UNCLAS NAIROBI 000598

SIPDIS

SENSITIVE

DEPT FOR AF/E, AF/RSA, AF/EPS, AND DRL/IL
DEPT ALSO PASS TO DEPT OF LABOR FOR SUDHA HALEY, PATRICK WHITE AND
MAUREEN PETTIS
GENEVA FOR LABOR ATTACHE CHAMBERLIN

SIPDIS

E.O. 12958: N/A
TAGS: ELAB ECON KE
SUBJECT: Kenyan Implementation of Decent Work Agenda

SENSITIVE BUT UNCLASSIFIED


1. (U) Summary: The Government of Kenya (GOK) is working with the
ILO to develop an action plan to implement the Decent Work Program
included in the September 9, 2004 African Union declaration in
Ouagadougou on employment and poverty alleviation. The GOK hopes
its new Ksh 1 billion (USD 14.5 million) Youth Enterprise
Development Fund will reduce widespread unemployment, but effective
implementation may prove difficult. The Labor Ministry claims the
Cabinet has approved the four labor reform bills intended to update
Kenya's labor regime and harmonize it with its East African
Community (EAC) partners. End Summary

Alleviating Poverty, Promoting Employment and Decent Work
-------------- --------------

2. (U) Permanent Secretaries from Kenya's Ministry of Labor and 10
other Ministries, the Employers Federation and the Union Federation
agreed to focus on three priorities in their efforts to implement
the Decent Work Program included in the September 9, 2004 African
Union declaration in Ouagadougou on employment and poverty
alleviation. The International Labor Organization (ILO) first
announced the Decent Work Agenda in 1999, calling for members to
integrate four strategic objectives into their general economic and
social policy making process: rights at work,
employment, social protection, and social dialogue. After a two-day
workshop with the tripartite social partners, ILO East Africa Rep
Schwettmann informed LabAtt the ILO will assist Kenya in developing
a country program to:


A. Promote youth employment and eliminate child labor by putting
child laborers in school and replacing them with unemployed workers,
16 years or older.


B. Extend social protection to the informal sector and rural areas
and combat HIV/AIDS in the workplace through provision of basic,
inexpensive health insurance.


C. Strengthen the institutional capacity of the social partners to
play a more effective role in the GOK's policy formulation process,
including its Vision 2030 growth strategy, and discussions with the

World Bank (WB) and IMF on macro-economic policy, structural
adjustment and privatization.


3. (U) Concerning theme A, the ILO Rep noted the Ministry of Youth
Affairs (MOYA) had briefed on the GOK's plan to distribute Ksh 1
billion (USD 14.5 million) in the first half of 2007 for the new
Youth Enterprise Development Fund (YEDF). MOYA reported the economy
absorbs only about 25 per cent of the young people joining the labor
market annually. The fund is aimed at creating employment in the
informal sector and is the Kibaki government's main effort to redeem
its campaign promise to create 500,000 jobs/year. Ksh 1 million
(about US$14,493) will be distributed to each of the 210
Constituencies, where Divisional Social Development Committees
(DSDC) will be established to lend up to Ksh 50,000 (about US$725)
to selected youth groups for a 5% administrative fee. Ksh 100
million (about US$1.5 million) will be used to provide
entrepreneurial training, create business linkages with larger
enterprises, facilitate the marketing of youth enterprise products,
and develop foreign employment opportunities. The remaining Ksh 690
million (just under US$1 million) will be given to 15 microfinance
institutions, credit cooperatives and banks for onward lending at an
interest of between seven and eight per cent. MOYA estimates that
200,000 youth will benefit. The GOK had previously announced
separate plans to rehabilitate a minimum of one youth polytechnic
school in each Constituency.


4. (SBU) Schwettmann expressed skepticism about the plan's likely
effectiveness. Based on his experience with a similarly designed
reconstruction project in Germany, he warned that without risk,
lenders lacked incentive to select borrowers with the best-prepared
business plans and coach them towards success.


5. (U) Concerning point B, the GOK has already made a start. In
October 2006, National Health Insurance Fund (NHIF) CEO Richard
Kerich announced a new medical insurance scheme to include informal
sector workers and people past retirement age. Under the new
scheme, people would pay a minimum Sh160 (about US$ 2.3) a month -
Ksh 1,920 (about US$28) a year - to receive full and comprehensive
coverage at government hospitals for maternity and diseases,
including surgery. At most mission hospitals and small private
hospitals, the scheme offers full coverage, except for surgery,
where patients would have to pay part of the fee.


6. (U) Concerning point C, ILO Program Officer Rutabanzibwa stated
the Labor Ministry needed to better explain and document its efforts
to carry out its functions and national policies to the Ministry of
Finance in order to obtain larger budget allocations. The Ministry
and Kenya's trade unions also need resources and capacity building
to play an effective role and maintain emphasis on employment issues
in the GOK's development of macro-economic and structural adjustment
policies. LabAtt agreed the Ministry is starved for the resources
needed to fight child labor, carry out safety inspections, and
enforce the labor laws. He suggested that investment in IT would
also help the Ministry, whose website is outdated, and whose e-mail
usually does not function.

Promoting Decent Work Agenda
--------------


7. (SBU) In November, the African branch of the International
Confederation of Free Trade Unions (ICFTU-AFRO) and the Central
Organization of Trade Unions - Kenya (COTU) agreed to participate in
the January 2007 World Social Forum (WSF) in Nairobi. Their goal
was to promote the Decent Work agenda and highlight other broader
issues affecting workers in the African continent. In his meeting
with LabAtt, AFRO SG Kailembo made it clear that he and COTU SG
Atwoli had worked hard to prevent more radical elements in the labor
movement and their allies in the WSF from hijacking the trade union
agenda.

Employment Policy
--------------


8. (U) ILO Rep Schwettmann also discussed developing an employment
policy with the Ministry. LabAtt pointed out that the formal sector
accounts for only about 10% of Kenya's employment. Any employment
policy should focus on strengthening the informal sector, commonly
known as Jua Kali, and vocational and business training, rather than
worrying about job losses from privatization of parastatals.
Capital at reasonable interest rates for small and medium
enterprises is desperately needed. LabAtt warned that the same
barriers of high crime, corruption, a dysfunctional judicial system,
and poor infrastructure that inhibit formal sector investment and
job creation also constrain job creation in the informal sector.
The GOK calculates that informal sector employment grew by 6.9% in
2005 to reach 6.4 million, creating 414,400 new jobs, whereas formal
sector job growth was only 44,000, restricted mainly by the
continuing decline in public sector employment.


9. (U) The Labor Ministry told the ILO representative the four labor
reform bills drafted by the ILO in 2004 under the DOL-funded
Strengthening Labor Relations in East Africa (SLAREA) project had
been approved by the Cabinet, and had been sent to Parliament.
LabAtt explained that the bills had to be published (gazetted)
before being sent to Parliament, and this would have to wait until
Parliament returned to session in March. The bills were drafted to
bring Kenya's labor laws into closer compliance with ILO norms, and
to harmonize Kenya's, Uganda's and Tanzania's labor laws before the
East African Community (EAC) allowed free movement of labor. Labor
Commissioner Kavuludi told the press Parliament would debate the
labor bills after it completed work on an unnamed bill not passed in
an earlier session.

Comment
--------------

10. (SBU) Kenya's social partners are making some progress in
implementing the ILO Decent Work Agenda as elements of the
Ouagadougou Declaration and Action Plan on employment and poverty
alleviation, 30 months after the conference. Critics of the YEDF
dismiss it as an election year ploy, but the project has been under
development for at least a year. It is encouraging that the GOK
decided not to give MPs control over distribution of the funds,
relying mainly on financial institutions to tap their experience.
Creating Divisional Social Development Committees (DSDC) to
distribute Ksh 1 million (about US$14,493) in each district may
reduce MPs' control over the funds. However, it seems likely the
DSDC's will repeat the uneven levels of transparency and
effectiveness experienced by the Constituency Development Fund
Committees over the last few years.

RANNEBERGER