The Kenya Economic Report (KER) 2015 whose theme is “Empowering Youth through Decent and Productive Employment” is timely as it provides an in-depth look at youth empowerment with a focus on employment.
According to the report released by the Kenya Institute for Public Policy Research and Analysis (Kiprra), the youth account for about 6o per cent of the labour force in the country, which is estimated to be growing at 2.9 per cent per annum.
Kenya’s median age is estimated at 19 years and the proportion of the population that is below 15 years is estimated at 43 per cent. Further, 78 per cent 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 per cent in 1983-1987 to 82.7 per cent in 2013/14.
This significant increase in the informalisation of employment can be attributed to a shrink in formal employment opportunities over the years. As is the case in most 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, 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 absorb 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, the informal sector is characterised by low wages and a general lack of social security benefits for its employees.
In this sense, jobs provided by the sector are of poor quality. Also, due to the reason that informality is driven by incentives to minimise 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 and small enterprises (MSEs) in manufacturing represent over 60 per cent of establishments and accounts for 29 per cent of those employed in manufacturing.
The breakdown of MSMEs involved in manufacturing according to the 2016 MSME Report by KNBS is 95 per cent as micro, 3.8 per cent as small and 1.2 per cent as medium-sized enterprises. The sector was ranked as the highest contributors accounting for 24.3 per cent of MSMEs gross value added. At publication of the report, this figure stood at 11.7 per cent of gross value added.
This represents a 12.6 per cent 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 reap the benefits of fetching higher market prices for their products.
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 who are engaged in manufacturing to venture into value addition of 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. —The writer is an informal economy analyst — [email protected]