The African Growth and Opportunity Act is continuing to fuel expansion of Kenya's textile and clothing industry while also encouraging investments in this and other sectors in Tanzania and Uganda, according to a new US government report.

Kenya's exports to the US under Agoa's duty-free terms grew rapidly in the first six months of 2004, the most recent period measured in the report by the US International Trade Commission. Kenya sold $132 million worth of goods to the American market from January to June last year. The corresponding figure for 2003 was $90 million.

Agoa has stimulated about $12.8 million in foreign direct investment in Kenya since the trade programme began in 2001, according to the report. Additional investment in Kenya's clothing export sector during the next two years will create about 7,000 new jobs, the report adds, citing estimates by export processing zone officials. That increase will bring the number of workers employed in Kenya's clothing-export industry to 52,000, the report says.

But those projections seem highly optimistic in light of anticipated shifts in the global clothing and textile trade in the coming years.

With all quotas on textile and apparel imports having recently been removed, major producing countries such as China and India are positioned to win much larger shares of the US market at the expense of Agoa-eligible exporters such as Kenya. Some analysts are warning that the gains made by African textile industries in recent years may be largely erased due to the elimination of quotas.

Such an outcome would devastate Kenya's expanding clothing-export sector. It would also be bitterly frustrating to countries such as Tanzania and Uganda that are just beginning to benefit from Agoa.

Tanzania's $1.6 million in Agoa-covered exports to the US during the first six months of last year equalled the amount for all of 2003. The increase reflects the opening early in 2004 of the Star Apparels factory, which has hired 700 workers, according to the US trade report. The plant is supplying goods to Wal-Mart, the largest retail chain in the US.

The $2.6 million in Agoa-covered products shipped by Uganda in the first half of 2004 greatly exceeded the country's total Agoa sales to the US for all of 2003.

Uganda anticipates further increases in garment exports to the US, the report says. It notes an agreement by Sunquest Apparel, a US firm, to build a weaving and spinning plant in Uganda that will make use of local cotton. A Hong Kong company is also planning to establish a spinning mill in Uganda, the report adds.

Perhaps foreshadowing a possible shift in Agoa exports generally, Uganda is also seeing increased investment in agricultural products eligible to enter the US duty-free. Shea nut butter and banana crisps are two items thought likely to find favour in the American market, the report says.

Similarly, Kenya has began to export coffee to the US under the terms of Agoa.

In addition to the threat posed by the elimination of international quotas, Africa's textile and apparel industries are handicapped by shortages of raw materials, obsolete equipment, and high production costs relative to Asian suppliers, the US report points out. "In Uganda, for example, a leading textile firm, Apparel Tri-Star, which had been sourcing fabric from Sri Lanka because of concerns about the quality of raw materials used in local production, only recently announced plans to start using fabric produced domestically," the report observes.

Agoa does appear to be encouraging some technology investment, the report says. It points to Jar Kenya (EPZ) Ltd, which has installed a Sh8 million ($100,000) satellite-based link for its local operations. African countries' export competitiveness in the global textile and apparel market is further hampered by high taxes and utility costs.

"Kenya's electric power costs are an estimated $0.07 per kilowatt hour, compared with $0.016 for South Africa," the report notes. "Power costs in Kenya account for 30 per cent of its apparel component costs versus 15 per cent for those in Egypt and Europe."

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.

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