Kenya’s cotton, textile and apparel industry has earned its reparation in the global market as one of the leading emerging garment suppliers for high-volumes of bulk basis. In 2015, Kenya’s total apparel exports reached USD 380 million. This figure was expected to grow by 5% in 2016 to reach USD 400 million, according to Kenya Association of Manufacturers.
African Countries provide investment opportunities to different partners and countries under the available trade agreements mainly to the African Growth and Opportunity Act (AGOA), the cornerstone of the U.S. government’s trade and development engagement with Sub-Saharan Africa.
Regionally, Kenya has enjoyed a strong position under AGOA—the country’s share of total SSA textile and apparel exports to the US increased from 16 percent in 2004 to 37 percent in 2014.
Apparel manufacturing in Kenya is the most attractive investment option for global investors, as Kenya has duty-free access to the USA under AGOA and to the EU under EPA. Kenya also has well-developed export channels, infrastructure and linkages with large USA buyers, which can prove beneficial for new investors.
Exports to the European Union also are increasing under the EU’s Economic Partnership Agreements with African countries.
Kenya’s textile and apparel sector has the potential to play a key role in anchoring the country’s deeper movement into middle income status and in serving as a source of gainful employment for its fast growing, young population. As a manufactured good, it offers opportunities for increased value capture and streamlined trade logistics and for the building of skills and experience from the factory floor to management level.
Based on these foundations, it therefore serves as a potential gateway to other manufactured goods, offering opportunities for Kenya to capture an increasing share of global trade and to advance economic diversification.
AGOA gives most Sub-Saharan Africa (SSA) firms duty free, quota free access to the United States, offering a substantial competitive advantage over other textile-apparel exporting countries. Therefore, the trade agreement has played a pivotal role in the growth of the continent’s textile-apparel sectors.
However, almost 15 years after the launch of AGOA and shortly after its renewal, Sub-Saharan Africa’s trade with the US remains dominated by natural resources. While some manufactured goods feature in the top ten exports from AGOA countries, these are almost wholly from South Africa.
Knit and nonknit apparel exports rank 27th and 33rd, respectively, in the value of AGOA countries’ exports, with AGOA countries amounting to under 1 percent of total
global apparel trade.
Kenya has 52 textile mills, of which only 15 are currently (2014) operational and they operate at less than 45 percent of total capacity. The existing mills operate using outdated technology and suffer from low levels of skilled labor and low productivity. The cost of electricity is a major cost driver for textile mills, as are the high maintenance and overhead costs due to old equipment. A further cost driver is the need to either use high-cost imported material or low-quality local fiber which requires additional processing.
The cotton, textiles and apparel (CTA) industry is the second biggest manufacturing activity in Kenya, providing livelihood to approximately 200,000 households. Kenya has 385,000 ha of land suitable for cotton cultivation, but only fraction of it is under cotton cultivation.
Current production of cotton lint in Kenya is approximately 7,000 tons. In Kenya, cotton is mainly cultivated under rain-fed conditions. Kenya also produces fibres like wool and sisal, but in small quantities.
There are 23 ginneries in Kenya, with an installed capacity to gin approximately 140,000 bales annually, but only eight of them are operational and the equipment in the ginning units are outdated.
Yarn is mostly imported from Asian countries. There are very few fabric production mills that mostly cater to domestic and regional markets.
Market access by apparel and textile firms is not as easy as it might seem given AGOA. For non-EPZ firms, access to the domestic market is difficult because the influx of second-hand clothing renders the market minuscule. Public agencies, which could be very large customers, primarily import to fulfill their needs.
International safari tourists are a predictable customer base, but relatively few repeat visitors and declining tourist numbers means a shrinking number of the same, standard products continue to sell. High-end Kenyan fashion designers sell items to a niche local customer base and have ad hoc agreements with international buyers.
For EPZ firms, AGOA’s late renewal represented a major source of market uncertainty and could have postponed investment in marketing, technology, and training, among others.
Addressing the influx of second-hand clothing and counterfeit products is a major concern for non-EPZ companies. For example, it is said that counterfeit products made in China and Turkey using Kenyan producers’ labels come into the market and are sold at 20-30 percent of the original product price.
Kenya has approximately 170 large-scale and 75,000 small-scale and micro apparel manufacturers. Out of these, 37 units are export-oriented that contribute to the bulk of the sector’s exports revenue. Kenya imports roughly 93% of its fabric supply, mainly from Chinese Taipei, Hong Kong, the People’s Republic of China, the Islamic Republic of Pakistan and the Republic of India
East Africa’s apparel exports are increasing continuously, but there is almost nil production of apparel accessories like labels, buttons, zippers or hooks, etc. An investment targeted at manufacturing and import substitution of such items can be a good proposition.
Despite being a small sector, Kenya’s textile and apparel industry has maintained a staggering double-digit growth rates in its apparel export, industrial employment and investment over the last few years.
Overall sector exports from Kenya have grown from US$ 253 million in 2009 to US$ 444 million in 2014 at a compound annual growth rate (CAGR) of 10%. The United States of America is the largest market, accounting for almost 82% of Kenya’s CTA exports. Kenya’s apparel exports have witnessed a CAGR of 14% from US$ 195 million in 2010 to US$ 379 million in 2014
When asked what measures AGOA thought would help expand market opportunities apparel and textile firms indicated that reducing non-tariff barriers for external markets would have the greatest impact. The introduction of local procurement policies is not reported to be important for EPZ companies engaged in cut-and make manufacturing (CM), but is an important consideration for both EPZ and non-EPZ companies seeking to diversify their products and markets.
Kenya is the gateway to East Africa. There are three sea ports in Kenya – Mombasa the (largest seaport in East Africa), Lamu and Malindi. Improvement in roads infrastructure is a huge contributor, since recent improvements have reduced the transit times from 18 days to five days from Nairobi to Mombasa port.
The Kenyan Government Supports smallholder farmers, by providing planting seeds, and advisory service through research and extension service; it supports irrigation scheme rehabilitation to restore production of irrigated cotton over the course of the next five to 10 years.
Kenya Investment Authority (KenInvest) facilitates implementation of new investment projects, providing aftercare services for new and existing investments. Incentives are provided to investors under EPZs, including tax incentives and holidays, VAT exemption, business allowance and investment deductions.
Note: This is a CTA (Cotton, Textile and Apparel) Sector Investment Profile Summary for Kenya from the 2014 analysis by ACTIF coupled with Kenya Apparel and Textile Industry-Diagnosis, Strategy and Action Plan by ministry of industrialization.
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Ministry of Industrialization and Enterprise Development
Tel: +254 202 731 531
Kenya Investment Authority (KenInvest)
Tel: +254 730 104 200 +254 730 104 210
Export Processing Zones Authority (EPZA)
Tel: ++254 45 662 1000