Agoa.info - African Growth and Opportunity Act
TRALAC - Trade Law Centre
You are here: Home/News/Article/AGOA to give a strong impetus to African textile and garment industry

AGOA to give a strong impetus to African textile and garment industry

AGOA to give a strong impetus to African textile and garment industry
Ethiopian textile factory
Published date:
Tuesday, 15 December 2015

Ethiopia and Kenya both countries face challenges such as poor infrastructure, cumbersome customs procedures, a dearth of technical and managerial talent and low levels of social and environmental compliance although with Ethiopia offering cost advantages and Kenya boasts higher production efficiency.

Following the 10-year renewal of the African Growth and Opportunity Act (AGOA) - under the United States' General System of Preferences that allows duty-free imports of a wide range of African products, which was signed by President Barack Obama on June 11, 2015, the African textile and garment industry is optimistic that its shipments to the United States, the world's biggest market will levitate almost all the textile and apparel products.

This is also driving many Turkish, Indian and Chinese textile companies to African countries, particularly Ethiopia and Kenya, to not only flee the rising production and labor costs at home but also to avail of the duty-free access to 8,000 products under the AGOA to the United States.

Kenya has emerged as Africa's largest apparel exporter, followed by Lesotho, Mauritius and Ethiopia. The Ethiopian government has identified textiles and apparel as a priority industry. But an obstacle to future growth is African countries' anachronistic infrastructure that can impact the continent's export trade. The energy costs need to go down while transportation and logistics need to improve.

Cotton has also become an important factor for Turkish companies. Turkey itself is one of the 10 leading cotton-producing countries and the fourth-largest consumer in the world. The country is, after India and Syria, the third-largest producer of organic cotton with a share of 3.4 percent, and Turkey's clothing industry is the seventh-largest in the world and the third-largest supplier to the European Union.

Nonetheless, developments in neighboring Syria create uncertainty for Turkey's cotton sourcing because three-fourths of cotton production in Syria is said to be controlled by DAESH. According to Turkish textile exhibitors at international trade shows, Turkey is no longer buying cotton from Syria. But it is a fact that the more than four-year war in Syria has led to a sharp decline in cotton production in Syria whose annual production today has fallen to 70,000 tons down from some 600,000 tons before the outbreak of the civil war.

African countries are particularly keen to attract job-creating investors, who are even given incentives for such purpose. However, incentives differ from country to country, and are given on a case-by-case basis. According to the Nairobi-based East African Trade and Investment Hub (EATIH), textiles and apparel account for some 90 percent of exports from sub-Sahara African countries to the United States. The bulk of exports is shipped by sea, but small quantities needed for seasonal purpose or last-minute ordering are also shipped by air, as Ivo Seehann, Lufthansa-Cargo's Nairobi-based general manager for Kenya and East Africa, confirmed.

Some textile companies that are eager to take advantage of the rising demand in the U.S. for textile and apparel products and also benefit from AGOA's duty-free imports are establishing multiple textile plants. Mombasa Apparel, an AGOA-supported company, launched its fourth textile factory in November 2014 on the coast of Kenya while Taiwan's New Wide Garment, which already has eight factories in Kenya, Lesotho and Ethiopia, plans to further expand its African operations.

Despite the AGOA duty-free privilege, not all African countries have been able to substantially increase their textile and apparel exports. Kenya, Lesotho and Mauritius account for much of apparel exports under the program. In 2014, Kenya exported $423 million worth of apparel to the U.S., followed by Lesotho with $289 million, Mauritius $227 million and Swaziland $77 million.

In fact, Ethiopia and Kenya in particular have the potential to become bigger players in garment manufacturing. Some European companies, including H&M, Primark and Tesco, have been sourcing their garment needs from Ethiopia, but other countries have also been supplying substantial quantities of apparel.

However, transportation costs are also not consistent. According to the 2015 East Africa Logistics Performance Survey, the cost of transporting a ton of goods through the northern corridor that runs from Mombasa, Kenya to Kampala, Uganda has declined from $ 3,400 to $2,500 over the last five years. On the other hand, the cost of using the central corridor from Dar es-Salaam, Tanzania to Kampala nearly doubled over the same period to $4,500 in 2015 from $2,507 in 2011, making the central corridor twice as expensive as the northern one.

But leaders of Kenya, Rwanda and Uganda are working to make the port of Mombasa and the northern corridor more efficient and have helped reduce clearance costs. The three leaders have also committed to speedily upgrade infrastructure connecting their countries, including the standard gauge railway and Kenya's Mombasa port.

Average clearance time for imported cargo at the Mombasa port dropped from eight days in 2011 to four in 2015, while it takes up to nine days to clear goods at the Dar es-Salaam port.

Tanzania and Kenya are in a race to quickly develop their ports with both vying to become the region's main transport hub, connecting other landlocked countries like the Democratic Republic of Congo, Rwanda, Burundi, Uganda and South Sudan to their ports.

While Tanzania is constructing a new port in Bagamoyo that will have capacity to handle 20 million containers per year, compared with Dar es-Salaam's installed capacity of 500,000, Kenya is constructing a bigger port in Lamu under the Lamu-Port-Southern Sudan-Ethiopia (LAPSSET) transport corridor project.

Meanwhile, the second phase of Mombasa's container port construction in Kenya is expected to start in early 2017. The Mombasa port has emerged as East Africa's main gateway for sea trade connecting the East African hinterland to the world. The port's construction, costing some $213 million, according to the Kenya Port Authority, will create an additional capacity of between 470,000 and 550,000 20-foot equivalent units (TEU). This will be followed by a third phase entailing construction of a 300-meter-long berth and adding another 450,000 TEUs. The ongoing work on phase one should be completed by February 2016.

According to Gail Strickler, assistant United States trade representative for textiles and apparel, African textile and apparel exports to the U.S. could potentially quadruple to $4 billion over the next decade through the renewal of the AGOA, creating 500,000 new jobs. But the African countries urgently need to upgrade infrastructure and simplify customs procedures.

 

Read related news articles

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

Why Africa, why Kenya? Remarks by US Ambassador to Kenya

Thank you, Scott, for the kind introduction. It is a pleasure to partner with the Prosper Africa initiative to drive investment in Kenya and countries across the African continent. I am happy to kick off our U.S.-Kenya Business Roadshow with all of you today, and to announce that we will be partnering with Prosper Africa throughout the year to engage businesses and investors in cities across the United States. Our next stops include San...

26 April 2023

Kenya-USA: Joint Statement on the third US-Kenya bilateral strategic dialogue [incl. VIDEO]

The text of the following statement was released by the Governments of the United States of America and the Kenya on the occasion of U.S.-Kenya Bilateral Strategic Dialogue in Washington, D.C. on April 24, 2023. Begin Text: The Governments of the United States of America and the Republic of Kenya held the third iteration of the U.S.-Kenya Bilateral Strategic Dialogue in Washington, D.C. on April 24, 2023.  The U.S.-Kenya Strategic...

24 April 2023

State Secretary Blinken praises Ethiopia on Tigray peace, no return to trade programme yet

U.S. Secretary of State Antony Blinken praised Ethiopia on Wednesday for its progress in implementing a peace deal to end the Tigray conflict, but stopped short of ushering the country back into a U.S. trade programme. Visiting Ethiopia to repair relations that were strained by the two-year war in the northern region, Blinken met with Prime Minister Abiy Ahmed and discussed ongoing efforts to solidify peace, restore basic services and address...

13 March 2023

Ethiopia asks US to reinstate AGOA trade benefits as US Secretary of State Blinken heads to Addis, Niger

Ethiopia is asking the Joe Biden administration to reinstate its duty-free access to the US market, arguing that “exceptional circumstances” warrant an immediate re-examination of its suspension just as Secretary of State Antony Blinken heads to Addis Ababa to discuss the cessation of hostilities in Tigray. The Office of the US Trade Representative (USTR) terminated Ethiopia’s participation in the African Growth and Opportunity Act...

09 March 2023

Kenya: Manufacturers push for 15-year AGOA extension

Kenyan manufacturers have asked the Trade ministry to request Washington to extend the existing duty- and quota-free access to the expansive US market window for another 15 years as the two countries prepare for talks over a long-term bilateral trade deal. The Kenya Association of Manufacturers, the sector lobby, argues that uncertainty over the more than two decades-Growth and Opportunity Act (AGOA) deal, which expires in two years, is...

02 March 2023

Kenya and US complete first round of trade talks

Kenya and the United States have concluded the first round of Strategic Trade and Investment Partnership (STIP) that will form a basis for future bilateral engagements. The Kenyan delegation, led by Trade Principal Secretary Alfred K’Ombudo, hope that the five-day talks on the free trade agreement will bear fruits. The government has been scouting for areas of collaboration that will increase foreign direct investment, promote sustainable...

13 February 2023

You are here: Home/News/Article/AGOA to give a strong impetus to African textile and garment industry