Pay Shy or Work shy?

Manufacturers feel the heat due to high staff Turnover

Staff conditions in factories and industrial parks in Ethiopia have long been a subject of debate. From pay scales to working conditions and safety, many of the issues connected to working in factories have led workers to leave their employment in droves. In addition, a lack of skilled manpower has become another hurdle that factory managers have had to contend with. EBR’s Ashenafi Endale explores.

For the last couple of months, production activity inside Addis Ababa Leather, a factory located in Gulele District, has been as slow as the fog. The factory is only operating partially, due too many vacant positions for an unusually long period.

“We have been advertising vacancies repeatedly for months, to no avail,” says Mulatu Woldemariam, marketing manager of Addis Ababa Leather. ”Unlike other manufacturers, tanneries and leather factories need skilled professionals for each technical and production position. Unskilled labor is hired to support each skilled professional.”

Addis Ababa Leather, which underwent significant improvements since it was privatized a few years ago, usually trains new recruits itself. “However, other tanneries attract them by offering a better salary or other benefits such as transportation. All factories in the leather industry are currently surviving by snatching labor from each other. Most of them do not provide training.”

“Currently, we have 284 employees, most of whom are semiskilled. But we need up to 500 employees, if the factory is to operate at full capacity,” explains Mulatu. The factory has the capacity to process 1,200 cattle hide a day as well as 2,400 sheep and goat hides. “We are focusing only on cattle, since there is limited skilled manpower to process sheep and goat skin.”

The high employee turnover and absence of skilled manpower has significantly affected the export performance of Addis Ababa Leather, according to Mulatu. ”It especially affected our export output both in quality and volume. We are using less than 80Pct of our capacity, of which only 40Pct is exported.”

Similarly, Akaki Metal Factory, which is involved in the production of assembled trucks, spare parts, and construction and agricultural materials, has been struggling, due to a significant number of vacant posts. “Manpower is usually scarce. We have especially had difficulty in finding electricians, financial experts, and metal engineers. Even if we find and hire them, they leave as soon as they get some experience, since there is a shortage in the industry,” says Matewos Asele, CEO of Akaki Metal Factory.

Pankaj Gupta, general manager of Ethiopian Steel agrees. “We are utilizing less than 50Pct of our installed capacity. We have various incentive packages to tackle the problem of staff turnover such as providing better salaries than the industry average, and providing training, as well as promoting employees as fast as possible.”

Ethiopian Steel manufactures various structural and finishing materials for the construction industry. It has factories in Addis Ababa, Gondar, Mekelle and Hawassa, with an installed production capacity of 50,000 metric tons annually. Ethiopian Steel, which was established two decades ago, is a member of the Indian Safal Group, which has had presences in 12 African countries for the last 60 years.

Small metal industries in the country currently employ 25,000 to 40,000 people, according to Tilahun Abay, director of the Planning and Communication Directorate at Metal Industry Development Institute (MIDI). The exact number of medium and large industries is under assessment by the Central Statistical Agency (CSA). “The labor shortage would be higher if all metal industries were operating at their full capacity,” he said.

The current staff turnover wave has been hitting all industries in Ethiopia recently. Industrial parks are not immune to the problem. “Labor mobility is high. Many companies in the industrial parks post vacancy announcements each day. The amount of newly incoming labor force is limited. On the other hand, internal mobility is significant,” says an official in Bole Lemi Industrial Park, who is not authorized to speak to the media. “One company takes employees of the company operating in the next shed simply by raising salaries by ETB50 or ETB100.”

The average salary in the Bole-Lemi Industrial Park is around ETB700. In addition, lunch expenses and transport costs are covered by the companies, according to employees in the park. “We work 12 hours a day confined in a factory. Under the current circumstances, ETB700 per month is not a salary, but pocket money,” argues Najiyat Kedir, one of the employees in Bole-Lemi. “I have learned many things like operating a sewing machine. But I am planning to become a domestic worker in one of the Arab countries, instead of wasting my energy here.” Najiyat joined the park after finishing grade ten last year.

There are 11 companies operating in 20 sheds in Bole-Lemi. Most of the companies are Chinese, Indian and Korean, all focusing on textile and garment. Close to ten industrial parks are currently operational, while more are under construction.

The manufacturing sector currently employs an estimated 200,000 people although the government envisions increasing the figure to two million by the end of 2019/20. The labor market pool has two main sources, higher education institutions and rural-urban migration. Over 100,000 graduates join the market from universities as well as technical and vocational schools each year. An increasing number of workers also join the market annually after leaving the agriculture sector. The staff turnover in the manufacturing sector is shocking, particularly for foreign companies that came to Ethiopia in search of cheap labor.

Although staff turnover is attributed to various factors, the major one is an unattractive salary and work environment. “I have changed jobs between three metal industries last year alone, in search of better salary and a more convenient work place,” says Daniel Befekadu, a father of two. “All of the companies register good profits but none of them are willing to pay better or compensate employees.”

Mengistu Girma, Manufacturing Industry Development Cluster Coordinator at Addis Ababa Industry Bureau agrees. “Salary and compensation in the manufacturing sector never matches the workload of employees. This is because industries pay the amount they want.”

Many factories, especially in industrial parks, pay very low salaries, misguided by the ‘cheap labor’ narrative, according to a lecturer at Addis Ababa University. “This is the major push factor for employees. Industries think they can replace the vacant posts as soon as employees leave, because they think there is a surplus unemployed force in the country. Even though there is a huge number of unemployed graduates, the industries do not want to pay more money.”

Setting minimum wages in the manufacturing sector was the hot issue during a meeting the Ministry of Labor and Social Affairs (MoLSA) held with stakeholders at the United Nations Economic Commission for Africa from December 26 to 27, 2018. “The Ministry has been in support of the move for long time. However, associations and representatives of the industries bitterly argued against it during the meeting,” says Basazin Deribe, public relations officer at the Ministry.

The other reason for the staff turnover is the low industrial and working culture. “My mother was penalized for being five minutes late for factory work back in China. But in Ethiopia, absenteeism is very high and normal,” explains John Snow, general manager of J&S Metal. “Staff turnover, absenteeism and poor working culture affect the productivity and profit of the company.”

However, Mekonen Hailu, director of the Communication Directorate at Ethiopian Investment Commission (EIC), argues that the staff turnover in Ethiopia is comparatively stable, compared to other African countries. “There is turnover but usually it is internal. They move from industry to industry, in search of better salaries. But they usually do not leave the manufacturing industry totally.”

Mekonen stresses that there are employees who have even established their own small manufacturing factory, after developing their skills in medium and large industries. “This is one of the main reasons the government is developing industrial parks and attracting foreign investors. After a few years, the skill of the labor will match the expertise of foreigners, particularly in industrial parks.”

However, for Mathewos, such expertise should come mainly by improving the weak university-industry linkage. “Universities must find out level and types of skills each industry need. Then good performing students must spend at least half of their time at industries, until they acquire every drop of available knowledge. So far, they come only for a short apprenticeship. Though we have cooperation agreements with various universities, none of them has the commitment to the end.”

Pankaj agrees. “It is particularly difficult to find skilled manpower in industrial management, finance, information technology, in addition to engineers. We usually bring expats for higher level positions. The local manpower is usually fresh and has little knowledge.”

8th Year • Jan.16 – Feb.15 2019 • No. 70