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Kenya – Fashion World’s Manufacturer

The textile and apparel market in Kenya is on an upward trajectory, with significant increases in exports, jobs, and supporting service sectors. According to the Industrialisation and Enterprise Development ministry, the sector can play a key role in anchoring the country’s deeper movement into middle income status and in serving as a source of gainful employment. Kenya has duty-free access to the US market,  under the African Growth and Opportunities Act (AGOA). Approximately 70 percent of Kenyan apparel firms have a US-dominant market orientation meaning that at least 80 percent of their output is sold to US markets. According to the ministry, the sector can create 300,000 jobs if it is given the attention it needs to grab a larger slice of the global clothing market, estimated by the International Textile Manufacturers Federation to amount to $1.5 trillion.

 

On a factory floor some 28 kilometres South of Nairobi, hundreds of employees are busy at work processing orders for clients abroad. Boxer pants, T-shirts and tank tops form the mix of products being stitched together in Kenya for a growing list of big global brands including Calvin Klein (CK), Hennes & Mauritz  (H&M), Tommy Hilfiger, G&T, Nautica, Arrow, Wrangler, Speedo, Izod and Cherokee. Rising costs of labour, raw material, energy and transport as well as tax hikes in China are proving a boon for Kenya as top global brands forayed into new source markets to escape operational loses in the Asian country. Although still in the early stages, the choice of Kenya  as a sourcing and manufacturing destination by international brands has brought a much needed impetus for the country’s textile industry that is on a recovery path after decades of decline due to mismanagement and stiff competition from cheaper imports and second-hand clothes. “Things are looking up….there has been tremendous growth over the last five years and we project more,” Fanuel Kidenda, CEO of the Export Processing Zones Authority (EPZA) says from his office boardroom that overlooks a vast complex of factories and warehouses. Buoyed by increased activity in East Africa, the number of enterprises operating within Kenya’s EPZs has jumped from 89 in 2015 to 110 in 2017 while another 40 are presently setting up. Overall investments by firms within the EPZ also climbed to about Sh89 billion in 2016 from Sh44 billion the previous year—reflecting a strong flow of Foreign Direct Investment (FDI) mainly into apparel factories specialising in cut-make and trim (CMT) functions.

 

AGOA The recent extension of the African Growth and Opportunity Act (AGOA) initiative to September 2025 has stirred growth in the Kenyan textile industry which has traditionally been driven by the Act’s preferential terms that accorded eligible sub-Saharan countries duty-free access to the US markets. Though the Act originally covered the eight-year period from October 2000 to September 2008, amendments by then US President George Bush in July 2004 extended it to 2015. The US Congress then extended it further to 2025. Numerous Kenyan products, notably apparel and agricultural produce, are beneficiaries of this arrangement.

 

Costs Despite the upswing in the performance of Kenya’s apparel segment, there is still a lot to be done to enable the country to compete effectively against other rival source markets both in Asia and in the region such as Ethiopia, Bangladesh and Vietnam. “While Kenya has made some headway in the global apparel market, it is lagging behind many countries,” a report by the World Bank Group and Global Development Solutions for the Ministry of Industrialisation and Enterprise Development said in part, citing the country’s relatively higher cost of doing business. Electricity is a major cost driver for textile mills in Kenya as are the high maintenance and overhead costs due to old equipment, the World Bank report said. Another concern is the need to either use high-cost imported material or low-quality local fiber which requires additional processing. 

May 22, 2020 KCB Venture

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