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Last week’s announcement by the Energy and Petroleum Regulatory Authority, which brought the retail price of a litre of petrol to an unprecedented Sh220 in one fell swoop, serves as a poignant indicator of the formidable challenges currently faced by Kenyans.

Surge in fuel prices compounds the existing harsh cost of living crisis, marked by rising prices for essential goods, a barrage of new taxes, and the depreciating value of the shilling. The situation is further exacerbated by diminishing job opportunities and increasing layoffs in various sectors.

The anticipation of further fuel price increases worsens this predicament for Kenyans, owing to the recent conflict between Israel and Hamas, which has already driven up global oil prices. While external factors undoubtedly contribute to fuel price fluctuations, we must acknowledge our own role in the current economic plight. Our inability to foresee this risk and implement measures that may shield the economy from the impact of excessively high fuel costs has been a contributing factor.

Be that as it may, the high fuel costs is more than just an economic concern; for it directly exacerbates Kenya’s most critical challenge – unemployment. According to recent data, Kenya’s overall unemployment rate stood at 4.9 per cent in the last quarter of 2022. However, when we examine youth unemployment levels, the picture is far grimmer, with approximately 30 per cent of the young generation currently without employment.

Two salient observations come to mind. Firstly, clearly, it is improbable that a substantial number of quality jobs will become available in the next few years, and most of those that do emerge may be absorbed into the government, further inflating Kenya’s already substantial wage bill, which currently stands at Sh1 trillion.

Secondly, considering the punitive tax regime that seeks to extract even more from an already heavily taxed population, the country must explore innovative strategies to incentivize entrepreneurship and attract foreign direct investment.

The political and business elite must wake up and smell the coffee because Kenya faces an urgent need to generate millions of new jobs annually, particularly for its burgeoning youth population.

In my opinion, a deliberate shift towards low-cost manufacturing can serve this government a strategic solution to address the pressing unemployment crisis. This is because manufacturing is inherently labour-intensive, and establishing a low-cost manufacturing base necessitates a substantial workforce equipped with a diverse set of necessary skills and expertise. As the manufacturing sector expands, the demand for local labour will increase significantly. 

Moreover, manufacturing is not an isolated sector; it relies on a complex web of suppliers, logistics providers, and support services triggering nodes of growth nearly everywhere in the economy.  This network further generates a ripple effect for more employment opportunities throughout the supply chain, ranging from raw material sourcing and transportation to quality control and packaging. Countless positions are created, contributing to job creation.

Growth in these sectors places additional income in the hands of Kenyans, stimulating consumer spending and further contributing to the economy and job creation. This is what is called the multiplier effect– the effect on national income due to an increase in demand — and it extends beyond manufacturing and positively impacts various sectors, including retail, hospitality, and services.

To achieve this, proper and deliberate investment in vocational and technical education, especially through partnerships with the private sector, is essential to bridge the skills gap. More importantly, the nexus between industry and political power must play a pivotal role in shaping an environment that can attract investors and create jobs.

 — The writer is the Business Editor, People Daily