Investor Dollars Versus Workers' Rights


By Ken Opala

February 21, 2003

Recent strikes by Export Processing Zones employees have raised questions about the Government's stand on labour interests against the need to attract foreign investment. The workers' revolt in the Export Processing Zone transfixed the nation and raised a pertinent issue: Should investor privilege compromise workers' rights?

The answer is as unavailable as it was early in the month when EPZ workers downed their tools. It was because of this that the State dithered as the strike snowballed into violence and looting.

Insiders say what annoyed workers most was that statements by various ministries - Labour, and Trade and Industry - appeared to absolve employers, and in so doing, were seen as stonewalling. They gave no indication that the 21,000 employees at the Sh20 billion free trade zones may have had solid grievances.

Sandwiched between workers' demands and investors' pressure, the Trade and Industry minister, Dr Mukhisa Kituyi, described the revolt as "hooliganism" and "primitive act of cowardice and irresponsible behaviour". Cotu distanced itself from strike

Elsewhere, the workers' umbrella body, the Central Organisation of Trade Unions, distanced itself from the strike, obviously split down the middle on whether to back the new Government that has promised so much or to pursue Cotu's mandate of protecting its rank and file.

"Authorities have been talking about investment, hardly about workers' rights," said Mr Laban Onditi, chairman of small and medium enterprises, Kenya National Chamber of Commerce and Industry. "Workers have a right to complain."

At face value, the choice was between investment and workers. The Government chose money instead, not its subjects. On the other hand, employers - driven by profit motive but overwhelmed by complaints about the rot in their sector - counted on the Government to resolve the impasse.

According to Ulhas Kamat, managing director of Kenap EPZ Ltd, the Government only responded when damage had been done. "The condemnation by the Government should have come a bit earlier than happened. Authorities should have visited the zone and talked to individual traders," he says.

Like a bush fire, the strike consumed EPZ outfits in Nairobi and Kitengela. Agitated workers forced reluctant colleagues to join in the looting. Their complaints about poor pay and "inhuman" working conditions were peppered with accusations of racism and sexual harassment.

Yet, amid the muddle, orders were cancelled and property destroyed. Nobody has quantified losses two weeks later. Initial reports by Dr Kituyi indicated that United States importers had cancelled $12 million (about Sh924 million) worth of textiles orders.

Investor shelved planned expansion

A local investor, Baraka, reportedly shelved planned expansion, occasioning the loss of 4,000 jobs. Reports indicated that unnamed potential investors had diverted their capital to Madagascar although authorities could not confirm this.

"Investor confidence is shaken," says Mr Ulhas Kamat, chairman of the umbrella textile manufacturers, Kenya Apparel Manufacturers and Exporters Association (KAMEA). "The loss - in terms of goodwill and money - is unquantifiable."

However, amid the condemnations, salient issues remained buried in the muddle. Which is crucial: investment or workers' plight? How does one strike a balance?

According to Nakuru Town MP Mirugi Kariuki, the country hardly needs investors who make money at the expense of workers' dignity and in total disregard of the existing legal provisions. The threat to withdraw to other countries is mere blackmail, he says.

"The Government should chase away any investor who perceives Kenya as a place where cheap labour is available and whose intention is to exploit workers with impunity," said the politician, who is the vice-chairman of the Law Society of Kenya.

That EPZ underpays its work is hardly front page news nowadays. In fact, Kathiani MP Kyalo Kaindi once claimed in Parliament that these free trade zones had become "a liability and money guzzler". His fears were later corroborated by a study funded by the United States Agency for International Development (USAid) two years ago, which showed that EPZ working conditions were not good.

Despite the huge turnover owing to the many concessions the investors enjoy, EPZ employers pay workers as little as Sh77 ($1) a day. The lack of union representation has conspired with the profit motive to frustrate any attempts to improve the wages.

Only a handful of workers are protected by the collective bargaining agreement, according to Mr Kamat. A sizeable chunk enter individual agreements, implying that wages depend on an employer's whim or employee's bargaining power. Insiders say even in cases where workers are represented by unions, the pay is still a dismal Sh150 a day.

Investors claim Kenya's high electricity costs, expensive freight charges and the tattered infrastructure have conspired to push up production costs. This, they say, has depressed wages. They say they are forced to source raw materials outside the country because there are none locally. "We have to import about everything," says a textile manufacturer.

Few agree. Workers and trade unionist claim investors are enjoying a "business holiday in Kenya".

Cotu chief Francis Atwoli says EPZ operations are not regulated. They import machinery and raw materials without duty but still pay workers "peanuts".

Since EPZ factories are not subjected to labour laws, they are out of bounds to labour inspectors. "(EPZ) has been a no-go-place," says Mr Atwoli. That aside, investors enjoy "a 10 year tax holiday", implying they are tax-exempt for a decade.

That labour inspectors do not visit these work places may have given some employers room to exploit workers and rake in billions of shillings. For instance, in 2002, the EPZ - which employs 21,000 workers - earned Sh17.5 billion, up from Sh2.7 billion two years earlier. At least 17 factories were in operation in 2000, 10 years since EPZ was launched in Kenya.

Revenue figures look huge

Whereas the revenue figures look huge, the net profit for the country is however, not as much. Import of raw materials is hardly reflected in the figures. At the same time, foreign investors are free to repatriate their profits. The number of factories have increased since Agoa's implementation in 2001. "More than half of the factories are relatively young, less than a year old," says the KAMEA chairman.

However, labour experts are convinced EPZ's woes transcend low pay. The wage disparity in the industry is the highest in the world, according to a report by the International Labour Organisation. The differential in remuneration between the highest and lowest worker in Kenya is a stupefying 150 per cent.

Further statistics by ILO indicate that whereas the Kenyan EPZ worker earns as little as $2 a day, on average, the same worker in other parts of the world earns between $5 (Sh385) and $7 (Sh539), especially in the poor nations. For instance, in 1998, a worker in Philippines earned between $5.20 (Sh405) and $6.60 (Sh514) a day, a wage reached by regional tripartite wage and productivity boards. Notwithstanding the boards, unionisable ones "enjoyed better terms", according to the ILO.

In Kenya's case, minimum wage guidelines were ideally meant to be the benchmark, yet most employers disregard them.

Kenya National Chamber of Commerce and Industry is surprised at the raw deal.

"Kenya's EPZ should not be an exception. In fact, we expect workers to be paid in dollars," says Mr Onditi.

He says since Kenya is a member of the World Trade Organisation, it is meant to abide by the organisation's rules that govern workers' rights. This opinion is shared by Mr Walter Weber, a textile consultant with the World Bank. "It is slavery at the EPZ. WTO rules should apply here."

But Dr Kituyi disputes. Normal rules guiding industrial relations cannot apply to workers at the EPZ. It is unfair, he says, to subject owners of EPZ enterprises to the usual employer and employee laws.

He proposes a trade union exclusive to the EPZ. "There is a new thinking that a new trade union should be formed to specifically fight for rights of EPZ workers."

A trade union is overdue. A task force on the the plight of workers set up by Labour minister Ahmed Khalif before his death in a plane crash in Busia, recommended that all EPZ workers be represented by trade unions.

The team - chaired by the Commissioner of Labour, and which drew representatives from Cotu, Federation of Kenya Employers (FKE), the EPZ Authority and the Export Promotion Council - presented its report on January 31.

Organised labour is a fundamental right for workers. This right is inalienable, and can only be denied in a state of oppression.

According to an ILO report, some governments have made concessions that exclude EPZs from local labour laws, merely to woo foreign investment. "Such practices are allegedly quite frequent and deliberate when it concerns the exercise of trade union rights". It is only in Kenya, Pakistan and Bangladesh that the EPZ is off organised labour.

US inspectors visit free trade areas

However, in dismissing workers' claims, EPZ entrepreneurs say conditions in free trade areas are similar worldwide. Under the Agoa arrangement, US inspectors visit the zones to ensure standards are followed. "The US sends its team to audit the manufacturing process," says Mr Kamat.

All told, as authorities grapple with the EPZ scenario, concern appears to shift to other possible causes of the wildcat strikes that have rocked Nairobi in the past fortnight. Authorities claim the strikes have not been spontaneous but instigated.

"In the case of EPZ, no notice was given, even unionisable employees were not involved. It is disturbing that (the) striking workers moved from company to company inciting other workers to join them and even destroying property," says Dr Kituyi.

The transition from Kanu to Narc "could have been an element (in the EPZ strikes)", according to Mr Kamat. "People find ways of taking advantage of a situation".

NGOs behind strikes

Assistant Labour minister Peter Odoyo claims activists and leaders of a number of non-governmental organisations were behind the strikes, a sentiment backed by Mr Atwoli.

"With the new Government, NGOs are finding it difficult to talk about democracy and human rights, so they are fanning discontent."

Dr Kituyi blames the scenario on political forces. "There are reports that there is a political force behind the (EPZ) strike. We are yet to ascertain the truth, so I may not be able to comment until we confirm exactly what is happening," Dr Kituyi told the Nation.

On Tuesday, acting Labour minister Najib Balala warned that non-governmental organisations inciting workers against employers risked de-registration. Mr Balala attributed the wave of strikes to activists in NGOs "now searching for activities to retain donor funding as most donors have shifted their support to the Government."

More Information on Labor Rights and Labor Movements
More Information on Export Processing Zones

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