Job losses, inflation cloud May Day fete

May 01, 2009: Kenyan workers mark their gloomiest May Day in nearly a decade this morning saddled by concerns over job security, falling purchasing power and continuing erosion of union power in a difficult business environment.

With the national economy expected to expand by only two per cent this year and political risk remaining at current high levels, analysts say more workers will lose their jobs as businesses declare redundancies and freeze wage increments to reduce exposure in the marketplace.

Current labour market realities are in stark contrast to the boom period that kicked off in 2004 and saw employers, including the Government, mark Labour Day with pomp and unravel new pay packages for employees.

For workers who are still holding on to their jobs, life has not been made any better by the high-level inflation that has far outrun wages and eroded purchasing power.

Job insecurity has become a reality of Kenya’s labour market in recent years as workers’ unions lose their muscle with dwindling membership and a hardening of positions on employment and pay by most employers.

Most Kenyan

companies have, for instance, barred their new recruits from joining unions — a move that has over time denied the labour movement the numbers and financial muscle they need to push their agenda.

Mr Benson Okwaro, the secretary general of Communication Workers Union, says that the challenging business environment and the diminishing role of unions in the management of workers affairs are the greatest impediments to economic welfare in Kenya.

“The poor shape of the economy is behind the layoffs, but the disregard for unions has also made its easier for employers to sack our members,” he said.
“We are been taken for granted because of our falling membership numbers.”

Facing drop

Statistics at Cotu show that of the potential 1.5 million unionisable workers in the formal sector across the country, only about 500,000 are members and the figure is expected to plummet further given the retrenchments, retirement and employment on non-union members.

A good example is the once mighty and combative Communication Workers Union which is currently fighting for its survival.

Over the past decade, the union has seen its membership numbers reduce from 34, 000 to 5, 000 due to massive lay offs and the introduction of new employment contracts.

This has cut its influence in pushing the union’s agenda in the local telecom’s market besides facing a drop in revenues due to reduced membership fees.

As a result, the firm has ceased to be a threat to the executives of Telkom Kenya from where the bulk of its members come from.

But it’s not just the Communication Workers Union which is struggling to remain relevant, the Kenya Electrical Trade and Allied Workers Union and the Universities Academic Staff Union (UASU) are but a few which have called strikes that have aborted and yielded little.

Cotu secretary general Francis Atwoli, however, notes that unions were forced to cut down their wage demand in 2008 due to the slowing economy.

“Workers are suffering because of bad politics in this country,” adds Mr Atwoli, “most of our members are suffering because their earning are based on agreements signed in 2007 when we did not anticipate the current costs of living.”  

This does not bode well with the rank and file employees whose standards of living is taking its worst battering in more than a decade as workers’ salaries fail to keep pace with the rising consumer prices or inflation.  

So far this year, the situation is not looking good for employees, especially junior workers.

This year employers are expected to have raised their workers’ salaries by an average of 4.5 per cent, nearly half what they received last year, according to estimates of the Institute of Policy Analysis and Research (IPAR)—a local think tank.
This pales in comparison with the monthly inflation levels that have remained at nearly 30 per cent for the past 16 months.
The Kenya National Bureau of Statistics yesterday released figures showing that monthly inflation for April stood at 26.1 per cent up from 25.1 per cent in March.

This is the fastest that general prices have risen in the Kenyan economy over the last two decades and if the situation persists, Kenyan employees would be worse off since they will continue buying less with their incomes and the money that they have been saving could run out faster than budgeted.

Analysts led by Central Bank are showing a bias for elevated inflation for better part of the year driven by expensive food.

“Inflation has crept up to a pace where wage increases are not making up the difference,” says Mr Kuria Muchiro, the head incoming country leader at consultancy firm PricewaterhouseCoopers (PwC). “They’re (employees) going to be losing ground relative to inflation.”

Executives tie the slow growth in wages this year to effects of the country’s battered economy and uncertain outlook in 2009, which has led to lower profit growth and conservative spending by the few firms that are still reporting tidy earnings.

The economy is expected to grow at two per cent in 2009, the same level as 2008 but lower that the 7.1 per cent in 2007 as effects of last year’s post-election violence and the global economic meltdown continue to affect key sectors.

This has delivered slower profit growth in 2008, a trend that is expected to hold until 2010, when the economy is expected to rebound.

Already, the few firms such as KCB Bank, Eveready and East Africa Cables that have reported their quarter one results indicate a poor performance in 2009 compared to last year.

For one, KCB Bank yesterday announced a five per cent increase in profits to Sh1.7 billion, which pales to the double digit growth it posted last year.

Another downside for workers is bonuses tied to performance which will continue to miss in their paychecks on the back of a lower profit outlook.
But with the feeble unions pushing for salary increments, through the collective bargaining agreements, that match the cost of living, employers reckon pay reviews should be tied to firm’s performance and workers’ productivity.
“The larger fraction of the increase should focus on productivity and not the cost of living,” Ms Jacqueline Mugo, the executive director of the Federation of Kenya Employers (FKE).

And with corporate Kenya’s performance looking dim so far, it’s clear that the workers who will be fortunate to hold jobs will have to take home less money.
Already, a number of corporate jewels including Zain, East Africa Breweries Limited and Haco Industries have trimmed their payroll in an effort to protect profits in a market where sales have slowed down amid rising cost of doing business.

Job security

FKE warned on Wednesday that downsizing is expected to continue, arguing that the economy was showing little signs of making a swift recovery.

This means that the anxiety that is currently spreading in most firms from the executive suite to the low cadre employees over job security is expected to hold, further hurting employee morale and productivity at the workplace.

But even as workers fret over jobs, their working conditions are also at risk after provisions that came with recently enacted labour laws were left in doubt after a court decision to quash nine sections of the Work Injury Benefits Act 2007.

This technically rendered the application of the legislation difficult.

The laws include the three-month maternity leave in addition to the 21-day annual leave, two-week paternity leave and compulsory insurance for workers against injury or disease.

“These laws were put in place to help the poor, but some rich people seemed not to have been impressed,” said Atwoli.