A pronouncement to increase the minimum wage will be a huge blow to industry and will negatively impact the livelihood of workers according to Kenya Association of Manufacturers.
“The Big Four Agenda has singled out Manufacturing as one of the key drivers of economic growth that the country intends to invest in for the next five years. Specifically, the Agenda focuses on sectors such as textile and apparel, leather, iron and steel, which are all labour-intensive sectors, to drive the contribution of manufacturing to 15% to the GDP by 2022,” read the statement from KAM.
According to KAM, to achieve the desired growth in the manufacturing sector, the sector has to grow at 36 percent every year. According to the recently released Economic Survey, Manufacturing’s real Gross Value Added increased only by 0.2 percent in 2017 compared to 2.7 percent in 2016 and 3.65 percent in 2015; far off from the 36 percent intend growth rate per year.
KAM says that the industry has yet to pick up pace from last year’s setbacks, which include a severe drought, high inflation rates and the economic slowdown due to the pro-longed elections period.
“Additionally, businesses in general, especially for labor-intensive industries have been, at best, stagnating instead of thriving, and at worst shutting down and relocating to other countries,” said part of the statement.
“The effects of a drastic minimum wage increase will mean restructuring and downsizing in many business operations. Unfortunately this also comes at a time when Kenya has been cited as having the highest unemployment rate in the EAC at 39.1 percent,” it added.