Bamburi spends Sh153m on laying off employees

Bamburi Cement #ticker:BAMB spent Sh153 million to retrench workers in its Kenyan operations in the year ended December, joining the list of firms that incurred substantial costs to reduce workforce.

National Bank of Kenya #ticker:NBK, Standard Chartered Bank (Kenya) #ticker:SCBK, Britam Holdings #ticker:BRIT and Barclays Bank of Kenya #ticker:BBK are among the publicly-traded companies that spent hundreds of millions of shillings to compensate retrenched employees.

Trimming of the payroll is part of overall cost-cutting measures seen in corporate Kenya, with firms aiming to boost margins in the medium to long-term.

“In order to achieve operational efficiency, the group undertook rationalisation of the staff which resulted in restructuring of the group,” Bamburi says in its latest annual report.

“The restructuring costs which are one off, principally represent packages for employees’ redundancies.”

The company did not say how many workers were laid off in the review period. Its staff count saw a net rise to 822 against 808 in 2017, indicating that the cement manufacturer hired more employees than those sacked.

The company also has a subsidiary in Uganda (Hima Cement). Cement manufacturers’ major costs include electricity, transport and salaries. Cement prices have been falling over the years amid increased supply of the commodity, forcing players in the industry to focus on cutting costs to maintain or raise their margins.

“From an industrial level, we shall utilise our new capacities to improve on availability in the market place, while continuing to drive process improvement and cost optimisation initiatives,” Bamburi said. The increased workforce reduction in corporate Kenya has been motivated by a mix of automation and the need to survive a tough operating environment.

NBK retrenched 112 employees in the review period at a cost of Sh541.2 million.

Britam spent Sh664 million to lay off 110 staff while StanChart shed 54 employees at Sh611 million. Barclays also spent Sh479 million to let go of 78 employees.

Insurers are facing increased competition in their industry while bank margins from lending have come down due to the interest rate caps.

Manufacturers are also grappling with subdued demand for their products, partly due to tighter credit markets.