Proposed minimum wage unrealistic—Employers

Recently, the Reserve Bank of Malawi announced a 44 percent devaluation of the kwacha followed by a hike of fuel pump price by the same percentage a few hours later. This has led to calls for the minimum wage rise to K144 000 from the current K50 000 by the Malawi Congress of Trade Unions (MCTU). On the other hand, the Employers Consultative Association of Malawi (Ecam) argues that raising the minimum wage to that level is practically impossible. Our reporter JACOB NANKHONYA, engaged Ecam executive director GEORGE KHAKI, who expounded on employers’ perspective of the devaluation. Excerpts:

What is your reaction to the 44 percent devaluation of the kwacha?

Our reaction is that this will lead to rising cost of living and it will, therefore, hurt our businesses and our workers, therefore, we need to look into the welfare of our workers by considering adjusting their salaries by the affordability of different companies.

What do you mean by affordability of companies?

The ability to produce more goods, sell them and make profits differs from one sector to another. You will find the sectors, let us say, agriculture, financial and education et cetera have different abilities to make money and; therefore, affordability to make profits is also different and the differences even go to companies. Therefore, their ability to raise wages will depend on their ability to make profits.

Does that mean the minimum wage, practically, being different from sector to sector?

We have argued that we should consider going into sectoral minimum wages on the same basis of affordability differing from wage to wage. Actually, Malawi now has started moving in that direction, you will recall that at the moment domestic workers have their own minimum wage so do have truck drivers. That is sectoralisation of minimum wage. We probably may have to look at expanding the sectors with minimum wage.

Based on the prevailing K50 000 minimum wage, which would rank higher or lower based on sectors?

If you look at published annual financial accounts of companies you will see that financial services are doing better probably that could be affordable and I am sure that levels of pay are way above market average and if we can compare with the agricultural sector, for instance, where the profit margins are very small, when they have to sell their commodities be it within or outside the country, you will find that the profit margin is very small. Therefore, their ability to afford the current minimum wage, I am not saying they cannot afford it, but their affordability would be different from the financial sector. The same goes to domestic workers, you wouldn’t expect their employers to afford in the same way a company would.

How soon would you want to achieve sector-based minimum wage?

We may not be able to say how soon but our recommendation is that we move gradually into sectors as we have done with domestic workers and truck drivers, so probably a gradual approach would assist us because it is not an utopia. Moving gradually would also help us as we would be learning from the challenges that we would be encountering.

There is a call by the MCTU to raise minimum wage to K144 000, what do you say about that?

We need to look at inflation or consumer pricing index. These two are indicators of how the cost of living has gone up. Devaluation on its own is not a cost of living indicator, it feeds into the consumer pricing index (CPI). Therefore, I think that we should use the cost of living figures. In fact, if you look at Section 54 of the Employment Act it will tell you that one of the triggers of reviewing wages is the cost of living.

In this regard, would it be realistic to wait for the market response to the devaluation before businesses start making adjustments in terms of wages and goods pricing?

I wouldn’t necessarily say so, there are some companies and employers who know their profitability and have already made adjustments to prices of their goods and services. They, too, need to get into constructive discussions with their employees and see how best they can move their wages. But for other companies that may not have the ability to raise their wages right now they need to wait and react to official inflation figures to come out.

What else would you like to say?

This is a very difficult moment for a nation to both workers and employers. The inflationary pressure we are experiencing adds into the cost of production for employers and when these things happen that cost is passed on to the consumer. So, we should be mindful that at the end of the value chain is the consumer. If you raise the prices of your goods and services unnecessarily they will be beyond the affordability of the consumers and they will stop buying. If they stop buying it means our companies will not be making as much money as they were making and they will likely be reducing their operations one of which will be laying off some workers and that will be creating unemployment. Therefore, for us there is need for genuine discussions between employers and employees in respective organisations so that they will come up with optimal wages that will help the company operations, that will help the welfare of workers and that will also look into not hurting the economy of the country. Similarly, we call upon the government to urgently call upon stakeholders of the tripartite structure members (MCTU, Ecam and government) to discuss this matter at hand).