Manufacturers criticise minimum wage increment

PHOTO | FILE 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.

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.

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.