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Employers term annual pay hikes unsustainable

By - | May 2nd 2013

By Macharia Kamau and James Anyanzwa

NAIROBI, KENYA: Kenyan employers are headed for a major collusion course with trade unions over employees’ pay hikes.

Through their umbrella body Federation of Kenya Employers (FKE), the business owners said regular salary increments are unsustainable and hurting businesses in the country.

Instead, they want the Government to craft ways of reducing the high cost of living, which has been cited as the main driver of frequent salary increment demands by workers.

“We feel that a lasting remedy lies in the reduced cost of living and lower prices of basic commodities to reduce the frequent agitation for higher wages... The government should look into how the economic growth being witnessed can benefit every Kenyan,” said Erastus Mwongera chairman FKE

Eng Mwongera who was speaking during the Labour Day celebrations at Uhuru Park on Wednesday also said the government should delink the minimum wage increase from Labour Day celebrations and instead do it towards end of year.

He noted that increasing minimum wage mid-year affected plans of many firms whose financial years run between January and December.

Mwongera instead proposed that increments be done towards end of year so that local firms can incorporate the new wage structure in their planning for the following year.

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“The government should review modalities of increasing minimum wage by delinking it from Labour Day celebrations and instead do it in the third quarter of the year as so that businesses can implement the increments at the beginning of the following year,” he said.

Mwongera said the Government should institute reforms to make the country attractive to investors.

In last year’s Doing Business report by the World Bank, Kenya dropped to position 121 from 109 and was overtaken by Ugandan, which was ranked at position 120 out of 185 countries surveyed.

Mwongera cited high corporate tax and the slow process of setting up a business as among the major factors that have over time seen Kenya.

“There is need for the government to move with speed and put in place immediate reforms to create a conducive doing business environment.

Mwongera also said the government should reduce its borrowing levels going forward, noting that the slow rate of economic growth did not correspond with the country’s debt levels. He noted that the level of the country’s public debt to gross domestic product (GDP) ratio poses serious threats to long-term growth.

In 2012 economic survey shows Kenya’s nominal wage bill rose to Sh878.7 billion, an 8.8 per cent growth from Sh807.9 billion paid out in 2010. Analysts have in the past raised concerns over Kenya’s burgeoning public debt and widening current account deficit saying the twin problems pose a big threat to the country’s economic stability.

By June last year, Kenya’s public debt had ballooned to Sh1.7 trillion, which is equivalent to 48 per cent of the GDP. The debt was hovering towards the 50 per cent mark that is considered unmanageable and unsustainable.

“Public debt has significantly gone up mostly due to huge borrowings to finance large infrastructure projects... our concern lies in the fact slow economic growth and the crisis, the debt levels are unsustainable

“It is imperative that the government goes slow on borrowing and try to stimulate economic growth.”



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