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IMF deal that froze Kenya government workers Sh82bn pay rise

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IMF deal that froze Kenya government workers Sh82bn pay rise


Lyn Mengich

Salaries and Remuneration Commission (SRC) chairperson Lyn Mengich on June 17, 2021 at the Hilton Hotel when she announced there will be no review of salaries in the public sector for the next two financial years. PHOTO | DIANA NGILA | NMG

Summary

  • Treasury promised IMF it will keep civil servants wages unchanged till 2025 as part of Sh252bn loan deal.

Kenya has frozen a Sh82 billion salary increments for all civil servants for two years, starting July following a deal agreed with International Monetary Fund (IMF) to keep pay unchanged until 2025.

The Salaries and Remuneration Commission (SRC) on Thursday revealed the freeze, highlighting the gravity of the country’s rapidly deteriorating cash-flow situation that is marked by near-stagnant revenues and worsening debt service obligations.

The Commission said the decision to suspend implementation of the third pay review cycle was made due to hard economic times caused by the Covid-19 pandemic.

It comes months after the IMF revealed that the State had committed to keep civil service pay unchanged for four years after the Fund’s board approved a new loan for Kenya valued at $2.34 billion.

Under the IMF deal, Kenya agreed to freeze pay to June 2025, curb fresh hiring and work on removing ghost workers, including staff who have died, retired or deserted duty.

The freeze in non-essential hiring and pay sets the stage for tough times ahead as costs of basic items such as fuel, rent and food continue to spiral.

Curbing perks

Civil servants last got a pay rise in 2017 and have used juicy allowances to enlarge their take-home pay, but the salaries agency has also announced plans to curb the perks.

The SRC has accused government officers of multiplying the number of allowances from just 11 in 1999 to 247.

“The National Treasury advised the commission that due to the effects of Covid-19 on the performance of revenue and the expected slow economic recovery, it should consider postponing the review for the next two fiscal years until the economy improves,” SRC chairperson Lyn Mengich said at a media briefing on Thursday.

This echoes the note released from the IMF in March, indicating the Treasury’s commitment to reduce the ratio of the government wage bill to GDP by about 0.5 percentage points by June 2024.

“This will be accomplished through continued restraint in hiring and wage awards, including in the four-year wage agreement that will come into effect in 2021/22 financial year and by improved wage bill management,” disclosed the IMF.

Kenya has struggled to reduce a bloated wage bill that is eating into development spending. It is expected the pay freeze help rein in public sector salaries to free up cash for projects such as building roads that ultimately create jobs.

Kenya’s public service wage bill stands at slightly above 50 percent of annual government tax revenue. The IMF puts the global benchmark at about 35 percent.

The IMF is expected to play a role in shaping policy that would require the government to implement tough conditions across many sectors.

Public purse

Its string of policy advisories come on the back of its multi-billion shilling loan facilities to Kenya where money flows straight into the budget to top up the public purse.

Under the administration of former President Mwai Kibaki, Kenya kept away from this type of credit, with most of the support from institutions like the IMF and the World Bank coming in the form of project support.

Kenya has recently faced a deteriorating cash-flow situation that has been worsened by the Covid-19 economic hardships.

Wage bill

The SRC data show that the wage bill has grown from Sh615 billion in the year to June 2016 to Sh827 billion last year, on the back of the juicy perks.

The 247 allowances account for 48 percent of the total wage bill.

The commission said if the Treasury’s revenue targets are met in the coming financial year, the freeze on pay increments will have the effect of reducing the burden of the public wage bill on Kenya’s revenues from 51.7 percent to 48 per cent.

More emphasis was put on allowances starting 2015 as the government saw it as an alternative to controlling its pension bill by not raising salaries.

State think-tank Kenya Institute for Public Policy Research and Analysis (Kippra) said that allowances paid to civil servants have made the government the preferred employer and called for a radical review.

Currently, allowances have the effect of doubling an employee’s pay and in some instances growing it by a factor of 10.

Kippra recommends capping of allowances to about 25 percent of civil servants’ gross pay while the SRC favours 40 percent.

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KQ resumes Mumbai flights after 4 months

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KQ resumes Mumbai flights after 4 months


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A Kenya Airways aircraft at JKIA. FILE PHOTO | NMG

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Summary

  • Kenya Airways will on Thursday resume flights to Mumbai, ending a four-month hiatus that was occasioned by increased cases of Covid-19 in the Asian state.
  • The airline in a notice to its customers yesterday said it will resume its operations on the route on September 16, 2021 with the first flight departing Jomo Kenyatta International Airport at 7am to arrive in Mumbai at 3:45 pm.

Kenya Airways #ticker:KQ will on Thursday resume flights to Mumbai, ending a four-month hiatus that was occasioned by increased cases of Covid-19 in the Asian state.

The airline in a notice to its customers Monday said it will resume its operations on the route on September 16, 2021 with the first flight departing Jomo Kenyatta International Airport at 7am to arrive in Mumbai at 3:45 pm.

The airline will then resume full operations on the route on September 20, flying three times per week on the Indian route, which is one of the most lucrative destinations on its network.

Passengers on the route will part with Sh46,000 ($419) for one-way air ticket on economy class seats from Nairobi to Mumbai- prices that are relatively the same compared to what it was charging before the Covid-19 pandemic.

“Welcome back onboard! Fly from Nairobi to Mumbai starting Thursday 16th September with normal schedules resuming from Monday 20th September 2021,” said the airline in a notice to its customers yesterday.

KQ Suspended passenger flights to and from Mumbai on April 30 until further notice, following a government directive on travel between India and Kenya due to a Covid-19 crisis in that country.

The airline said on Friday that passengers who had booked tickets after May 1, the date of the last flight from Mumbai to Nairobi, will have to change their plans.

Affected passengers, KQ said, could also take vouchers for the value of their fare for future travel within 12 months.

India has seen soaring infection rates in the recent days, since the discovery of a new virus variant. Last month, India put on lockdown one of the states following a spike in cases of Covid-19.

Other countries that have banned flights to India include France, the UK Bangladesh, Oman and Hong Kong that have banned travel to and from India or asked their nationals coming from the Asian country to isolate themselves in government-approved hotels.

India has so far detected 33,264,175 corona virus cases with the number of deaths hitting 442,874 as at September 13.

A large number of patients from Kenya also travel to India every year for specialised medical treatment, especially cancer care, helping to drive medical tourism in the densely populated country that boasts affordable and easily accessible healthcare.

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Lower import volumes push mitumba prices to new highs

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Lower import volumes push mitumba prices to new highs


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Man pulls a cart loaded with second-hand clothes at Gikomba Market in Nairobi. FILE PHOTO | NMG

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Summary

  • Traders paid Sh100,527 on average per tonne of the used clothes, popularly called mitumba, compared to Sh96,286 the previous year.
  • Kenya Bureau of Standards (Kebs) banned importation of the clothes from late March through mid-August in a bid to contain the spread of the life-threatening coronavirus infections.
  • Findings of the Economic Survey 2021 suggests dealers shipped in 121,778 tonnes of mitumba in 2020, a 34.02 percent fall compared with 2019 and the lowest volumes since 2015.

The average price of a tonne of second-hand clothing items imported into the country crossed the Sh100,000 mark for the first time last year on reduced volumes in the wake of safety protocols and guidelines to curb spread of coronavirus.

Traders paid Sh100,527 on average per tonne of the used clothes, popularly called mitumba, compared to Sh96,286 the previous year.

Kenya Bureau of Standards (Kebs) banned importation of the clothes from late March through mid-August in a bid to contain the spread of the life-threatening coronavirus infections.

Findings of the Economic Survey 2021 suggests dealers shipped in 121,778 tonnes of mitumba in 2020, a 34.02 percent fall compared with 2019 and the lowest volumes since 2015.

Last year’s drop was the first dip since 2011 when 76,533 tonnes were shipped in compared with 80,423 tonnes the previous year, the official data collated by the Kenya National Bureau of Statistics (KNBS) shows.

The import bill for the merchandise amounted to Sh12.24 billion, a drop of 31.11 percent, or Sh5.53 billion, year-on-year.

TIn imposing the temporary ban on used clothes, Kebs had applied a standard which prohibits buying second-hand clothes from countries experiencing epidemics to ensure disease-causing microorganisms are not imported into Kenya.

Higher quality and relatively lower prices for mitumba has continued to drive demand for used clothes at expense of locally-made products amid higher margins enjoyed by traders largely operating in informal markets.

The lucrative second-hand clothing market has seen traders from China —a key source market for the merchandise —open shops in Gikomba, Kenya’s largest informal market for mitumba, in recent years to cash in rising demand.

Earnings from exports of articles of apparel and clothing accessories fell 5.32 percent to Sh32.92 billion last year compared with 2019, data indicates.

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Court backs Atwoli union in horticulture membership feud

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Court backs Atwoli union in horticulture membership feud


Cotu boss Francis Atwoli

Cotu boss Francis Atwoli. FILE PHOTO | NMG

Summary

  • A trade union that is led by the long-serving Central Organisation of Trade Unions (Cotu) boss Francis Atwoli has survived an attempt to stop it from representing over 60,000 workers in the horticulture industry.
  • Newly registered Kenya Export, Floriculture, Horticulture, and Allied Workers Union (Kefhau) had filed as a case in the Employment and Labour seeking to bar the Atwoli-led Kenya Plantation and Agricultural Workers Union (KPAWU) from representing workers in the industry.

A trade union that is led by the long-serving Central Organisation of Trade Unions (Cotu) boss Francis Atwoli has survived an attempt to stop it from representing over 60,000 workers in the horticulture industry.

Newly registered Kenya Export, Floriculture, Horticulture, and Allied Workers Union (Kefhau) had filed as a case in the Employment and Labour seeking to bar the Atwoli-led Kenya Plantation and Agricultural Workers Union (KPAWU) from representing workers in the industry.

Mr Atwoli is the secretary-general of KPAWU. The rival union claimed KPAWU had encroached on its area of workers’ representation.

Justice James Rika, however, dismissed the claim and ruled that the dispute should have been taken through conciliation, and was therefore presented in court prematurely.

He also stated that Kefhau must go beyond its registration and recruit sufficient members from the employers, to be granted recognition and organisational rights.

“Registration on its own, does not afford the claimant (Kefhau) recognition. Until there is proof that Kefhau has satisfied Section 54 of the Labour Relations Act, the status quo must be maintained,” said the judge.

“Kefhau must recruit at least 50 percent plus one, of the unionisable employees in the floriculture and horticulture industry, members of the Agricultural Employers Association to be considered for recognition,” he stated.

He noted that there is a Recognition Agreement and CBA, binding Mr Atwoli’s union and Agricultural Employers Association, affecting 73 Flower Growers Group of employers, and over 60,000 employees.

“It is objectionable for Kefhau to be allowed organisational rights, and the legitimacy to receive trade union dues and agency fees, from over 60,000 employees, just on the strength of registration as a trade union,” said the judge.

Kefhau wanted the court to declare that it is the sole trade union, which is allowed by its constitution to carry out activities in the export floriculture and vegetable industry, and an order restraining Mr Atwoli’s from representing workers in that area.

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