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The three companies behind the layoffs have attributed the decision to fire their workforce to different reasons, but mostly cutting on costs/COURTESY

Kenya

Shrinking credit access, automation driving layoffs – analyst

The three companies behind the layoffs have attributed the decision to fire their workforce to different reasons, but mostly cutting on costs/FILE

NAIROBI, Kenya, Aug 9 – In the last one week, more than one thousand people have lost their jobs.

The three companies behind the layoffs have attributed the decision to fire their workforce to different reasons, but mostly cutting on costs.

Last week, Telkom Kenya said it was firing 575 people on account of redundancy.

On Wednesday, Stanbic Bank announced it will let go 255 workers, a move the bank said is aimed at reducing the company’s cost.

Yesterday, loss making cement manufacturer East African Portland Cement (EAPCC) announced it was laying off all its employees in a restructuring plan expected to save the company from further losses.

Capital Business spoke to the Treasury Cabinet Secretary Ukur Yatani on the issue but he maintained that the Kenyan economy is resilient and currently stable, adding that he would address the matter at a later date.

Below are some of the reasons as to why more people are being fired, according to Gerald Muriuki, an analyst at Genghis Capital;

Lack of access to Credit

“The capping of bank interest rates that took effect almost two years ago, has led to a reduction of the number of loans given to companies. This has in turn been affecting the profitability of many companies, hence the decision to fire their workers,” Muriuki said.

For instance, in December 2018, EA Portland Portland saw its revenue decline by 18 per cent, which it blamed on slow market uptake on account of prolonged election period. The company said the knock-on effects of interest rates capping had a negative impact on its revenues.

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Automation of company processes

“Many companies are being forced to reduce their workforce due to the adoption of technology which is replacing human labour. The manufacturing and banking sectors for instance are being heavily affected,” he said.

Muriuki added that more jobs will be lost especially in the banking sector as banks embrace agency banking and automated systems.

 Business Prospects

“Some of the companies that have been laying off their workers have not been doing well for a long time,” Muriuki said. 

EA Portland for instance reported a 30 percent increase in loss to Sh1.26 billion for the half year ended December 2018 up from the Sh949.2 million loss it posted six months before.

The company attributed the heavy loss to increased output prices, a sluggish market and production challenges, arising from the company’s tight working capital position.

Telkom has been operating in an extremely competitive environment and only has a small market share in the telecommunication sector, accounting for only 7.9 percent, compared to Safaricom’s 62.4 percent share and Airtel’s 26.1 percent.

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