A local thread manufacturer has bagged licensing rights for a key American brand in its efforts to crack the Agoa market.

The deal signed last week between Fine Spinners and American & Effird (A&E) will enable the former to sell thread to local garment manufacturers, which sell exclusively to the US under the tariff-free terms of the African Growth and Opportunity Act (Agoa).

A&E, which is the world's second biggest thread manufacturer, is a preferred supplier to some of the leading clothing design houses and apparel makers in the US.

Managing director, Shanti Shah, told BusinessWeek that as a result of the deal, his company was now in a position to increase its 150 tonnes a month capacity, and add 50 more workers to its current roll of 250 at its Industrial area plant in Nairobi.

"We're already targeting major growth on our current 15 per cent market share among the garment manufacturers at the EPZs (Export Processing Zones). For the first time we're giving the 38 EPZ manufacturers, who have hitherto relied on imports for their stitching thread, a local option," he said during an interview.

Fine Spinners, with its $300,000 (Sh273 million) a year turnover, is a joint venture between Nakuru Fibres and the widely diversified Bedi Investments, the flagship of the Bedi family.

It started operations in 1996, the result of privatisation of East African Fine Spinners which had slid into receivership under government hands.

A director, Jaswinder Bedi, welcomed the deal and noted that it would enable Fine Spinners - known for its Chui and Simba brands of sewing machines, to diversify beyond apparel into new areas such as footwear automotive products and home furnishings.

Under the terms of the partnership, signed last week by Mr Shanti and A&E president Fred Jackson, and witnessed by Trade and Industry minister, Dr Mukhisa Kituyi on Friday, Fine Spinners will manufacture threads for the rest of the region with royalties for Uganda, Tanzania, Tanzania, Rwanda, Burundi and Ethiopia.

Mr Jackson said that while the initial arrangement does not involve any infusion of equity by the Americans, this could not be ruled out in the future.

A&E already has an African presence by way of South Africa and Mauritius, where it has put equity in subsidiaries. Agoa, a trade scheme authored by the Clinton Administration to improve trade between the US and Africa, has been a runaway success in Kenya since it was launched in 2000.

The country's moribund textile industry has been given a new lease of life with exports to the US growing from a low of $45 million to nearly $200 million last year.

Some 36,000 direct jobs have been created in the country's EPZ zones, while last year, Kenya overtook Madagascar as the second largest apparel exporter from Africa to the US.

During last week's function, Dr Kituyi appealed to the local US Embassy to help Kenya lobby for a further extension of the Agoa privileges which according to the Act, end in 2008.

Another clause that allows manufacturers out of Africa to source their fabric from regions like Asia also come to an end next year, presenting yet another potential threat to the Agoa success story.

A&E has operations in 28 countries and handled an annual turnover of $293 million last year.

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