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Business

Agoa doubts cut Kenya exports to US by 12pc

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Workers at an EPZ textile factory. Africa intends to table outstanding trade issues at the World Trade Organisation ministerial meeting to be held in Kenya in 2015. PHOTO | FILE

Worker at an EPZ textile factory. Kenyan apparel shipped to the US under the African Growth and Opportunity Act declined by 12.1 per cent last year to 74.4 million pieces. PHOTO | FILE 

By LYNET IGADWAH, BUSINESS DAILY

Posted  Friday, April 21   2017 at  11:47

In Summary

  • Under Agoa the US has become Kenya’s largest apparel export destination.
  • Textiles and apparel account for about 80 per cent of Kenya’s total exports to the US under the pact.

The volume of Kenyan apparel shipped to the US under the African Growth and Opportunity Act (Agoa) declined by 12.1 per cent last year even as uncertainty clouds the 17-year-old preferential pact under President Donald Trump.

The 2017 Economic Survey shows apparel volumes exported declined to 74.4 million pieces in 2016 even as earnings increased to Ksh35.2 billion ($352 million) on the back of a weak shilling.

Under Agoa — a trade pact allowing US buyers to import goods from a number of sub-Saharan African countries without paying duty or facing quota restriction — the US has become Kenya’s largest apparel export destination.

Former US President Barack Obama extended Agoa to September 2025 allowing local entrepreneurs more time to benefit from the preferential trade pact.

There have, however, been fears that President Trump could either use executive orders to cut short that period or refuse to renew it upon expiry.

Textiles and apparel account for about 80 per cent of Kenya’s total exports to the US under the pact.

The Economic Survey shows direct employment generated by Agoa increased by 2.5 per cent to 42,645 people in 2016 while the number of enterprises operating at the export processing zones (EPZs) increased to 91 from the 89 recorded in 2015.

Total sales by the enterprises in the 65 gazetted EPZs increased by 5.8 per cent to Ksh68.7 billion ($687 million) in 2016 from the Ksh64.8 billion ($648 million) recorded in the year before.

The report says exports from the EPZs increased by 3.7 per cent to Ksh63.1 billion ($631 million), accounting for 91.9 per cent of the total sales.

Mid last year, the government exempted garments and footwear bought from EPZs from paying 16 per cent value added tax (VAT), in a move to make the products more affordable to Kenyans.

Trade barriers and duty free imports from Common Market for Eastern and Southern Africa states have been cited as the biggest impediments to growth of EPZs in Kenya.

With the country becoming more visible on the global map, local traders are increasingly opening more supply channels to the US, helped by increased interactions with American investors.

Conferences like the Global Entrepreneurship Summit that attracted Mr Obama have opened the much-needed avenues of interaction.

Last September, Kenyan authorities said they were looking to expand the list of products that the country exports.