Kenya enjoys highest labour productivity in East Africa

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AtwoliHiring a Kenyan will get you more output than say if you offered the job to a Ugandan.

That, however, is changing, with a new report pointing to the speed at which Ugandan workers are pulling up their socks, offering hope that the Kenyans could soon be knocked off the number one spot.

A March 2014 report by the ministry of East African Community Affairs (MEACA) notes that labour productivity in Uganda, Tanzania and Rwanda is narrowing the gap on a stagnated Kenya. The report is titled A Comparative Analysis of Labour Productivity in the EAC Partner States: How does Uganda compare with Other Partner States? It notes that “By all measures, labour productivity in Kenya and Burundi has been stagnant in recent years.”

Kenya enjoys the highest labour productivity in the EAC, closely followed by Uganda, Tanzania, Rwanda and Burundi. The report disputes media reports that have always labeled Uganda’s labour force as the most unproductive among the East African Community states.

Many newspapers have based their stories on The State of Uganda Population Report 2010: Population and Sustainable Development: Emerging Challenges Opportunities and Prospects, which pointed out that one needed six Ugandans to do a job that would be done by one Kenyan, and that one Tanzanian could do a job done by four Ugandans.

“The report did not indicate a source for this statement,” the MEACA report, authored by Malcolm Spence, notes.

The new findings, however, show that Uganda has the largest industrial sector, as a proportion of the overall national output, and the most productive industrial sector in the region. While Kenya boasts of the highest capital-to-worker ratio in the region, Uganda is the fastest growing in the region, owing to its ability to attract comparatively high levels of foreign direct investments.

Uganda has been playing catch up. According to figures from World Development Indicators 2013, Uganda surpassed Kenya in terms of contribution to GDP per person employed in 2007 and has not looked back since. While Uganda jumped from $1,750 to around $2,700 between 2000 and 2012, Kenya only moved from $2,200 to $2,450 during the same time.

This is partly because Uganda is the only partner state for which industry accounts for more than a quarter of output. “For all partner states, industry accounts for a substantially greater proportion of output than employment, revealing higher labour productivity rates in that sector” reads the report.

This is however subject to debate, since many of these industries employ non-Ugandans which may not necessarily mean that Ugandans are becoming more productive. The report, on the other hand, notes that high borrowing rates continue to hold back domestic investment, which would have further boosted productivity.

Uganda experienced high inflation levels in 2011 that resulted in Bank of Uganda changing strategy; the bank raised its Central Bank Rate, influencing commercial banks to do the same with their interest rates, ultimately pushing higher the cost of borrowing.

Industrial region

While all five EAC states are described as agricultural economies, the report notes that productivity in the region’s industrial sector is approximately ten times that in the agricultural sector.

“Kenya’s agricultural sector is more than twice as productive as any other EAC partner state,” the report reads.

Kenya also leads in several measures of human capital, including literacy rates, primary completion rates and the proportion of firms offering formal training.

With respect to basic requirements of the business environment, Rwanda has the best institutions in the region. The 2013 World Bank’s Doing Business Report ranked Rwanda as the second best place to do business in Africa, after Mauritius.

Not conclusive

Accurate data with respect to unemployment rates in the EAC is sadly lacking as former research fellow at the Makerere-based Economic Policy Research Centre, Lawrence Bategeka, earlier pointed out.

He argued that unemployment figures did not include those who had simply given up looking for work, with many in disguised employment, or engaged in subsistence or own account work.

“This serves to underscore the need for full-fledged labour market information systems and the undertaking of comprehensive Manpower Surveys as stipulated by the Common Market Protocol,” Bategeka argued back then. The Common Market Protocol provides free movement of workers across member states.

Improve industry

Given the drastically higher productivity rates in the East African industrial sector, the report recommends further structural transformation toward industrial production. It advises all partner states to implement and annually review minimum wages as a precursor to a fully-fledged common market with labour mobility across all sectors.

Besides increasing public spending on education, Uganda is urged to work towards improving the quality of its institutions, particularly public institutions and deal with the vices of corruption and public sector mismanagement.

Hiring a Kenyan will get you more output than say if you offered the job to a Ugandan.

That, however, is changing, with a new report pointing to the speed at which Ugandan workers are pulling up their socks, offering hope that the Kenyans could soon be knocked off the number one spot.

A March 2014 report by the ministry of East African Community Affairs (MEACA) notes that labour productivity in Uganda, Tanzania and Rwanda is narrowing the gap on a stagnated Kenya. The report is titled A Comparative Analysis of Labour Productivity in the EAC Partner States: How does Uganda compare with Other Partner States? It notes that “By all measures, labour productivity in Kenya and Burundi has been stagnant in recent years.”

Kenya enjoys the highest labour productivity in the EAC, closely followed by Uganda, Tanzania, Rwanda and Burundi. The report disputes media reports that have always labeled Uganda’s labour force as the most unproductive among the East African Community states.

Many newspapers have based their stories on The State of Uganda Population Report 2010: Population and Sustainable Development: Emerging Challenges Opportunities and Prospects, which pointed out that one needed six Ugandans to do a job that would be done by one Kenyan, and that one Tanzanian could do a job done by four Ugandans.

“The report did not indicate a source for this statement,” the MEACA report, authored by Malcolm Spence, notes.

The new findings, however, show that Uganda has the largest industrial sector, as a proportion of the overall national output, and the most productive industrial sector in the region. While Kenya boasts of the highest capital-to-worker ratio in the region, Uganda is the fastest growing in the region, owing to its ability to attract comparatively high levels of foreign direct investments.

Uganda has been playing catch up. According to figures from World Development Indicators 2013, Uganda surpassed Kenya in terms of contribution to GDP per person employed in 2007 and has not looked back since. While Uganda jumped from $1,750 to around $2,700 between 2000 and 2012, Kenya only moved from $2,200 to $2,450 during the same time.

This is partly because Uganda is the only partner state for which industry accounts for more than a quarter of output. “For all partner states, industry accounts for a substantially greater proportion of output than employment, revealing higher labour productivity rates in that sector” reads the report.

This is however subject to debate, since many of these industries employ non-Ugandans which may not necessarily mean that Ugandans are becoming more productive. The report, on the other hand, notes that high borrowing rates continue to hold back domestic investment, which would have further boosted productivity.

Uganda experienced high inflation levels in 2011 that resulted in Bank of Uganda changing strategy; the bank raised its Central Bank Rate, influencing commercial banks to do the same with their interest rates, ultimately pushing higher the cost of borrowing.

Industrial region

While all five EAC states are described as agricultural economies, the report notes that productivity in the region’s industrial sector is approximately ten times that in the agricultural sector.

“Kenya’s agricultural sector is more than twice as productive as any other EAC partner state,” the report reads.

Kenya also leads in several measures of human capital, including literacy rates, primary completion rates and the proportion of firms offering formal training.

With respect to basic requirements of the business environment, Rwanda has the best institutions in the region. The 2013 World Bank’s Doing Business Report ranked Rwanda as the second best place to do business in Africa, after Mauritius.

Not conclusive

Accurate data with respect to unemployment rates in the EAC is sadly lacking as former research fellow at the Makerere-based Economic Policy Research Centre, Lawrence Bategeka, earlier pointed out.

He argued that unemployment figures did not include those who had simply given up looking for work, with many in disguised employment, or engaged in subsistence or own account work.

“This serves to underscore the need for full-fledged labour market information systems and the undertaking of comprehensive Manpower Surveys as stipulated by the Common Market Protocol,” Bategeka argued back then. The Common Market Protocol provides free movement of workers across member states.

Improve industry

Given the drastically higher productivity rates in the East African industrial sector, the report recommends further structural transformation toward industrial production. It advises all partner states to implement and annually review minimum wages as a precursor to a fully-fledged common market with labour mobility across all sectors.

Besides increasing public spending on education, Uganda is urged to work towards improving the quality of its institutions, particularly public institutions and deal with the vices of corruption and public sector mismanagement.

-observer.ug

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