In Summary
  • Many workers lack what the report refers to as “broad skills,” such as marketing, accounting and business management, in addition to technology and credit facilities.  
  • According to a 2015 report by the United Nations Economic Commission for Africa, the high rates of informality in African countries such as Kenya are due to a large supply of labour, and a lac of social safety nets.

Kenya must do more to assist informal business formalise if it is to improve economic growth, a World Bank report and economic data show.

The World Bank 2016 Economic Update released recently pointed out that while young companies contribute in a large way to the creation of jobs, the formation of new companies in Kenya is slow.

The report says that such informality is likely “to trap people into poverty.

Older, more established companies tend to hire more permanent workers, but such companies make up only one quarter of all non-agricultural jobs in the country according to the report.

The most productive companies in the country were not creating jobs, and a negative relationship existed between job creation and productivity, meaning that the least productive firms tended to create more employment. 

While more people are doing jobs, the jobs are not becoming more productive.

Young firms are businesses that are five years old or less

According to data from the Kenya National Bureau of Statistics, over the five years from 2010 to 2014, the split between workers in the formal and informal sectors in Kenya remained largely unchanged.

In 2010, 18 per cent of all workers worked in the formal economy while 82 per cent worked in the informal sector. In 2014, 17 per cent of all workers worked in the formal sector while 83 per cent worked in the informal sector.


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