Massive job cuts looming

September 22, 2008

, NAIROBI, September 22 – Nearly 80,000 jobs are at stake in the manufacturing industry if the government does not subsidise the escalating cost of electricity in the country.

The Chief Executive of the Kenya Association of Manufacturers (KAM) Betty Maina said some of the association’s members were threatening to shut down their operations if the situation did not improve.

“This number only represents jobs in the manufacturing industry.  We haven’t considered other industries which are also reeling from this costs,” Ms Maina noted.

In the last one year the cost of electricity has increased by 600 percent and currently manufacturers are paying between sh10 and 15 per kilowatt.

In January this year, the cost of fuel was Sh1.77 per unit compared to Sh1.12 per unit during the same period last year.  

KAM chairman Vimal Shah said that energy costs alone constituted over 40 percent of the total manufacturing cost which was approximately a 33 percent increase in overall total costs.

Mr Shah observed that overall effective cost per unit of electricity for the industrial sector had gone up from Sh8 to Sh15 on average over the past one year.

“To say that product costs in the country are among the highest globally is an understatement, yet manufacturers are the largest power consumers,” Shah noted.

He added: “With these high prices, most industries are now facing the reality of possible closure and company relocations which will result in huge job losses in the industry.”

The association wants the government to intervene immediately by encouraging more private players to increase investment in the sector and to reduce inefficiencies in the current power generation capacity to solve this problem.
Put to task on why the manufacturers had not raised the issue through the Prime Minister’s office that houses the Private-Public sector secretariat, Shah said pointed out that talks on the issue were ongoing.

“We are still in dialogue.  The point is that we are not getting decisive decision-making so they are not saying anything yet.  I’m sure there struggling with the idea because even politically its not correct to have such a high cost of living.  But I think the issue is we need to think rapidly and make sure we focus on this issue before we divert to other issues.  This is a major cost!” he emphasised.

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