Recession hits home as diaspora starts streaming back
Employees work at a building site in Madrid last year. Immigrants are among the most vulnerable to a slowdown as illegal or temporary workers are first to be fired by struggling employers, especially in the troubled construction sector. Photo/REUTERS
It was the announcement early last week that Zain Kenya and East African Breweries Ltd were planning to shed up to 200 jobs that finally brought home the reality that the global economic crisis has reached East Africa.
The actions of these two multinationals are not unique and will certainly not be the last.
Several entities have been scaling back operational activities since early last year across the region.
The hospitality sector – most notably in Kenya – had not recovered from the effects of the post-election violence of early year, when rising oil prices and air-fares threatened the recovery of international travel to the region by mid-2008.
Shortly thereafter, the credit crisis hit our primary markets in the United Kingdom and Europe, putting many potential travellers out of work and out of non-essential spending.
The mining sector almost exclusively the preserve of multinational corporations started shutting down regional operations last year in Tanzania, Zambia, Burundi and the Democratic Republic of Congo as global commodity prices of precious metals crashed precipitously.
This reignited the fierce debate about the fragility (and wisdom) of Africa’s role as the world’s preferred exporter of raw or primary products.
The African Development Bank says export revenues will shrink by as much as 40 per cent this year, with a direct effect on employment.
NGOs and projects that relied on funds from the West and those supported by the bilateral and multilaterals have also had major cutbacks in activities and personnel.
The nascent outsourcing business in the region has also been hit, but with a mixed bag of results.
Although several Kenya BPO businesses have seen long-term contracts cancelled as their principals collapse, a growing number of Western businesses have opted to rely even more on the same outsourced solution providers as they struggle to cope with the need to cut costs.
But the hallmarks of this global slowdown-led African employment crisis are not just local or regional jobs disappearing.
An equally significant effect has been the return of hordes of professionals from the diaspora in the British, North American and European markets; echoing the decline in diaspora remittances over the past year.
This has meant young graduates and upcoming professionals from the region now have to compete for the few available jobs with experienced professionals abruptly shunted out of their jobs in the Western nations.
According to recruiting firms, these are primarily professionals in the financial service and consulting sectors.
Others are blue-collar worker from the manufacturing, engineering and ICT sectors, but notably fewer from health and education sectors.
The reasons for this trend are easy to understand.
The collapse of several banks, investment funds, mortgage lenders and insurance companies put a huge number of professionals out of work literally overnight, and manufacturing has been equally hit as output slowed sharply across the globe.
The slowdown has forced institutions to scale down operations drastically despite the bailout money to shore up their businesses.
Several of these cutbacks have also taken on distinctly nationalistic dimensions, sparking fears of a new round of protectionist behaviour that will undermine global trade and delay recovery. Similar fears continue to stalk local employees of multinationals in East Africa.
The International Labour Organisation projected last month that unemployment could increase by 40 million people globally by year-end, a disproportionate number of them migrant workers.
Rising unemployment also stunts domestic consumption, exacerbating the slowdown. In most of Africa, formal sector employment buttresses several other strands of the national economies.
Africa’s vulnerable place at the periphery of the global village – like little huts at the frontline of potential attack from marauding raiders or wild animals – has only served to highlight the powerlessness of the continent in the face of the vagaries of the global economic order.
Unable to call upon such resources as the West is pumping into its economies to stimulate growth, Africa’s recovery prospects will continue to depend on those of its rich trading partners.
