Business Daily (Nairobi)
Michael Omondi
23 April 2008
(Page 2 of 2)
Now, in addition to a hostile competitive environment, Telkom's new owners with a request for a matching cash injection from the Kenya government seem to be lost on political irony.
The thinking within Treasury is that the Government is keen on focusing its resources in growth sectors including tourism, agriculture and infrastructure as the country faces missed targets because of the political turmoil that gripped the country in the first quarter of the year.
The Government says the country might not hit its growth targets due to the political turmoil with talk it could knock at least two percentage points off the country's economic growth this year.
The economy grew at the rate of 7.1 per cent last year.
Sources at Treasury also back their position on the fact that the Cabinet and Parliament would be reluctant to release funds to the firm now that it has ceased being a parastatal after the French telecom buyout.
The move is likely to send the French team back to the drawing board as it races to rescue its Sh26 billion investment, which gives it a 51 per cent stake in the State owned firm-to win a majority representation on the board and the power to appoint top managers. France Télécom has already used some of these powers when it fired the Kenyan managers.
The firm's weakened cash position is best captured by two recent embarrassing events.
Even as the firm's management races to repair its broken image before its former employees, a huge fraction of its staff are vexed over the working conditions.
Already, the firm's workers union, the Communication Workers Union, issued a strike notice on Monday to push for better terms even as the management offered a 10 per cent pay hike.
"This is an insult given our members have not received a pay increase for the past two years," said the union's general secretary, Mr Benson Okwaro, adding that the union is demanding for a 300 per cent increase.
After the firm engineered the largest retrenchment in Kenya's corporate history within a span of eight months, the thinking was that it would offer the remaining staff a payrise matching those of its competitors- Safaricom and Celtel.
The firm reduced its staffing levels from 17, 288 workers to about 3, 100 between last May and February.
Expenses driven by the bloated work force were increasing at a faster rate that the revenues and this saw the hitherto state firm make huge losses.
Its turnover has been declining at an annual rate of 10.5 per cent over the last three years to settle at Sh16.3 billion in 2006 from Sh20.9 billion in 2003 as its competitors continue to munch its market share.
The firm notes that it expects to make a loss of Sh1.18 billion in 2007- a reduction from the previous year's figure of Sh2.7 billion.
The frosty relationship between Telkom's management and its unionisable staff comes at a time when human capital is emerging as the most sought after resource in the local telecoms market and an arsenal for market growth.
This forms the reason why Telkom's management has in the past week been working round the clock to find a formula to placate its workers without worsening its poor cash flow position.
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