mr Oparanya said his ministry had identified fast-tracking infrastructure spending especially on roads and energy, standard-gauge railway construction, dam construction to speed up growth.
“We need to quicken development expenditure if economic growth is to pick up pace. The cumbersome procurement procedures are preventing the absorption of development expenditure and must be addressed,” said Mr Oparanya.
Growth was higher in 2011 in Uganda at 5.2 per cent while in Tanzania’s economy expanded at 6.1 per cent. This year, GDP growth in Uganda and Tanzania is expected to be 5.5 and 6.1 per cent, respectively.
Kenya’s 4.4 per cent GDP growth was realised on the back of increased remittances, higher credit expansion as well as spending on infrastructure but bad weather, high oil prices and inflation slowed down the overall output growth.
The survey found that the country received depressed rainfall during the first quarter of 2012 with many tea growing regions suffering severe frost that led to lower output.
A recent survey by the Monetary Policy Committee of the Central Bank showed that the private sector has projected GDP growth this year of five per cent or more, noting the improved economic environment including a decline in interest rates.
“Interest rates [are] expected to decline in the remainder of 2012 with the declining inflation and reduction in government of Kenya domestic borrowing which could improve liquidity conditions…Most private sector firms expect a growth of five per cent and above in 2012 with the improving economic environment,” said the MPC in the survey conducted among major companies in major towns.