Industries laying off heavily and how to cushion yourself

According to the World Bank, the Kenyan economy is growing at a rate of 6% per annum. With such growth, it is expected that more opportunities of employment are created to absorb young people with the necessary skills. However, in the past five years alone, an estimated 2.2 million SMEs closed shop due to various factors. This, obviously, resulted in job and revenue losses. Additionally, several companies reduced the number of staff in a bid to manage their bottom lines or to reduce expenditure. This was as a result of reduced income or other factors such as the introduction of technology which rendered some positions redundant.

Obviously, such measures affect families as sources of income are affected. While there have been jobs created in other industries in the past couple of years, it is worth noting that job cuts are now on the rise. We will look at some of the reasons why this is happening and what you can do to protect yourself.

But first, let us look at the industries that have been greatly affected by job cuts in the recent past.

1. Media industry:

Late last year, the Nation Media Group shut down Nation FM and QTV. The largest media house in the country stated that it was reorganising itself with the “objective of transforming the Group into a modern Twenty-First Century digital content company of embracing a digital/mobile-first business model.”

Earlier on, Royal Media Services, a leading media company in the country also sent home about 50 members of staff in a move that also affected some of its top reporters and editors. The media house cited a drop in revenue and a plan to move to digital as the causes of this move. Additionally, people are consuming content differently and this means fewer clients for media houses, which shrinks their margins and renders some staff members redundant.

      2.   Banking industry

The banking industry is labour-intensive but lately, the industry has been scaling down in terms of the number of people it employs.

“In the last 3 months of 2016 alone, Kenyan banks have a combined total of 1,000 job cuts” Business Daily.

Last year, Sidian Bank offered early retirement opportunities to some of its members. Family Bank also chose to offer some of its staff member’s early retirement so as to implement layoffs. In November 2016, Standard Chartered Bank also announced that it would be laying off 300 staff members as it was closing some of its branches in Nairobi. Bank of Africa also joined this list when it announced that it would be shutting down 12 branches, resulting in job losses.

3.   Manufacturing industry

Every developed country in the world has had to rely heavily on a booming manufacturing industry. While Kenya tries to boost this sector so as to create jobs and grow the economy, job cuts have been witnessed in some companies. Last year, Sameer Africa, Kenya’s only tyre manufacturing company, shut down its operations in Nairobi, resulting in a total of 600 jobs being lost.

In July last year, Coca-Cola also announced that it was moving its headquarters from Nairobi to South Africa in a move that was meant to streamline its structure.

In 2014, Eveready a leading dry-cells manufacturer shut down its manufacturing plant in Nakuru citing unfavourable competition from cheap imports which had made its operations unsustainable.

Reasons for downsizing

While the economy is said to be growing and the middle class expanding, job layoffs continue to be witnessed at alarming rates and various reasons have been fronted for this phenomenon. It should be noted that these job cuts affect employees at all levels from senior to junior positions. They include;

1. Adoption of new technology

Technology is both good and bad. It has facilitated the ability to do things faster and more efficiently.  It has also eased how people interact, which is a good thing. Businesses have also benefited from the shift to digital marketing, which is touted to be cheaper than traditional marketing. As such, technology has also created many jobs.

However, not all is rosy. For example, media houses claim to be laying off staff members due to the shift to digital ways of doing things, which improves efficiency and renders some jobs redundant.

Banks have also cited the adoption of technology as a reason for requiring fewer staff members. For examples, many banks have adopted mobile and internet banking systems which do not require people to go to the bank, which then means that there are fewer people required to serve customers. Fintech is now the in thing, meaning that banks are adopting technology to reduce operational costs and give customers more options.

Manufacturers have not been left behind in adopting new technologies that require fewer people to operate. Manufacturing is labour intensive as processes require human attention. However, with increased automation, manufacturing companies are cutting back on labour to increase efficiency and production while bringing down operational costs.

     2.  Unfavourable competition

For many years, Kenyan manufacturers have had to contend with counterfeits which flood the market and make it hard to do business. Currently, this problem is compounded by cheap imports which have flooded the local market making it hard for local companies to compete profitably.

For example, Sameer Africa, Kenya Fluorspar and Eveready East Africa closed local operations or moved their operations to other markets citing unsustainable competition from cheaper imports. This has resulted in job cuts as the companies have either had to scale down operations or shut down altogether.

Cheap imports, made possible by superior technologies in other countries and government subsidies, makes the imports cheaper and uncompetitive. Since most manufacturing companies can’t keep up, they either scale down operations or shut down.

3.   A consumption-driven economy

Kenya is a predominantly agricultural economy. However, Kenya usually exports raw materials and imports finished products. In most economies, the processing stage of raw materials creates jobs and adds value to the products.

The consumption-driven economy means that there are fewer jobs being created and those companies that are actually involved in processing find it hard to compete with the imported finished products. This is what has led to the closure of companies like Tata Chemicals.

4.   Competition from local companies

In a twist that shows that there is job creation at the same time, some multinationals are also downsizing due to increased costs of operation which are occasioned by low sales volumes, due to strong competition from homegrown companies.

According to the Financial Times, the one-size-fits-all business models are what are affecting multinationals. This means that these companies use business and marketing models used in other countries and assume that they will work in local markets. In some instances, the companies fail to tailor their products and marketing campaigns to the needs of the local market and adapt to changes with time.

Meanwhile, homegrown companies come up with unique features and marketing campaigns that suit the local market and eat into the market share of multinationals. This has seen many multinationals close shop or downsize as they cannot keep up with the operational costs at reduced incomes. For example, Nestlé Kenya has had to cut down its operational costs as revenues shrink due to stiff competition from homegrown companies.

5.   Cost-cutting measures

Multinationals seem to be experiencing a severe reduction in their profit margins. Traditionally, most of the companies dominated local markets and faced no serious competition. However, with the rise of cheaper imports and homegrown companies offering similar value at lower costs and with lower operational margins, the huge operational costs of multinationals are unsustainable.

Multinationals such as Nestlé, Coca-Cola, and Cadbury have had to rethink their strategies in order to save their falling profit margins. Job cuts have thus become common with multinationals trying to retain their profit margins amidst shrinking market shares.

6.   High cost of energy

Affecting manufacturing companies, the cost of energy is said to be prohibitive in Kenya. Manufacturing companies are energy-intensive and high energy costs often make operational costs rise. Companies such as Tata Chemical Ltd have had to shut down and layoff workers in the process, due to the high cost of energy.

Eveready also shut down its Nakuru plant citing the high cost of energy and cheap imports for making the operations in Kenya sustainable. The company moved its operations to Egypt, where energy costs are low.

Faced with high costs of operation due to expensive energy and cheap imports, which the multinationals cannot compete with, the manufacturing companies are either choosing to shut down or shift to other countries. The move had rendered many people in Kenya jobless.

What to do when faced with job layoffs

Job cuts are now the norm rather than an exception. With the permeation of technology, increased competition and slimmer profit margins, companies are resorting to layoffs in a self-preservation bid. While losing a job is truly sad and sometimes inevitable, here is what you can do to cushion yourself;

1. Gain extra skills

With automation and increased adoption of technology, the skills required to perform certain tasks are changing. As a result, you would do yourself a huge favour by gaining extra skills through formal and informal training, if you are in an industry that is cutting down jobs, you can enhance your skills and protect your job in the process.

Sometimes, you only require to use online platforms to learn new things, take up a professional development course or enrol for a degree that will equip you with the necessary skills.

2.   Start job hunting

Looking for a job, especially in an economy that is not producing many, can be stressful. However, with a looming job loss, it is best to save yourself from being jobless. Most companies will often announce in advance that they plan on downsizing. What they don’t reveal is who will be axed. As such, it is best to stay ahead of the game by embarking on a thorough job hunt.

Make use of your networks, BrighterMonday and even recommendations. This will cushion you from the shock of having no source of income once layoffs are affected.

3.   Grow your side hustle

Having a side hustle is now becoming a trend, fueled by job uncertainty, and the fact that incomes are not able to adequately cater for the needs of people.

These side hustles can easily become the main sources of income when downsizing hits you. If there are looming job cuts in your company or industry, start giving more attention to your side hustle. Devote more time and resources and with time, it can grow into a big business that adequately caters for your needs and those of your family.

4.   Save more money

Most people are not disciplined when it comes to saving money for a rainy day. However, with a sudden job cut, you can find yourself jobless and moneyless. However, if your industry has been experiencing a sharp rise in job cuts, it is wise to start saving diligently as you put up measures to provide a personal buffer.

In the event that you find yourself out of a job, you can still survive for some time without a regular source of income.

It is clear that job cuts have been on the rise. The most affected industries are banking, manufacturing and media industries. The reasons for the glaring job losses in these industries range from too much competition, inability to adapt to local markets, permeation of technology and the high cost of energy, among others. Most of the companies simply choose to downsize when they need to apply job cuts while others shut down altogether and move to other markets. This has rendered many people jobless and you can protect yourself by gaining extra skills, saving for a rainy day, job hunting and turning to your side hustle to get an income.