By Luke Anami

Kenya risks sliding into an informal economy following massive layoffs by companies.

The layoffs are as a result of last year’s post-election related violence and the current global recession.

Reacting to the recent announcements by East African Breweries and Zain-Kenya that they will be laying off staff to mitigate against the current financial crisis, the Federation of Kenya Employers (FKE) is petitioning the Government to move in with incentives to cushion companies.

"With the high cost of business all time high, it is inevitable that the layoffs are likely to continue," said FKE National Chairman Patrick Obath.

"It is therefore necessary for the Government to move in with speed to provide incentives for those who want to invest and those that are experiencing the effects of the global financial crisis to cushion against the lay offs," he said.

High cost of retrenchment is forcing Kenyan employers to look elsewhere for cost management opportunities in an economy where growth has slowed down to a near halt — signalling to workers that it may take some time before their jobs are on the line. "We need prompt and co-ordinated Government actions to avert a social crisis that could be severe, long-lasting and global," said Obath.

Whereas last year’s election related violence affected many companies, the global crisis has further worsened the situation, threatening to erase efforts already made by industrial players to improve the economy.

The number of unemployed globally could rise from 190 million in 2007 to 210 million later this year. Kenya is unlikely to escape the crisis. The idea of sliding into informal economy is therefore real.

"We must link better productivity to performances in all sectors of the economy. We must improve efficiency and stop complaining about the situation," said Obath.

An economic employers survey preliminary report released by FKE early this year indicated that up to 500 firms laid off workers in the second half of last year. The survey by FKE titled Effect of Economic Recession & Post Poll Violence on Labour Industry Preliminary Report January 2009, says most firms shed staff due to post-election violence, high labour costs due to the new labour laws and inflation. The report indicates that construction and manufacturing industries were the most affected. With the economy expected to grow by only 2.1 per cent, this situation is set to continue.