Firms making contributions to the National Social Security Fund (NSSF) have dropped for the first time since the Covid-19 pandemic, pointing to company dissolutions in an economy ravaged by a tough operating environment.
Fresh disclosures from the State-controlled pension fund indicate that 540 employers dropped off the list of contributors during the year ended last June, marking a first drop from the 1,131 who exited the scheme at the height of Covid in 2020.
NSSF contributions are a compulsory statutory deduction for all registered companies operating in the country, with the drop in the number of firms under the fund pointing to business closure.
This emerged in a year when Kenya’s economy grew at the slowest pace last year since the Coronavirus pandemic four years ago, hobbled by floods, costly bank loans and disruptions that followed anti-government protests against the Finance Bill.
The soft economy could have triggered firms to close shops. The number of individual member contributors, however, rose by 369,934 during the review period to hit a new high of 3.3 million, in what the fund attributes to the onboarding of the civil service workforce.
“Fund active members increased by 369,934 in the 2023/2024 financial year, which is a 12 percent increase in active membership. The increase is mainly attributed to registration of public servants who were previously not members of the Fund,” wrote NSSF in its latest annual report.
“During the same period, active employers reduced by 540 to settle at 78,009 from 78,549. This is a negative development and management has put measures to ensure the trend is reversed in the next financial year.”
The reduction is reflected in data from the Business Registration Service (BRS) which indicates that during the period, a total of 1,817 companies applied for strike off from the register.
The registry also received nine applications for voluntary liquidation during the year, in addition to 20 other petitions for liquidation of companies by court.
About 14 other firms were put under administration during the period, while six others were under administrative receivership as 15 filed for bankruptcy.
The deteriorated business environment is further evidenced by a 7.6 percent dip in the number of new business registrations in 2024, reversing a trend witnessed the prior year when new registrations rose 2.9 percent, according to BRS data.
The country’s gross domestic product (GDP) — a measure of all economic activities— grew at 4.7 percent compared with 5.7 percent a year earlier, according to the Kenya National Bureau of Statistics. The growth was the softest since 2020, when the economy contracted 0.3 percent because of shutdowns and travel curbs to contain the spread of Coronavirus infections.
Treasury said growth in the economy was battered by a raft of factors such as a tight fiscal space, high interest rates, nearly three months of youth-led protests and floods that damaged infrastructure.
He added that declining interest rates will lift Kenyan growth this year, which is forecast to grow at 5.4 percent.
The Kenyan central bank has slashed its benchmark rate by 300 basis points to 10 percent, forcing banks to lower the cost of credit, which is expected to increase loan supply.
Growth in agriculture, which accounts for 22.5 percent of total output and employs more than 70 percent of rural people, slowed to 4.4 percent from 7.1 percent in 2023.
The manufacturing sector showed signs of recovery, growing at a slightly faster pace of 2.8 percent compared with 2.2 percent in the prior year.
Growth in ICT decelerated to 7.0 percent from 10.3 percent, while growth in financial and insurance activities slowed to 7.6 percent from 10.1 percent.
Activities in the construction sector contracted 0.7 percent in 2024 compared with a growth of 3.0 percent the year before on reduced public expenditure on projects such as roads, while growth transportation and storage sector slowed to 4.4 percent from 5.5 percent.
