African Company's Use of Merit Pay, Other Reforms Shows Way to Success

In the rippling, colossal expanse of the Kerio Valley, Kenya's largest mine glimmers in the sun. Its 400 full-time employees are busy blasting and digging. Some operate bulldozers in the open pit, others work the mill and load fluorspar, a fine powder used for construction purposes, on trucks headed to Mombasa, Kenya's largest port.

The miners are making twice as much as they did six months ago, when the mine was owned by the government.

The man who bought the mine is a young Canadian who has ripped through red tape, raised living standards for his employees and their families, and is set on increasing productivity by 30 percent. Charles Field-Marsham is also the son-in-law of Nicholas Biwott, a Cabinet minister and Kenya's most powerful man after the president.

Critics say that the mine operation symbolizes much of what is wrong with Kenya: nepotism and exploitation of the poor masses by a wealthy ruling elite whose lives contrast sharply with those of bone-thin children living in poverty.

Many critics in Kenya would argue that Mr. Field-Marsham was able to buy Kenya's only lucrative mine because of his father-in-law. Yet the energy-packed twentysomething also embodies the raw, positive force of free-market enterprise that's badly needed in this Texas-sized country that, until recently, was shackled by price controls and state ownership of businesses and industries.

"Things are changing fast in this country," says Field-Marsham. Kenya's economy has undergone considerable transformation over the past three years.

Exchange and price controls have been removed, and stringent fiscal policies have brought inflation down from more than 40 percent in 1993 to 9 percent in 1996.

The deficit has been slashed from 9.2 percent in 1993 to an estimated 1.8 percent in 1996. Privatization has been a driving force, with 140 of 207 state companies slated for sale in 1991 already sold.

When he took over the mine in western Kenya, Field-Marsham replaced its manager with Sultan Rhemtulla, the geologist who had discovered the mining potential of the area 20 years before.

"The first thing we did was tell employees they would be paid by how much they produced," Mr. Rhemtulla, a wry, unflappable man, explains.

"We set the rate at $3 per ton of material extracted. This means the workers are now earning about $80 a month, compared to the $40 they were making before."

It also means that the mine will expand production and profits by 30 percent, well above the $8 million rate of the last 20 years. "I could run the mine at a higher profit," Rhemtulla explains. "But that would leave all these people without a job in a few years' time."

Next, management set about renovating homes for the 6,000 people who live on the premises, installing the only satellite dish in the valley, restocking the school library, and putting in a few computers as well. An ambulance parked in front of the new family-planning center is on-call 24 hours a day. Rhemtulla also allows employees to cultivate small patches of land, which Field-Marsham leases from the government.

Still, living conditions are far from ideal, and wages are not exactly magnanimous, considering the profit. But, as Rhemtulla puts it, "it's a start."

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