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Maplecroft Kenya Labour Standards Report shows poor governance can cause business to inadvertently break employment law

16/09/2010

For businesses that have a presence in Kenya, Maplecroft's latest Labour Standards Report is an essential read. This report provides guidance to companies navigating the complicated political, economic and cultural landscape in Kenya. Organisations are at risk of breaking labour laws without necessarily realising that they are doing so because of the wide use of casual workers (7.9million). The use of casual labourers may account for reduced productivity whilst also infringing several labour laws.

The report points out that legal protection can be weak. Labour contracts, for example, need not be written in certain circumstances, leaving workers vulnerable to exploitative practices. Despite the passing of the Children Act in 2001, children still continue to be subjected to sexual violence, prostitution, trafficking and forced labour. When uncovered in and around supply chains, risk of complicity could have a detrimental effect on business from a stakeholder perspective. Given poor working conditions amongst Kenyan supply chain partners especially in the agriculture and construction sectors, there is a growing imperative for thorough screening and due diligence in human rights and labour standards monitoring.

Fraud, bribery and corruption are also rife in Kenya, which can make running a legally compliant business difficult. In March 2010, the EU threatened to withhold financial aid from Kenya and to be reticent about promoting Kenya to potential investors. The World Bank has also suspended disbursements due to concerns over fraud and corruption. This further creates a more risky business environment. Currently the Ministry of Labour does not have sufficient capacity to enforce laws. In certain regions, corrupt police or immigration officials are complicit in human trafficking. They are known to receive bribes to overlook, or obstruct human trafficking investigations.

Kenya's population is growing at a very high rate. According to the August 2010 census, the country's population is increasing by one million inhabitants every year. Maplecroft points out that this level of growth considerably outpaces the country's infrastructure development, particularly health and education. This is despite the fact that the government currently spends half the national budget on developing national infrastructure; this is therefore an unbalanced equation, which could have a severe impact on business. Economic Processing Zone (EPZ) business also grew by 50% due to benefits such as tax holidays. On September 13, BBC reported that Kenya invited bids to build a new port in Lamu. This project is part of a £14.3bn transport scheme which includes a railway line that connects Kenya to Ethiopia and Southern Sudan. The World Bank approved a credit of (circa) £38million (GBP) to support unemployed youths. For businesses moving into Kenya staffing should not be an issue as unemployment is running at 40%, graduate levels are also high.

Localised labour rights and protection risk profile

Health and safety hazards in the Kenyan workplace are an area of acute concern. Official statistics reveal that for some sectors like construction, horticulture and manufacturing (especially in Economic Processing Zones), deaths at the workplace are as high as 45.9% of the workforce, although the Ministry of Labour says that it is taking steps to address the problem. The Business Daily News Report states that experts are warning of increased cases of workplace accidents due to cost cutting measures taken by employers in the recession. An example of this could be illustrated by the collapse of a building under construction in Kiambu in October 2009, which resulted in 16 associated deaths.

Wages in Kenya are a strong area of discontent with organisations like 'War on Want' reporting that workers who supply British supermarkets only earn half of what equates to a living wage, rendering them unable to feed their families. The Maplecroft report shows why economists at the IMF warn that the aim to transform Kenya into an industrialised middle-income economy by 2030 is no longer a realistic proposition.

Reports also persists of very low paid workers, such as tea pickers in Kenya boosting their income by selling sex, which increases the risk of the spread of HIV/AIDS. In November 2009, Irene Cheruiyot, Head of Unilever's HIV programme said "the economic implications of managing HIV are very high, and the earlier large-scale growers and companies realise it, the better."

Climate change is impacting on Kenya, which is a keen risk due to its strong sector presence in agriculture. IMF MD Dominique Strauss-Kahn commented in a report entitled "IMF proposes climate change kitty" by Kenyan newspaper, The East African website, "Climate change will hit low-income countries soonest and hardest... Without urgent action, the continent will suffer more from drought, flooding, food shortages and disease - possibly provoking further instability and conflict". However, the IMF is planning to raise (circa) £64.9 billion (GBP) to support climate change in developing countries, including Kenya. Support for business growth in Kenya is being generated. Market opportunity is there for the well informed investor.

The Maplecroft Kenya Labour Standards Report is a valuable tool for businesses to address specific risks and opportunities in Kenya. Maplecroft offers a wide range of reports which use up to 500 indices across 196 countries in areas such as political risk, legal and regulatory, human rights and climate change.

For further information or to purchase a copy of the Kenya Labour Standards Report please email info@maplecroft.com