Manufacturers fault raise on basic wage
The chairman of the Kenya Association of Manufacturers (KAM) Polycarp
Igathe (right) shares a joke with Kenya Airways Group Human Resources
Director Alban Mwendar (left) during a past function. Mr Igathe
criticised President Uhuru Kenyatta’s move to increase the pay of the
lowest paid workers saying it could lead to an increase in the cost of
goods May 2, 2013. FILE
By LUCAS BARASA
Manufacturers have criticised President Uhuru
Kenyatta’s move to increase the pay of the lowest paid workers saying it
could lead to an increase in the cost of goods.
Kenya Association of
Manufacturers chairman Polycarp Igathe said Thursday the increment had
“left a bad taste in the mouth of industries”.
The industries, he said, were already grappling with the high cost of doing business.
On Wednesday, President Kenyatta announced a minimum wage increment of 14 per cent effective immediately.
He said the raise was meant to cushion Kenyans against the high cost of living.
Last year, the government
increased the minimum wage by 13.1 per cent, enabling the lowest paid
worker in major towns to earn Sh8579. The latest increment means the
lowest paid worker will now pocket Sh9,780 per month.
Mr Igathe said such decisions “always bring the country back to a vicious cycle” and could lead to increase of costs of goods.
"Any wage increments that are
not based on productivity will always have negative effects on the same
people that we will be trying to protect because companies will just
increase the cost of the final goods and this also affects the
competitiveness of Kenyan goods on the international markets,” said Mr
Igathe.
He regretted that some companies had shut down operations in Kenya because of the high cost of doing business.
“Not so long ago a motor
assembly plant relocated to South Africa because of the high cost of
doing business in Kenya, in Kisumu a cereal processing industry
relocated its plant to Zimbabwe all because of the high cost of doing
business,” Mr Igathe said.
The KAM chairman said the
textile industry, which is also hard hit is likely to see many
industries scale down heavily as a result of high labour costs.
“Some textile industries have
already said that they have no clue as to how they can run their
businesses in Kenya anymore as they continue to face challenges
competing with countries such as Bangladesh, Ethiopia, Cambodia and
Lesotho whose minimum wage is much less than that of Kenya,” Mr Igathe
said.
According to KAM, the minimum
wage in Bangladesh is Sh5,719, Lesotho’s is Sh 4,758 while Ethiopia and
Cambodia have pegged the pay at Sh6,450.
Mr Igathe said the manufacturing
sector has strongly called for consultation with industry “before
announcements of such a big nature that have a potential to cripple
industry are made".
He said some companies in the Export Processing Zones (EPZ) have also expressed dismay at the increase.
“The invitation to invest in the EPZ was under
the pretext that the zone would be governed separately like a separate
zone without being affected by unions and ceremonial wage increases,” a
statement from KAM quoted a director in the textile industry as saying.
Mr Igathe said KAM had received
numerous sentiments from investors who expressed their dissatisfaction
with the government's wage increase.
Although KAM supports
mechanisation, Mr Igathe said, there is need for huge capital investment
in the sector for this to be achieved.
He said the move could lead to lay offs.
“Industries want to work with
government to provide jobs for the unemployed but at the level at which
minimum salaries are currently pegged that may not be tenable. There is
an urgent need for government to meet with the private sector and
discuss this further,” said Mr Igathe.
During Labour Day, Federation of Kenya Employers
(FKE) chairman Erastus Mwongera urged the government to stop the
practice of announcing the salary increments during the celebrations and
instead review pay at the beginning of the year.
FKE had proposed a 4.5 per cent annual wage
increase in line with the current economic growth while the Central
Organisation of Trade Unions (Cotu) proposed a whopping 60 per cent
raise.
An independent body set up by the Ministry of Labour proposed an increment of between 14 per cent and 17 per cent.
Mr Mwongera also asked the government to address the high cost of labour and reduce the costs of goods.
He said the Salaries and Remuneration Commission
was doing a good job in harmonising salaries to bring the wage bill to
manageable levels.
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