A prolonged global recession could have negative effects on performance of companies located within the country’s Export Processing Zones (EPZs), leading to possible layoffs and a drop in foreign exchange earnings.

"We have already seen our key export markets coming down by between 20 and 30 per cent due to global recession," says Godino Mwasaru, the chief executive officer, Vermont EPZ (Kenya) Ltd.

Dealing in preserved natural flowers and foliages, Vermont has its main markets in Japan for bulk roses and Russia floral arrangements, in addition to buyers in UK, Belgium and France.

"We also have to deal with rising costs of electricity, fuel and fertiliser. A rise in prices of these inputs affect the cost of fresh flowers, which is our raw material," says Mwasaru.

He disclosed this at a recent investor briefing held by the Export Processing Zones Authority (EPZA). But the Authority remains optimistic that things will not get worse than they already are.

"Most of the firms operating in the zones have forward contracts, some running upto November this year. If the global financial crunch eases before then, it will be business as usually for most of these firms," Mr Joseph Kosure, the authority’s acting chief executive told The Standard.

Intense competition

Uncertainty in the EPZ programme in light of coming to an end of the African Growth and Opportunity Act (Agoa) legislation and global recession [Note from AGOA.info: The AGOA legislation only expires in 2015 unless further renewed, and the apparel provisions in 2012]], happens when textile and apparel firms, located in the zones, are faced with intense competition for the US market, from India, China, Lesotho and Madagascar.

More than 70 per cent of EPZ output is exported to the USA under Agoa. Kosure says unlike in the past when the EPZ programme was the preserve of the textile and apparel industry, things have since changed and the zones have undergone drastic diversification.

"Investors in textile and apparel industry now comprise only 25 per cent of all firms in the zones. The rest are in varied sectors," he says.

Latest AGOA Trade Data currently available on AGOA.info


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