Why Kenya should diversify into niche products to benefit from Agoa scheme

What you need to know:

Small firms should take advantage and tap large market for speciality goods in US.

Did you know that you can export live chicken and goats duty free to the US under the African Growth and Opportunity Act (Agoa) scheme?

A quick examination of the list of products that can be exported to the United States under Agoa, shows a variety of food products such as vegetables, fruits, fruit preparations, meats, grains, nuts, seafood and even broken rice which is not allowed for local consumption in Kenya.

It is like an African marketplace, as these are products which are readily available locally and with minimum processing can be exported.

Globally, the view has been that the Agoa scheme is mainly used for the export of energy products. This is because 46 per cent of exports under the scheme consist of crude oil and other energy related products.

However, this does not present much opportunity for job creation in African countries since these products don’t require much value addition and, therefore, results in underutilisation of the scheme.

Without an inbuilt monitoring and evaluation of Agoa, this trend could continue unchecked, minimising the intended original objective of improving productivity in the industrial sector.

Our diversified exports base and the fact that we are not yet an oil producing country should spur us to take full advantage of this opportunity as was envisioned from the beginning.

A limited perception in the country has been that Agoa targets the textile and apparel sector. As the sole organisation charged with the issuing of Agoa visas for the apparel sector, Kenya Association of Manufacturers (KAM) estimates that around 4,500 shipments of apparel and textiles make it to the US each year.

This volume indicates vibrant use of the Agoa dispensation in this particular sector which is very labour intensive.

However, we can widen the net and focus on exporting other products that are accessible to us. Given that our economy is agriculture based, agro-processing of niche products in the Agoa scheme is indeed one of the sure ways to bring in revenue to our country.

In particular, we could take advantage of speciality foods particularly those of African cuisine.

The market for speciality foods in the US has been growing and is currently estimated at $70 billion (Sh7.1 trillion).

The demand for these products is consumer driven and the market is divided into five based on factors such as wellness, indulgence, ethnicity, value and convenience.

This also widens the suppliers to include SMEs, some that are already exporting food products because they have the ability to tap into these markets very easily.

I acknowledge that challenges do exist such as the high cost of transportation, the lack of cold chain facilities and stringent phytosanitary standards.

A bigger challenge perhaps is the lack of information which makes such difficulties seem insurmountable to SMEs. Hence, there is a need for capacity building to empower start-ups and small businesses to take advantage of the benefits brought on by legislation.

It is also important for SMEs to prioritise special requirements such as market positioning, social and religious certifications which may impact on the processing of the product.

For example, 59 per cent of US consumers purchase speciality foods and 70 per cent of consumers of speciality foods in the US mostly buy their products from supermarket; only nine per cent buy online, with coffee being the most sought after product.

This information is critical to map out the magnitude of the US market and the huge potential therein for our local businesses.

The Kenya Industrial Transformation Programme has already pointed out the fact that we only process 16 per cent of our agricultural output. In turn we import $3.8 billion (Sh385.8 billion) in raw and processed commodities for our consumption.

The imbalance created by the inability to process our products is tackled in pillar two of the programme which lays emphasis on the need to turn Kenya into an food processing hub. Agoa can help us take the first steps towards this goal.

The writer is the CEO of the Kenya Association of Manufacturers. Email:[email protected]