Workers in Kenyan factories earn more than twice the average wages that industries in Ethiopia and Bangladesh pay their labourers even as global brands favour low pay countries, a new study shows.
US-based Centre for Global Development puts the annual pay per worker in Kenyan industries at $2,118 (Sh218,154), equivalent to Sh18,179 per month.
Workers in Ethiopia’s sweatshops earn an average $909 (Sh93, 627), or Sh7,802 per month while the wage in Bangladesh, famous for its vibrant garments industry, is a paltry $835 (Sh86,005) yearly.
Tanzania factories pay an average $1,776 (Sh182,928) a year, or Sh15,244 monthly, the study shows.
“Yet taking the broader global picture their (Kenya) manufacturing labour appears costly relative to that of Bangladesh, a country with comparable income level and competitiveness rating,” the report says.
Kenya has been adjusting the minimum wage to cushion lowly-paid employees from inflation, despite fierce opposition from employers who argue that the increments have not been matched to productivity levels.
The Federation of Kenya Employers (FKE) warned that unplanned wage increases risk pushing up cost of doing business in the country and cause investor flight or trigger retrenchments to cut costs.
Kenya’s minimum wage stands at Sh10,955 a month for a general labourer in the cities of Nairobi, Kisumu and Mombasa where the cost of living is steepest.
The US think tank used World Bank data to sample 5,500 firms in 29 countries based on industrial labour costs and capital costs to measure productivity in sub- Saharan Africa in comparison with manufacturing hubs like Bangladesh.
It says that coastal African economies like Kenya, Tanzania and Senegal are standing on the tip of industrial take-off.
“If any countries were to feature in an African manufacturing take-off, these countries would surely be expected to be in the vanguard,” the report says, but cautions that Kenya’s high wages could spook investors and lead them to Ethiopia.
Ethiopia’s low wages and investor-friendly electricity tariffs, four times cheaper than Kenya’s, have pulled in global fashion brands manufacturers like H&M and Guess.
Kenya in 2014 announced plans to revamp its export processing zone in Athi River into a modern textile city but that has not happened.
The plan had received commitment from top US fashion houses including Calvin Klein, Timberland and Tommy Hilfiger three years ago to set up manufacturing shops in Kenya.
High operation cost and an influx of cheaper imported products have seen a number of manufacturers exit the local market and relocate operations to other economies, resulting in job losses.
Procter and Gamble, maker of Ariel detergent, relocated to Egypt while Colgate, Chocolate maker Cadbury and tyre maker Sameer Africa shut operations in favour of imports.
The report indicates that capital costs per worker in African firms are higher compared to other manufacturing hubs.
“Higher capital cost per worker, lower value added per worker, and relatively similar levels of human capital suggest that African firms have lower productivity and/or pay a higher premium for technology and access to capital than comparator firms.”
Kenya’s capital cost per worker is the highest in the region at Sh1 million, compared to Tanzania (Sh591,220) and Sh632,111 for Ethiopia.