EPZ processors seek minimum wage exemption

Export Processing Zone (EPZ) manufactures are seeking an exemption from the country’s minimum wage bands to spur competitiveness.

This is part of a raft of measures export market processors are seeking to have passed as a way to remain a competitive market as destinations such as Ethiopia continue to attract manufacturers with cheap labor.

United Aryan Limited founder Pankaj Bedi said on Monday that while other manufacturers can hike cost of goods to the local market, an increase in costs in the export market will take away Kenya’s edge as a manufacturing hub.

“In the export business, we are dealing with global competition. When dealing with local competition, if the wage increases in the local sector, everybody can increase the price because it affects everybody. In our case, Bangladesh, China, India and next door even Ethiopia, nobody is increasing the wages, so it has to be productivity and incentive related,” Mr Bedi said.

EPZs employee an estimated 56,000 employees tapping an export market estimated at Sh40 billion annually.

During Labour Day celebrations, the government announced a five percent minimum wage increase which could see salaries go up by 1,458 shillings.

Speaking while touring the facility, Labor cabinet secretary Ukur Yatani said the government through the EPZ Authority was working on creating an enabling environment for manufacturers with necessarily focusing on wages as the only operating cost component.

“Salary increase alone without accompanying productivity is also a big challenge. We are going to enter a partnership linking all EPZ with the national productivity sector so that they can look at all matters that not only reduce on cost but increase the efficiency and production capacity of the workforce,” Mr Yatani said.

The proposal to be delinked from the government’s annual minimum wage increase was tabled during the Kenya Private Sector Alliance (KEPSA) roundtable with president Uhuru Kenyatta on Thursday last week.

The Labor Ministry was given one week to come up with a workable draft to be implemented in line with enhancing development of the manufacturing sector.

Mr Yatani however said EPZA would also be looking at non salary related costs that could also be adjusted to make the sector competitive.

“The ministry of industrialization has already proposed to Treasury to look at the area of tax cut so that we can be more facilitative with a view on reducing on the overall cost of production rather than just focusing on the labor component,” he said.