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US boosts Kenya apparel industry with $55m in new trade deals

US boosts Kenya apparel industry with $55m in new trade deals
Published date:
Saturday, 29 April 2023

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 Prosper Africa – a US government initiative to increase trade and investment between African nations and America –  and will mostly target women-led organisations as well as the export processing zones (EPZs), where a majority of employees are young women.

 “It is a pleasure to partner with the Prosper Africa initiative to drive investment in Kenya and countries across the African continent,” said US Ambassador to Kenya Meg Whitman.

New co-investments

The funding involves six new co-investments with American and Kenyan apparel companies, which will connect American buyers with Kenyan manufacturers, creating jobs.

In 2022, the US became Kenya’s largest export market, edging ahead of Uganda.  Kenya exported about $890 million in goods to the US against imports of around $600 million.

Ambassador Whitman said US-Kenya trade is expected to increase by a $1.5 billion as the two countries negotiate the Strategic Trade and Investment Partnership.

Model agreement

“This agreement will be a model for the rest of the continent once signed,” said Whitman.

“Many US tech companies have already figured this out and decided that they need to be in Kenya.”

The companies include Copia Global, Semiconductor Technologies Ltd, Twiga Foods, Market Force, Power Financial Wellness, and electric vehicle start-ups.

“I’ve met these companies, visited their operations, and what I see happening here has many of the critical components that make Silicon Savannah a reality,” she added.

Kenya’s Cabinet secretary for Investments, Trade and Industry Moses Kuria pledged to reduce taxes, electricity costs and other trade barriers to investment.

“We are providing an environment that is conducive to investment, starting with the Strategic Trade and Investment Partnership (STIP),” said Kuria.

Beneficiary firms

Scott Cameron, acting chief operating officer at Prosper Africa, said the six new co-investment partnerships include UAL and MAS Intimates, which is already at the Athi River EPZ, and which will create jobs in the formal sector and provide training for Kenyan workers to increase production of high-quality Kenyan-made apparel.

“UAL will increase apparel exports to the US market by building a one-stop shop in Kenya that harmonises all steps in the production process from farm to fashion,” said Cameron.

The funds will also be channelled to Mega to expand the company’s production capacity.

The other beneficiary is Coast Apparel, which will buy machinery to increase production and export capacity, creating new jobs for women and youth.

Funding to Best Lifestyle will help to hire and train new employees as it expands its manufacturing in Kenya.

Build factory in Kenya

NexGen is expected to set up a factory in Kenya to manufacture tags and labels for branding products in apparel and footwear for sale within and outside Africa.

These new co-investments build on the 14 deals announced by President William Ruto at the American Chamber of Commerce Summit in Nairobi in March.

Kenya has been a beneficiary of the Africa Growth and Opportunity Act (Agoa), a preferential trade programme that will expire in 2025. It also qualifies for textile and apparel benefits.

The trade volumes between Kenya and the US have been skewed in favour of the US but Minister Kuria has pledged to address the inequality through proposals to lower the cost of doing business in Kenya.

“To ensure that we attract more investment and more buyers into the market, we’ve identified several areas, which we are working on. One of them is the availability of industrial spaces for investors. We are looking at Eldoret and Busia, which are on the border of Kenya and Uganda,” he said.

Cost of energy

The minister added that the government is addressing the cost of energy as well as reviewing the tax regime and gaps in the legal framework on doing business.

Kenya exports to the US are chiefly apparel, macadamia nuts, coffee, tea and titanium ores while it imports mainly aircraft, plastics, machinery and wheat.

US Secretary of State Antony Blinken and Kenyan Cabinet Secretary for Foreign and Diaspora Affairs Alfred Mutua discussed strengthening bilateral relations across all five pillars of the Strategic Partnership and advancing peace and prosperity.

“Kenya is open for business,” said Mutua. “We are saying we want more trade, not aid.  Kenya is well placed on the African continent to be a hub for American investors.”

Free trade area

“We now have the African Continental Free Trade Area, with a population of 1.3 billion people.  When you come and invest in Kenya, it means you’re investing on the continent of Africa.” 

Blinken noted that the US is supporting Kenyan-led vaccine production, including through Moderna’s $500 million investment in a new manufacturing facility near Nairobi, which will produce mRNA vaccines to tackle viruses such as Covid-19, Ebola, respiratory syncytial virus and HIV.

“We’re committed to supporting US investment in Kenya, particularly in key sectors like information and communications technologies, agriculture, and renewable energy, which will help Kenya achieve its goal of reaching upper-middle income status by 2030, while creating jobs and opportunity for people in both our countries,” Blinken said.

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