Capital FM (Nairobi)

7 December 2012

Kenya: Order to Reinstate KQ Workers 'Worrying' for Investors

Recent pronouncements from the judiciary and court decisions suggest that the new constitution may unwittingly have led to centralization of great responsibility and power in the judicial arm of government.

This automatically means failure in the judiciary will have far-reaching and terrible consequences to the nation of Kenya.

A few days ago the Industrial Court made a ruling reinstating Kenya Airways workers that has been received as a major blow to industrial relations and the free enterprise market system in Kenya. The court decision sets worrisome precedent - that investors/employers are no longer free to deploy rationality in allocating factors of production to sustain and keep industry and enterprises afloat during hard economic times.

In the Kenya Airways decision, it is appears the judge only interpreted labour as a right enshrined in the constitution and forgot to extend interpretation of labour to being a factor of production. As a factor of production, the investor is expected and at liberty to allocate labour in the most efficient way.

How can the Kenya airways management be at fault for exercising commercial rationality? How can they further be compelled by judgment to reinstate laid off workers at historical price rates, comforts and perks? Which other industry or enterprise is next in line to being forced by judgment to do the same to the detriment of its existence? Does the shareholder and/or investor have no rights under the new constitution? Did the constitution subjugate and diminish the right of the investor, the creator of wealth to the rights of the worker?

Anyway, court decisions are court decisions and KQ has appropriately moved to do what it must do under the law i.e. obey the law. I believe the laid off workers are now reinstated. However anyone running or owning a business with trade union representation must worry and remain eternally concerned.

Left to stand, this decision is a game changer in terms of the investment climate. The decision adds toxicity to the Kenyan economic climate. The government as the largest employer must worry the most.

Any more of this type of decisions by our courts will lead to rapid shifting of production and services to cheaper, more profitable, policy and judicial certain economic climates.

Investors vote with their bank accounts and their legs. Kenyans are taking a wrong turn by allowing such court decisions to stand. It must be lawfully appealed. Otherwise jobs for young people will be exported. Kenya Airways must appeal it and representative Business Member Organizations (BMOs) within Kenya Private Sector Alliance (KEPSA) must enjoin as an interested party in the case.

One of the greatest challenges for Kenya's future is our habit of not raising enough money through taxation to pay for what the government spends and then heading to borrow in order to bridge the gap. Loss makers do not pay tax. Kenya Airways reported a big loss in 2012.

Kenya Airways shareholders and management are battling to keep it afloat amidst turbulent times. I would appeal to them as well as aviation and allied workers union to meaningfully engage and agree. Do not allow judicial arbitration we shall all lose big from mis-interpretation.

Recently in America the largest bread maker 'Hostess' filed for bankruptcy laying off 18,000 workers due to insensitivity of trade unions.

Also review the tragedy of the South African economy that has become structurally uncompetitive due to labour costs advanced by a strong trade union that is part and parcel of the ruling party. Kenya cannot afford the similar toxic and turbulent industrial relations. And God forbid that we have trade unions joining as partners in political parties.

Peter Drucker the guru of management once said - The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday's logic. We therefore must act with modern updated logic to overcome the matter. Courts must never undermine 'Willing Employer, Willing Employee' principle. It is fundamental to free market enterprise.

For information, I am a platinum elite plus customer of Kenya airways. Since the layoffs, I am enjoying a better experience from the KQ on-ground staff. The frustrating 'idle hardcore sheng banter' that was KQ ground staff at the gates is much less and the waiting lines are getting shorter.

(Igathe is the Chairman Kenya Association of Manufacturers - KAM)

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