Business Daily (Nairobi)
George Omondi
8 June 2008
The flow of apparel from Kenya to the US under the AGOA facility dropped again last month as the economy of the world's only superpower continues to falter.
The exports have been on a rapid decline since last year as Asian and Chinese exports surged, but the latest drop is attributed to the effects of a recession in the US that has just started to bite. Already, Kenya's Export Processing Zones (EPZ) is paying the price for the prolonged recession in the US, through job cuts and capital migration to Asia.
"A prolonged recession in the US portends a very grim outlook for the EPZ firms, but we are waiting to see what other windows open as the world continue to react to low orders from the leading textile market," said EPZA's head of public relations, Jonathan Chifalu.
Athi River-based Rising Sun, MRC EPZ, Global Apparels and Ruaraka-based Apex are the latest firms to close shop as low orders for apparels and garments from the US force them into unviable capacity levels.
The Kenya Export Processing Zones Authority (EPZA), however, says it has stepped up campaigns to convince the firms operating under it to diversify their destination for exports beyond the United States as the recession persists in the world's only super power.
Despite recent shocks, the American market remains Sub Saharan Africa's most lucrative market for apparel and footwear. The sustained campaign by the industry lobby groups to secure extension of AGOA attests to this.
SpendingPulse (an arm of MasterCard Worldwide) data indicate that consumer spending on apparel and footwear in US slid in the month of May as buyers scaled back on discretionary purchases amid a sluggish economic environment.
According to the data, May sales were down 1.1 percent versus May 2007, with women's apparel declining 5.4 percent and footwear decreasing 1.0 percent.
These declines, adds the data, could continue as consumers are hammered by higher gasoline and food prices; a falling housing market and the US credit crisis.
Not smooth sailing
"We embarked on a drive to encourage apparel manufacturers to turn to other markets long before the US economy started faltering. The interim Economic Partnership Agreements secured late last year also opened a big AGOA-like window within European Market that our local manufacturers should take advantage of," Chifalu said.
He admitted that changing local manufacturers' attitudes towards the EU market has not been smooth sailing. Besides, strenuous Rule of Origin,
Mr Chifalu said local manufacturers who fret at the prospect of slim orders from EU market compared to the US market remain a highly sceptical lot.
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