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Kenya seeks a revival in textiles

By Lucie Morangi | China Daily Africa | Updated: 2017-07-23 15:18

Kenya is reaching out to Chinese entrepreneurs for help in reviving its moribund textile and apparel sector.

The country believes the business community can offer insights that will enable it to scale up its exports, thereby improving foreign earnings, creating jobs and increasing cotton farmers' earnings.

According to the government, cotton production stands at 4,000 metric tons, while domestic demand is about 37,000 tons. With only six mills in operation, down from 22 in the 1980s, Kenya bridges the shortfall by importing from neighboring Uganda and Tanzania.

While its apparel exports stood at $380 million in 2015, they have the potential to reach as much as $3 billion annually by 2025, according to a 2015 McKinsey report. The industry is supported by affordable electricity and cheap labor, with monthly salaries as low as $60, thus making the country a preferred investment destination, says the study. Export Processing Zones, which employ more than 66,000 people, supply garments to brands such as Puma, Wal-Mart, J.C. Penney and H&M.

This, however, pales in comparison with China's global dominance in the textile and apparel sector. According to the World Trade Organization, China is first among the top three biggest exporters of apparel, ahead of the European Union and Bangladesh. Apparel Resources, an online information portal on the industry, says that the Asian giant exported the equivalent of 3.13 billion square meters of apparel, worth $7.44 billion, to the United States between January and April this year. This is around 37.18 percent of the total US apparel imports.

In view of this success, Kenya believes local Chinese entrepreneurs can offer invaluable insights on how it can improve its global standing in this sector. According to a World Trade Statistical Review 2016 report by the WTO, the current value of world textile and apparel exports totaled $291 billion and $445 billion respectively, in 2015.

"China's meteoric rise to the second-biggest economy was on the back of, among others, the textile and apparel industries. They have the skill, technology and experience that we would like to borrow and explore in our quest to jump-start this sector," says Anthony Muriithi, head of Kenya's Fiber Crops Directorate of Agriculture and Food Authority, a government agency that regulates fiber crops.

He says the government is keen on reviving the cotton sector, which was once one of the country's main foreign-exchange earners.

"Cotton and textiles have been prioritized by the government in our economic blueprint. We have recently introduced improved seeds from Israel to boost production to meet a strong demand for lint by domestic mills as the country eyes export opportunities presented by the African Growth and Opportunity Act," says Muriithi. Last year, the act - enacted by the United States in 2000, giving selected countries duty-free, quota free access to its marketwas extended by 10 years.

"China has a rich repository of technical information that will breathe new life into the sector," Huang Peixi, co-director of the Confucius Institute at Moi University, told the Maritime Silk Road-China-Kenya Textile Industry Cooperation Forum 2017. "Opportunities can be found in interactive events where the Chinese experience is shared."

China has carved a niche in the global sphere due to its unrivaled industrial integration, supply chain efficiency and reliability. High labor costs are, however, an emerging challenge.

"This is in addition to the global economic recession, among other challenges," says Zhuo Wu, chair of the Kenya Chinese Chamber of Commerce.

Reports say that China's market share in some leading textile and apparel markets is gradually declining. For example, Chinese products accounted for a 39.7 percent share of the EU imports in the sector in 2013, down from 41.4 percent in 2012, 43.9 percent in 2011 and 45.5 percent in 2010. Chinese market share in the US also dropped from 41.2 percent in 2011 to 38.9 percent in 2014.

"East Africa, Kenya in particular, has a vast amount of land for large-scale production of cotton, good climate and availability of labor. Chinese entrepreneurs are eager to build partnerships and increase exports to US and European markets," says Zhuo.

Igadwa Mwasiagi, from the Department of Manufacturing Industrial and Textile Engineering at Moi University, says there are at least 11 million Kenyans under the age of 30, a great resource presenting opportunities to upscale the sector.

"The region has been unable to meet the global demand for textiles and apparel presented by the African Growth and Opportunity Act and Europe. The window of opportunity is closing fast, and thus the need for partnerships with adept entrepreneurs who can easily latch onto the global supply chains," he says.

He believes Kenya can move from its current export earnings to the $1 billion mark by taking advantage of international treaties that grant it access to regional and international markets, availability of trainable workers, high worker retention, good water supplies and improved infrastructure.

Moreover, improved post-production efficiency and strong corporate social responsibility programs improve Kenya's attractiveness.

Liu Feng, an entrepreneur with two clothing outlets in Nairobi, says he is interested in the Kenyan sector. After operating similar businesses in Angola for 10 years, he is convinced that the East African economy presents good prospects.

Kenya's ease of doing business and liberalized foreign currency controls, together with plans to create special economic zones, reinforce Feng's confidence. However, he says more information is needed on the tax regime, incentives and other government regulations.

Mwasiagi, however, says that challenges need to be ironed out first for the sector to blossom. These includes weak investment downstream in the spinning, weaving and finishing subsectors.

"What we are currently doing - cut, make and trim - is not sustainable," he says, pointing to the finishing processes taking place in the country's Export Processing Zones.

This is in addition to challenges in trade facilitation, reluctance of training institutions to offer technical skills relevant to the industry, use of outdated machinery and high costs, especially for energy.

"The electricity charges are still high compared with Ethiopia, and sometimes unreliable. Products from the country have to be competitively priced for us to expand our global market position," says Feng.

He believes the move to collaborate with local Chinese entrepreneurs is prudent. Besides easy access to cheap credit from financial institutions back home, they are able to identify and bring in modern equipment and good practices to improve efficiency while using established links in international markets to push Kenya's export products, he says.

In some quarters, it is believed that the key to revival of the sector lies in building capacity, especially at the tail end of the value chain. Festus Musyoki, center manager at Kenya's Textile Training Institute, a department under the National Industrial Training Authority, a government agency that regulates the quality and efficiency of industrial training, says that by training and upgrading the skills of workers in the apparel subsector, the effect will snowball across the whole sector.

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