Employers sound alarm over 'unattractive' investment environment in Kenya

The Federation of Kenya Employers (FKE) has issued a stark warning about the state of the country’s investment climate, citing rising operational costs, unpredictable policymaking, and eroding investor confidence.

During its 66th annual general meeting, FKE laid bare the pressures facing businesses, warning that the country is losing its edge to regional competitors.

“Notably, the 2024 World Citizenship Report ranked Rwanda, Uganda, and Tanzania as more attractive destinations for high-net-worth individuals than Kenya, highlighting growing concerns about our investment climate, and this is unprecedented,” FKE President Dr. Gilda Odera said.

At the heart of the concerns is the growing operating burden on employers, driven by statutory deductions such as the housing levy and the SHIF contribution.

The Federation says these costs, coupled with shifting regulations, are weakening enterprise resilience and forcing redundancies across key sectors.

In 2024, only 75,500 formal jobs were created, down from 123,000 the previous year, according to the Kenya National Bureau of Statistics (KNBS).

“This decline comes at a time when between 800,000 and 1.2 million new job seekers enter the labour market annually, while more than 5 million people remain unemployed. This stark mismatch between job creation and labour market demand illustrates a harsh reality that Kenya is educating its youth for a lifetime of unemployment unless something changes,” said FKE CEO Jacqueline Mugo.

And while the Federation has welcomed aspects of the 2025 Finance Bill, the body says certain provisions are giving employers sleepless nights.

These include a controversial clause granting KRA access to trade secrets and personal data from businesses, as well as the extended tax refund timelines of up to 180 days.

“Policy unpredictability and frequent regulatory changes have made long-term business planning challenging,” Dr. Odera noted.

Recently released data from the Kenya Bureau of Statistics indicates that employment in the formal sector has been shrinking.

The Federation of Kenya Employers is asking the government to initiate targeted reforms to spur growth in the private sector. This, it says, will help generate jobs and enable it to support the larger economy.