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Manufacturers oppose 14 per cent minimum wage increase

By - | May 3rd 2013

By James Anyanzwa

Kenya Association of Manufacturers Association chairman, Polycarp Igathe

KENYA: Kenyan industrialists have objected to the 14 per cent minimum wage increment announced by President Uhuru Kenyatta on Wednesday.

 The manufacturers through their umbrella body Kenya Association of Manufacturers (Kam) said the move is unsustainable in the current economic status.

The industry lobby termed the increment as a ‘bad taste’ in the mouth of industries, still grapping with the high cost of doing business. It said the wage increment could prompt an increase in the cost of goods and declaration of redundancies as manufacturers seek to against cushion themselves against additional costs.

Kam chairman, Polycarp Igathe cautioned that any wage increments that are not based on productivity would always have negative effects on the same people that the action is meant to help. “This is because companies will just increase the cost of the final goods and this also affects the competitiveness of Kenyan goods on the international markets,” he said. Igathe noted that some companies have already shut down their operations in Kenya because of the high cost of doing business.

He said 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,” he said.

Labour costs

It is feared that 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 globally.” These firms do not know how to compete with countries such as Bangladesh, Ethiopia, Cambodia and Lesotho whose minimum wage is much less than that of Kenya,” said Igathe.

The minimum wage in Bangladesh is Sh5719 (US$66.5), Lesotho’s minimum wage is Sh4758 (US$5,533) Ethiopia and Cambodia has a minimum wage of about Sh6450 (US$ 75).

The manufacturers also called for consultation with industry before announcements of such a big nature that have a potential to cripple industry are made.

 Igathe said Kam has received numerous sentiments from investors who have expressed their dissatisfaction with the Government ceremonial wage increases.

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