TRALAC - Trade Law Centre

Kenya: Agoa's Lease of Life to Cloth-Makers

Wednesday, 10 January 2007

Source: The Nation (Nairobi)

The Government should take advantage of the extension of the African Growth and Opportunity Act (Agoa) facility to 2012 to reorganise the garment industry that is on the verge of collapse.

The chairman of Kenya Garments Manufacturers Association, Mr Thomas Puthoor, said that high production costs arising from the high cost of fuel, electricity, transport and a huge wage bill has made Kenya one of the most expensive areas in the world to operate from.

Mr Puthoor told Nation: "We are competing against countries like China, India, Bangladesh, Taiwan and Vietnam where companies enjoy subsidies from their respective governments, and unless the Kenya government intervenes, more factories will close down and relocate."

The high production cost, according to Mr Puthoor, has made products from Kenya to be very expensive and not competitive on the market that is being shared by other players offering cheaper prices for their goods.

"Ghana and Egypt are some of the African countries that are pulling more industries because they provide incentives, while Kenya was losing because of the tough conditions that factories were operating under," he said.

Value garments

The Export Processing Zones Authority (Epza) had earlier called on manufacturers to transform the sector to fit into the new world competition order by shifting into value garments in order to remain in business.

"The only option left for the factories to compete with major players in the world is to target a special clientele with value added products," an official of Epza had said.

But Mr Puthoor said it would still take less time and resources to produce high value products in the competing countries than it would take in Kenya. "We will be lying to ourselves that we can effectively compete with countries that have everything in place including good infrastructure, government support and easy access to raw materials.

Bureaucracy was a major point against Kenya, Mr Puthoor noted. "It takes us more than 100 days to import fabric from China and India while it is only between 20 and 30 days for industries in those countries to get the materials," he said.

The industry that was boasting of employing over 40, 000 people some five years ago, he said, was now left with about 10,000 people.

This follows closure of over 50 percent of the factories, Mr Puthoor said.

Massive losses

At the same time the garment manufacturers are complaining of massive losses in business following the recent appreciation of the shilling against the dollar.

The factories which depend on imported fabric for the garment manufacturing are estimating the loss in recent months at about 10 percent.



“ Latest AGOA Trade Data currently available on AGOA.info


Click here to view a sector profile of Kenya’s bilateral trade with the United States, disaggregated by total exports and imports, AGOA exports and GSP exports.


Other regularly updated trade statistics on AGOA.info include: (click each link to view)

  • AGOA-Beneficiary Countries’ AGOA and GSP Trade Aggregates

  • AGOA Trade by Industry Sector

  • Apparel Trade under AGOA’s Wearing Apparel Provisions

  • Latest Apparel Quotas under AGOA

  • Bilateral Trade Data for all AGOA-eligible countries individually.