FKE National President Dr. Gilda Odera
The Federation of Kenya Employers (FKE) has issued a detailed press statement outlining critical challenges facing the business environment in Kenya and setting out key priorities for government action in 2025.
During the press briefing, FKE National President Dr. Gilda Odera and Executive Director Ms. Jacqueline Mugo called on the government to adopt bold measures to address systemic issues affecting businesses and workers.
FKE Executive Director Ms. Jacqueline Mugo:
A Challenging 2024 Business Environment
Reflecting on 2024, Ms. Mugo highlighted mixed outcomes from government reforms in various sectors, including health, housing, tourism, agriculture, and manufacturing. “While we acknowledge the positive growth in tourism and hotels due to the post-COVID-19 recovery plan, other sectors have struggled with significant challenges such as low demand, liquidity constraints, and high operational costs,” she stated. She urged the government to build on the gains made in tourism by offering visa-free entry to transit travelers and visitors staying less than 96 hours to further boost the sector.
The FKE noted that the introduction of the Social Health Insurance Fund (SHIF) and Social Health Authority (SHA) has faced “teething challenges” that hinder efficient access to healthcare for Kenyans. Dr. Odera stressed, “Transparency, inclusivity, and clarity in governance must be prioritized to ensure Kenyans can access healthcare seamlessly.”
Despite reforms, employers were hit hard in 2024 by rising production costs, unpredictable tax regimes, and frequent legislative changes. According to Ms. Mugo, “These challenges strained businesses, led to redundancies, and hindered compliance with the Employment Act, particularly the two-thirds payroll deduction limit.”
FKE’s Priorities for 2025
The Federation called on the government to focus on fiscal responsibility, tax reforms, formalization of the informal sector, and strengthening labor relations to restore economic stability.
Fiscal Responsibility: FKE urged the government to streamline public spending, clear pending bills, honor collective bargaining agreements (CBAs), and reduce bureaucratic overlap between national and county governments. Dr. Odera emphasized, “Fiscal responsibility is not just a matter of numbers; it’s about restoring trust, curbing waste, and ensuring every shilling spent delivers value.”
Tax Reform: To address the high cost of doing business, FKE recommended adopting a stable and predictable tax regime that avoids overburdening businesses. Ms. Mugo appealed to the government, stating, “Introducing new taxes in this climate would only exacerbate financial pressures on businesses and households. We need policies that foster growth, not stifle it.”
Support for SMEs: The FKE called for clear standards for informal enterprises, access to credit for production, and promotion of cottage industries to boost rural economies. “Small businesses are the backbone of Kenya’s economy. Supporting their growth will create jobs and drive innovation,” said Dr. Odera.
Labor Relations: FKE urged the government to gazette pending tripartite wage councils, including those for private security, hospitality, and seafarers. Ms. Mugo stressed, “Effective social dialogue is key to industrial harmony. Delays in implementing return-to-work formulas and negotiated agreements erode trust and disrupt essential sectors like healthcare and education.”
Focus on Agriculture
Employers in the agriculture sector, a key pillar of Kenya’s economy, raised alarms over rising air freight costs, stringent EU market demands, and delayed VAT refunds. “The cost of air freight has risen by 40% since 2021, putting Kenyan flower exporters at a disadvantage compared to competitors like Ethiopia and Ecuador,” Dr. Odera explained. She urged the government to negotiate favorable terms through the Economic Partnership Agreement (EPA) and leverage Kenya Airways to expand freight capacity.
The FKE also highlighted delays in VAT refunds amounting to KES 12 billion, which continue to disrupt agricultural operations. “Delayed refunds create cash flow problems, hinder growth, and threaten jobs in the sector,” said Ms. Mugo.
Tea Sector Concerns
Illegal activities and lack of law enforcement in Nandi and Kericho have disrupted tea operations, jeopardizing employment and livelihoods. The Federation called for urgent government intervention. “The tea sector is a critical pillar of our economy, supporting thousands of jobs. Disruptions in this sector will only worsen unemployment,” said Dr. Odera.
A Call for Collaboration
The FKE called for a collaborative effort between the government and stakeholders to address these pressing issues. “Let 2025 be the year we come together to create a conducive environment for business growth and improve the lives of all Kenyans,” urged Ms. Mugo.
The Federation reaffirmed its commitment to working with the government and other partners to ensure Kenya remains an attractive destination for investment and economic growth.
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