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Ideas & Debate

Textile industry faces imminent death

A worker at the Rivatex East Africa factory in Eldoret: It is shocking that an industry that employed about half a million people now has a paltry 20,000 and the number keeps dropping due to closures. Photo/JARED NYATAYA
A worker at the Rivatex East Africa factory in Eldoret: It is shocking that an industry that employed about half a million people now has a paltry 20,000 and the number keeps dropping due to closures. Photo/JARED NYATAYA 

Once considered one of the most progressive sectors, Kenya’s textile industry is a pale shadow of itself following closures and relocations which have caused massive job losses over the years.

It is unfortunate that Kenya — a country with a high unemployment rate — could allow such a high-potential industry to go down the drain.

The shocking fact is that an industry that once employed close to 500,000 Kenyans now only employs less than 20,000 people and the number continues to decline.

Truth be told, the textile and garments industry was the second largest employer after the public sector in the 1980s until early ‘90s.

Remaining firms have scaled down operations to below 30 per cent of capacity.

Various factors can be attributed to the imminent collapse of the textile and garments industry, chief among them high production costs, lack of market and credit facilities and high labour costs among others.

These are issues that the government is able to address in order to restore this industry which once flourished.

There is urgent need for the Government to reduce the cost of production in Kenya with special focus on energy and labour and Government services offered at the ports

Power costs in Kenya are among the highest worldwide.

While power in Kenya costs 19 US cts/kwh, it costs only 10 US cts/kwh in neighbouring Uganda and Tanzania, four US cts/kwh in South Africa and two US cts/kwh in Egypt.

High power cost is one of the reasons Kenya’s products remain uncompetitive.

Time has come for the Government to step in and rein in runaway electricity cost.

If Kenya is going to be at par with its competitors, the Government should consider taking at least 50 per cent off the current tariffs of Sh17 per KWh for industry to enhance competitiveness.

Consideration should also be given to the fact that almost half of electricity cost is government levies such as fuel charge, VAT and rural electrification programme charges which should all be waived.

Labour is one of the major factors that greatly increase the cost of doing business for the textile industries.

Kenya’s average costs for unskilled labour is Sh8,500.

Adding this to other social costs, it comes to an average of Sh10,000.

This is compounded by the annual ceremonial increase on Labour Day.

We have said that wages should be pegged to productivity and though the Government has acknowledged this several times, it is stuck to the annual minimum wage adjustment, such as the 10 per cent announced by the Prime Minister on May 1, 2010.

In this regard, therefore, industry should be allowed to peg returns to productivity by adopting the piece-rate approach.

The Government should also work towards improving service delivery mainly at the Port of Mombasa by both KPA and KRA which can best be described as falling below par.

Port users are normally subjected to high costs arising from delays of clearance of goods and verification of imports and finished goods, cost of inland haulage, and other KPA tariffs.

Such costs and delays have an impact on lead-time and the time taken between receipt of orders and delivery to buyers, which affect decisions.

Lack of a market has been another major impediment to the growth of the sector.

This is mainly because of unfair competition from both second-hand clothes and un-customed imported garments, and failure by the government to promote purchase from local industries.

Although the procurement law states that at least 15 per cent of all public procurements should be local, the government has in the past not demonstrated this commitment.

Considering that government is the single largest buyer, it is regrettable that public bodies such the police, army, National Youth Service among others, normally source for their uniforms and other requirements from abroad.

The recent circular directing ministries and parastatals to buy locally is a welcome move that spells hope for not only the textile industry but also other sectors.

This move is encouraging, and the government should implement the provision of the procurement law to promote local business by ensuring that public entities source most of their supplies from local producers.

Effort must be put into place to ensure that all second-hand clothes and new garments coming into the country are properly levied in order to reduce unfair competition.

Access to credit

The uncertainties in the industry have heightened poor access to credit where many banks have avoided the sector like the plague. This hurts growth.

It must be recalled that in 2006, a government taskforce came up with the Cotton, Textile and Apparel Value Chain Report that was meant to help salvage the textile industry.

We welcome efforts to implement the recommendations of the task force.

As a key stakeholder in the textile industry, the Kenya Association of Manufacturers urges the government to move with speed and implement this report fully in order to save the textile and garments sector from collapse.

Ms Maina is the CEO, Kenya Association of Manufacturers.

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