Economy & Politics

Agoa doubts cut US exports 12pc

Workers at the United Aryan EPZ factory in Nairobi. photo | salaton njau | nmg
Workers at the United Aryan EPZ factory in Nairobi. photo | salaton njau | nmg 

The volume of 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 Sh35.2 billion on the back of 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 Sh68.7 billion in 2016 from the Sh64.8 billion recorded in the year before.

The report says exports from the EPZs increased by 3.7 per cent to Sh63.1 billion, 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.