The Kenya Economic Report 2015 whose theme is ‘Empowering Youth through Decent and Productive Employment’ released by the Kenya Institute for Public Policy Research and Analysis (KIPPRA) is timely as it provides an indepth look at youth empowerment with a major focus on employment. The youth account for about 6o% of the labour force in the country, which is estimated to be growing at a rate of 2.9% per annum. According to the report, Kenya’s median age is estimated at 19 years and the proportion of the population that is below 15 years is estimated at 43%. Further, 78% of the population is aged below 35 years.
A big challenge facing most youth is the lack of decent and quality jobs; almost three out of every four youth are engaged in the informal economy, traditional agriculture and pastoralist activities. The share of employment in the informal sector in total employment, excluding traditional agriculture and pastoralist activities, increased from about 17.1% in 1983-1987 to 82.7% in 2013/14. This significant increase in the informalization of employment can be attributed to a shrink in formal employment opportunities over the years. As is the case in most parts of sub Saharan Africa, most entrepreneurs opt to venture into informal business as a last resort for it is often the only way they can earn a living.
With Kenya’s median population age being below 20 years of age, in order to arrest the rapidly growing rates of unemployment that have seen a spike in the growth of entrepreneurial informality, the report calls for the development and implementation of employment creation policies and strategies to that will engage this demographic group. Some of the suggestions include investment in productivity enhancement skills, and quality job creation in fast growing and labour-intensive sectors such as services, agriculture and industry, while promoting the manufacture of export goods for the regional and international markets.
Given that about 88 per cent of manufacturing sector employment is in the informal sector, potential interventions in the sector would be a good place to begin. As is the norm, jobs in the informal sector are characterized by low wages and a general lack of social security benefits. In this sense, the quality of jobs provided by the sector are of poor quality. Also, due to the reason that informality is driven by incentives to minimize tax and compliance costs as well as other external factors such as challenges to access of credit, the report suggests that in order to create quality jobs, policy making should mitigate some of the constraints limiting their transformation to formal enterprises.
It is interesting to note that the report also indicates that Kenyan micro, small and medium sized enterprises (MSMEs) in manufacturing represent over 60% of establishments and account for 29% of those employed in manufacturing. The breakdown of MSMEs involved in manufacturing according to the 2016 MSME Report by the Kenya National Bureau of Statistics (KNBS) is 95% as micro, 3.8% as small and 1.2% as medium sized enterprises. The sector was ranked as the highest contributor accounting for 24.3% of MSMEs gross value added. At publication of this report, this figure stood at 11.7% of gross value added. This represents a 12.6% increase over a two-year period. The significance of ingraining a value addition angle into the manufacturing processes of MSMEs cannot be overstated as it will ensure that manufacturers in this sector of the economy not only reap the benefits of fetching higher market prices for their products, but also enhance the growth of robust value chains that are essential to the successful implementation of national industrialization plans. As is the case with most informal enterprises, firms grapple with issues that include limited access to technology as well as limited research and development activity.
It is clear that tackling the challenges posed by informality is a key to providing a sustainable solution to youth unemployment in the country. Focusing on aspects that improve their productivity such as upskilling, increased access to technology as well as investing in research and development processes will enable those that are engaged in manufacturing to venture into value addition for their products. The trickle-down benefits of implementing policies that are centred around overcoming the aforementioned challenges will be an investment in this country’s future.
Informal Economy Analyst.