Kenya offers textile firms tax incentives to create jobs
Kenya has started offering tax incentives to clothing companies, a key part of its under-performing manufacturing sector, to create jobs and provide affordable new clothes for shoppers.
Executives in the textiles industry said the changes included allowing them to sell 20 percent of their annual production locally without sales taxes and without paying import duties on the materials and equipment used to produce the garments.
The advent of cheap, second-hand clothes imports from the U.S. and Europe, locally known as mitumba, in the 1980s, put local apparel firms out of business and killed production of raw materials like cotton.
"The manufacturing sector is still facing some challenges in regards to cheap imports and the counterfeit goods," said Mwangi Kiunjuri, the planning minister. He said they were dealing with the difficulties by implementing new policies to encourage firms to boost production and hire more people.
The government has been paying more attention to the sector in recent years, offering cheaper electricity to textile firms in export processing zones. The removal of sales taxes at a recent local sale resulted in thousands of consumers standing patiently in long lines for a chance to buy garments, which are normally exclusively exported to European and American retail chains. Kenya has the highest rate of youth joblessness in East Africa, the World Bank said, with 17 percent of all young people eligible for work lacking jobs.
Neighbouring Tanzania and Uganda have comparable rates of 5.5 and 6.8 percent respectively. Formal manufacturing accounted for 9 percent of Kenya's$70 billion economic output last year, but it employed just 0.3 million people out of 45 million, official data showed this week. Apart from the job creation potential of boosting textile firms through the initiative, officials said it could help dislodge mitumbas from their dominant position. They estimated that 70 percent of Kenyans cannot afford new clothes.
"The core essence of what the government is trying to do is trying to create a situation where you have affordable new clothes available to Kenyans," said Jaswinder Bedi, head of Bedi Investments, a Kenyan firm which exports clothes to high fashion retailers in the West. Beatrice Obwocha, a Nairobi mother who bought jeans, blouses and children's clothes at knockdown prices during last month's sale, said there was huge demand for new, locally-made clothes.
"People were just getting in and buying a lot of stuff. Some even with sacks," she said of the sale that lasted a few days. A new pair of jeans, which would normally cost about $35, about 3,500 shillings, went for $6 at the sale.
Read related news articles
Ruto's State visit spotlights Kenya's centrality to Africa-US relations [Download Facsheet]
President Joe Biden's choice of Kenya for a first African state visit in more than 15 years is no coincidence, but both countries must be clear on what is driving this increasing strategic dependence. Kenyan President William Ruto's arrival in Washington on 22 May ends a historic drought. No African leader has made a state visit to the US since John Kufuor of Ghana in 2008 - three times longer than the previous record gap, but a period that...
23 May 2024
Senator Coons talks US and sub-Saharan African countries partnership amid Kenyan President’s visit
In case you missed it, U.S. Senator Chris Coons (D-Del.) discussed Kenyan President William Ruto’s visit to the United States this week and the need for Congress to advance a reauthorization of the African Growth and Opportunity Act (AGOA) in an interview with Devex yesterday. A major area of interest for President Ruto is the trade relationship between the United States and Kenya, and his visit is expected to lend support to the...
22 May 2024
Kenya: 4th AmCham business summit to advocate for enhanced partnership and investment In US-East Africa trade
The fourth edition of the regional American Chamber of Commerce Kenya (AmCham) Business Summit, the premier platform for strengthening bilateral trade and investment between the United States, Kenya, and East Africa is set to be held on April 24–25, 2024, in Nairobi, Kenya. Kenya’s President William Ruto is confirmed as Chief Guest, leading a government delegation to the summit that aims to expand commercial opportunities and markets....
19 March 2024
US President Biden to welcome Kenyan President Ruto to the White House in May
President Joe Biden plans to welcome Kenyan President William Ruto to the White House in May, hosting a state visit after reneging on his promise to visit Africa last year. White House press secretary Karine Jean-Pierre said Friday that the visit set for May 23 will mark the 60th anniversary of U.S.-Kenya diplomatic relations and "celebrate a partnership that is delivering for the people" of both countries while affirming "our strategic...
18 February 2024
'Nigeria missing as Kenya, Ghana tap AGOA opportunities to boost foreign exchange earnings'
Africa’s biggest economy is still failing to tap the opportunities that the African Growth and Opportunity Act (AGOA) present to boost its foreign exchange, amid acute dollar shortages. The AGOA has been on for over twenty-three years as it was enacted in 2020. In 2015, the program was modernised and extended to 2025, implying that there are only about 15 months before the window closes. Some countries have taken advantage of the AGOA more...
05 February 2024
Kenya-US to deepen ICT, apparel and agriculture trade
Kenya and United States are in talks to identify areas of interest in information communication technology (ICT) sector that can interest US firms. A meeting between The US Ambassador to Kenya, Megan Whitman, and the Cabinet Secretary for Investments, Trade, and Industry Rebecca Miano, the states sought cooperation in six key areas. The meeting laid the groundwork for an enhanced collaboration between Kenya and the United States in...
09 November 2023
Kenya President Ruto joins US-Kenya business roadshow in San Francisco
Kenya's President William Ruto will address leading US technology companies and investors on Friday at the US-Kenya Business Roadshow in San Francisco organised by the American government’s Prosper Africa initiative. The roadshow - also co-organised by the US Embassy in Nairobi - highlights the business and investment potential in Kenya’s booming tech sector, a statement from the US Embassy in Kenya said. The event is part of a...
15 September 2023
AGOA boosts Kenya's textile exports to US, sector sees 7.2% growth
The African Growth and Opportunity Act (AGOA) has benefitted Kenya’s textile and apparel sector, leading to monthly exports to the tune of Sh4.5 billion, or Sh150 million per day, last year, according to a study by London-based Institute of Economic Affairs (IEA). The programme has had a positive impact on the country’s export-processing zones (EPZs), especially in the textile and garment sector. Kenya is the second-largest exporter of...
08 August 2023
Kenya's president meets US delegates on trade and investments
Kenyan President William Ruto has today held talks with US Trade Representative, Ambassador Katherine Tai. The discussions were based on US trade policy. Ruto said that the country is ready to strengthen the already existing relations between the two nations. "We will stretch our ties beyond the African Growth and Opportunity Act (AGOA) in the wake of advanced technology and climate change, for the full exploitation of our trade potential,"...
19 July 2023
US trade rep in Nairobi as Kenya's solo deals worry the EAC block [incl. Readouts]
The US trade representative is in Nairobi to co-lead a meeting that seeks Kenya's partnership in a fresh trade deal. The Trade and Investment Framework Agreement (TIFA Council) is pursuing various agreements even as regional peers express concern over Kenya's solo approach. Yesterday, Trade Representative, Katherine Tai met patron circle members of the American Chamber of Commerce-Kenya (AmCham Kenya) ahead of today's...
17 July 2023
US boosts Kenya apparel industry with $55m in new trade deals
The US is giving Kenya $55 million for expansion of export processing zones in a move that will boost Nairobi’s apparel exports. US initiative Prosper Africa and the US Embassy announced the funding at the launch of the US-Kenya Business Roadshow held on April 25 in New York. The announcement was part of the commitments made by President Joe Biden at the US-Africa Leaders’ Summit last year. The funds will be channelled under USAid and...
29 April 2023