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Monday, July 28, 2014

Government is not doing enough to drive job creation

Unemployment among the youth has reached crisis proportions. According to Uganda’s long serving president, Yoweri Museveni, young people in Eastern Africa engage in conflict because of lack of jobs.

Now governments are talking and taking some action. But are governments doing enough?

In Kenya, the government is getting rid of obstructive red tape and making it easy for private sector to set up business. In turn the government expects private sector to “do all it can to “help young people find dignified work”.

Since 2013 the government now requires that 30 percent of all procurement jobs must be awarded to youth, women and people with disabilities. The government also expects the private sector to apply similar rules in their procurement processes. A core principle of Kenya’s national employment policy is that all major investment projects will be analyzed to determine their potential for creating employment, especially for young people.

Furthermore, Kenya has established mechanisms to increase access to capital for the youth. According to the government the Youth Enterprise Development Fund, worth Ksh. 6 billion has reached 20,000 youth and provided training for 200,000 young entrepreneurs. However, the government recognizes that poverty, youth unemployment, and inequality cannot be addressed without the energy and enterprise of the private sector.

And the private sector is right on cue. Under the Kenya Youth Empowerment Project, Kenya Private Sector Alliance (KEPSA) is has provided internship and training for over 11,000 youth between 2010 and 2014. The project has been placing interns, drawn mainly from Nairobi, in energy, finance, ICT, manufacturing and micro and small enterprises. Kenyatta University has signed a deal with 50 companies to offer paid internship for its students. In June Kenyatta University signed a deal with 50 companies to offer paid internships for its students beginning next month. The concept is based on Canadian Co-op Education where students can elect study-work module that contributes toward their college degree.  

Two things to take away from the foregoing: first, the government recognizes that a vibrant private sector is critical to creating well paying jobs, driving national economic growth and prosperity; second, that the private sector is more than ready to work with government to advance policies aimed at creating jobs. But we must ask one question. What role should government play with regard to creating employment?

The private sector is doing the best it can under what can be described as a less than ideal business environment. But the government is not pulling its weight.  

In my view the core business of government is to facilitate innovation and enterprise. This includes providing security to citizens and business, creating a level playing field based on responsive regulatory environment, which spurs flows of human capacity, technology and finance. More importantly, the government must investment in education to develop the requisite human resource capacity to drive the innovation and creativity needed to build a vibrant and competitive private sector.

On the question of human capacity, we must pay attention to the deplorable state of learning in our schools and universities. In 2012 a study by UWEZO, an education advocacy, revealed that more than two out of every three pupils who have completed two years of primary school fail to pass basic tests in English, Swahili or Math. Equally disconcerting is the recent study by Inter-University Council of East Africa and the East Africa Business Council, which revealed that 51 percent of students graduating from our universities are half-baked.

Government must not crowed out private enterprise, and here is one example. Currently, the government spends billions of tax revenue in purchase or lease of vehicles. We spend billions of shillings in maintenance. The cost of keeping thousands of drivers, who are not so well paid, is colossal. But imagine how many high quality jobs could be created in the transport sector if the government outsourced transportation, including vehicles and drivers to the private sector. Moreover, the Youth Enterprise Development Fund should be managed through grants to private sector, to support skill building and transition from school to work programs.

Progressive legislation could also drive employment creation. How about a requirement by law at the county level for local value creation? Most agricultural products, such as bananas, potatoes, beef, poultry and fish are transported to distant urban markets as raw products, denying millions of young people in rural Kenya stable jobs and income. 

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