New jobs created by firms operating in export processing zones (EPZs) fell sharply in the year ended June on the back of reduced apparel exports in markets such as the United States.
Data from the State Department of Trade shared with the Treasury shows EPZ firms added 2,127 jobs in the review period compared with 12,891 a year earlier.
The additional jobs in the review period were the worst performance for EPZ firms since the 2019/20 financial year when they shed 8,135 jobs on the back of Covid-19 disruptions.
The department had targeted 15,782 additional jobs but says the 13.4 percent performance was mainly because of the poor performance of EPZ firms in the apparel industry.
“This is mainly attributed to disruption in the EPZ apparel industry due to insufficient orders in the export market especially in the US, which necessitated the firms to reduce employment,” said the department.
“The (apparel) sector contributes the bulk of employment within the EPZ programme. The situation is now improving and the sector is slowly rebounding.”
A majority of EPZ firms are in textiles and apparel and largely export to the US under the quota- and duty-free Growth and Opportunity Act, which expires in September 2025.
Outside the Covid-19 year, EPZs had never created under 4,000 jobs in a year at least since 2014/15, according to data from the State Department of Trade. The slowed pace of job creation was amid the overall exports growing from Sh98.14 billion to Sh111.8 billion in the review period, marking the first time the annual exports crossed the Sh100 billion mark.
Kenya closed June 2022 with 165 EPZ firms, up from the previous year’s 144 but below the targeted 172.
EPZs are under the Export Processing Zones Authority (EPZA) and enjoy attractive fiscal, physical, and procedural incentives including a 10-year corporate and withholding tax holiday as well as a 100 percent investment deduction on new investments.
The firms are also granted perpetual exemption from payment of stamp duty on legal instruments and payment of value-added tax and customs import duty on inputs.
The authority also offers incentives to SME exporters, with the majority of local Kenyan shareholding desiring to be set up under the EPZA programme.
SMEs from sectors such as horticulture, textile and apparel are offered purpose-built infrastructure with smaller warehouses and excused from paying rent for four months.
A business is classified as a potential EPZ SME if it is an existing business whose total initial capital investment is less than Sh40 million, has below 100 workers and is at least 75 percent Kenyan-owned.
