Garment and apparel sector of the country’s export processing zones has posted growth in recent successive years.
Kenya’s textile industry stays on a recovery path after decades of decline due to mismanagement and stiff competition from cheaper imports and second-hand clothes.
The garment and apparel sector of the country’s export processing zones (EPZs) has posted growth in recent successive years—boosting the overall performance of these clusters that are targeted bolstering the economy.
The EPZs experienced growth in most of their performance indicators in 2016, the Economic Survey showed with the total capital investment of enterprises increasing from Sh48.1 billion in 2015 to Sh51.2 billion in 2016.
The number of local employees engaged by EPZ enterprises increased by 3.4 per cent to 52,019 while value of exports increased by 3.7 per cent to Sh63.1 billion in 2016.
The extension of the African Growth and Opportunity Act (AGOA) initiative to September 2025 has particularly stirred growth in the textile industry. Though the Act originally covered the eight-year period from October 2000 to September 2008, amendments by then US President George Bush in July 2004 extended it to 2015. The US Congress then extended it further to 2025.
Several Kenyan products, notably apparel and agricultural produce, are big beneficiaries of this arrangement which has lifted import duty on all eligible products and granted preferential market access upon compliance with Rules of Origin.
The resurgence of the Kenyan textile industry has already attracted new foreign investments. Several top global fashion brands have recently signed production contracts with local textile manufacturers in Kenya.
Calvin Klein, Arrow, Izod and Cherokee are among the international labels that have signed with Kenya-based firms, according to officials of the Export Processing Zones Authority (EPZA).
Other brands including Hennes & Mauritz (H&M) started local production in 2014 at Ashton Apparel.
In 2016 the number of gazetted zones increased to 65 in 2016 from 56 in 2015, according to the Economic Survey 2017. Private enterprises owned and operated 62 zones while three zones were public.
The number of operational enterprises within the EPZ increased from 89 in 2015 to 91 in 2016 while the total capital investment of EPZ enterprises increased from Sh 48.1 billion in 2015 to Sh51.2 billion in 2016.
“The number of local employees engaged by EPZ enterprises increased by 3.4 per cent to 52,019 persons in 2016” the Economic Survey 2017 said. The EPZ programme was characterised by a slow growth until 2000 when the Agoa deal was made.
The Agoa deal had an instant effect on the sector in that by 2011, the number of gazetted zones had risen to 44 with a further 13 established since bringing the total to 57.
The government plans to introduce Special Economic Zones (SEZs) to replace the EPZs that has been criticised for being low on wealth creation.
A 2016 World Bank (WB) report said that bad timing and weaknesses in design totters the performance of the EPZ despite rapid expansion boosted by Agoa-linked apparel exports.
Kenya is setting up several SEZs in Mombasa, Lamu and Kisumu. The Kisumu facility is aimed at growing export trade within the East Africa Community (EAC) and the Great Lakes region. Another SEZ will also be set up close to the geothermal plants in Olkaria.
Manufacturers in the SEZs will be offered discounts on power bills because of lower transmission costs from the geothermal plants in Olkaria to the industrial hubs.
The SEZs shall be subject to a reduced corporate tax of 10 per cent for the first 10 years and 15 per cent for the next decade.
Unlike the EPZs which are limited to manufacturing, commercial and service activities, the SEZ Act provides a long non-exhaustive list of activities.
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