TRALAC - Trade Law Centre

Kenya: EPZ Gets New Lease of Life

Thursday, 25 January 2007

Source: The Nation (Nairobi)

The Export Processing Zone (EPZ) is confident the struggling textiles industry will be back on its feet after the US extended the African Growth and Opportunity Act (Agoa) fabric provision.

Already, some investors want to return to Kenya while now ones have sent inquiries from EPZ on how to set up factories.

EPZ operations manager John Akara said the extension of the fabric rule was good news for the industry that had been rocked by uncertainties.

"It now means that manufacturers can plan for long-term programmes without any fear of being locked out," Mr Akara said.

Under the provision, which has been extended to 2012, eligible countries in the sub-Saharan Africa are permitted to use fabric from any source to manufacture apparel for export to US.

The provision was to end in September, this year.

Not enough

Only Lesotho and Mauritius had mills for making fabric but it was not enough to meet the demand from the region.

In Kenya, statistics indicate that out of 60 factories started in 1992 when Agoa was introduced, only 18 are still in business.

More than 40,000 employees have lost jobs.

According to the latest Agoa report, only South Africa had made an arrangements to acquire US$1.2 million (about Sh82.8 million) worth of yarn from Lesotho in the event the provision was not renewed.

The chairman of Kenya Garment Manufacturers Association, Mr Thomas Puthoor, said the announcement had given the industry a new lease of life as many countries lacked the facilities to produce fabric.

Mr Puthoor said Kenya was still the most expensive country in the region in the manufacture of garments for export.

Currently, labour consumes about 40 per cent of the operations cost at EPZ and the steady rise of the Kenyan shilling against the dollar had led to loss of about 10 per cent of the business, he added.