Kenya has the opportunity to establish a strong domestic and international footprint in textile and
apparel manufacturing through the Africa Growth and Opportunity Act (AGOA) which opened up the US
market for finished textile products. This would be a firm foundation for propelling Kenya into middle
income status and creating gainful employment for its fast growing, young population.Through value addition and streamlined trade logistics, it would be a potential gateway to other
manufactured goods, offering opportunities for Kenya to capture an increasing share of global trade and
to advance economic diversification.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 10 exports from AGOA countries, these are almost wholly from South Africa. In fact, AGOA countries account for under 1 percent of total global apparel trade.

Competitive challenges facing sector

1. High cost of power at over 20 cents per kWh compared to competitors in countries that pay considerably less, such as Chinese firms that pay an average of seven cents per kWh, or Ethiopian firms that pay six cents per kWh. This results in power costs accounting for up to 25 percent of Kenyan textile firms’ operating costs.
2. Obsolete equipment in some firms that increases operation costs. In-vestment by textile firms in new technology will significantly reduce their operating costs even in a high power cost environment.
3. Low labour productivity compared to cost of wages. Sewing operators’ wages in Kenya average US$180 per month compared to US$60 in Ethiopia. Comparatively higher wages do not necessarily inhibit apparel firms from competing globally so long as productivity rises to match higher wage levels. This has not occurred in Kenya, where the value-added to minimum wage ratio is lower than most competitor textile- apparel countries. Skills concerns, both at the managerial and technical levels, are to blame.
4. Lack of fast and effective trade logistics that affects speed to market, with a container taking longer to get to the US than it does from countries such as, China, India, South Africa, and Vietnam. Costing over US$2,000, it is more expensive than almost all apparel exporting countries, bar Ethiopia.

Opportunities

• Going green: There are environmentally conscious consumers willing to pay a premium for under the Life-styles of Health and Sustainability (LOHAS) segment, which is almost 20 percent of US adults, and more in European markets. Producers willing to reconfigure their production processes, despite the cost can reap big.
• Such ‘green-focused’ investments have energy efficiency and conservation measures at the core of their operations- at each stage of the production – and emission levels are kept within the recommended levels of the Intergovernmental Panel on Climate Change (IPCC). It is easier for such producers to attract capital on concessional terms, thereby off-setting the business cost of‘green production’.
• Buyers of small order runs of premium products: This segment is best served well by small scale producers of a range of products, from new niches such as crowd-sourced de-signs, to the small,quick turnaround runs required by the pinnacle of fast fashion buyers. However, the price premium that such smaller batch buyers pay also requires quality to be of a higher standard than commodity products. It also requires very skilled labour, from management to the factory floor to secure quality.

Strategic Government interventions

1. Revival of textile firms, including Rivatex and Mountex, supported by the ‘Buy Kenya, Build Kenya’ initiative. This is promoting local production and helping to wean Kenyans away from second-hand clothes, known locally as Mitumba. The initiative gives Kenyans an opportunity to access quality, locally made affordable clothes with prices range from Sh100 to Sh600 for the same clothes that are sold at Sh6,000 in the US and UK markets. President Kenyatta said in a past event. One study by the Institute of Economic Affairs (IEA) estimated that Kenyans spent Sh197.5 billion in 2019 on clothes and footwear.
2. Athi River Textile Hub Development
3. Completion of 16 industrial sheds, and provision of basic infrastructure facilities (roads, electricity and water, sewerage and security fence) at Athi River EPZ
4. Revival of KIKOMI textile factory
5. Modernisation of RIVATEX machinery through completing modernization of spinning and weaving areas, construction of effluent treatment plant for zero discharge, perimeter wall and fire management systems.
6. Renovation of leather factory in Kariorkor, Nairobi.
7. Support for biotechnology innovations like BT Cotton by the Nation-al Biosafety Authority. BT cotton is resistant to pests and diseases, matures faster and delivers higher yields per acre. This is a critical lifeline for cotton farmers and the supply of cotton as a raw material for the textile industry.
8. Negotiations with the US on a Free Trade Agreement (FTA). The United States and Kenya began free trade agreement (FTA) negotiations in 2020 under then-President Trump but they were put on hold as the Biden Administration reviewed its trade policy priorities. However, the July 1 expiration of U.S. Trade Promotion Authority (TPA), under which President Trump had notified Congress of his intent to enter into the bilateral FTA negotiations, poses a hurdle. A U.S.-Kenya FTA would be the first by the US with a country in sub-Saharan Africa (SSA). Overall, the pact would build on the objectives of the African Growth and Opportunity Act (AGOA). For the US, Kenya is the single largest source of apparels in sub-Saharan Africa. In fact, the US Fashion Industry Association (USFIA) recently noted that there is a tremendous opportunity to expand trade between the United States and Kenya by removing both tariff and non-tariff barriers under a US-Kenya FTA. There is also a push by the industry to conserve the liberal rules of origin for apparels that Kenya currently enjoys under AGOA, in an FTA with the US.
9. Ratification of African Continental Free Trade Area by Kenya: With (AfCFTA) coming into effect from January 1, 2021, intra-Africa trade will see a significant increase with Kenya among the member states of AU (African Union) who are in a position to benefit from the deal under the principle of reciprocity, once talks regarding the rules of origin are complete.
10. The agreement will create the largest free trade area in the world measured by the number of countries participating. The brings together a market of 1.3 billion people in 55 countries with a combined gross domestic product (GDP) of USD3.4 trillion. However, its full potential is dependent on member countries implementing significant policy reforms and trade facilitation policies.

According to the World Bank’s Chief Economist for Africa, Albert Zeufack, “the African Continental Free Trade Area has the potential to increase employment opportunities and incomes, helping to expand opportunities for all Africans.”