15 August 2014

Kenya Targets Sh88 Billion AGOA Exports to U.S.

Kenya is betting on renewal of the AGOA trade pact and direct flights to boost exports to the United States to at least $1 billion (Sh88.08 billion) annually within three years.

The country is lobbying for the duty-free trade pact to be renewed for a further 15 years, while direct flights between Nairobi and US cities are expected by early next year.

Kenya is one of the 41 countries qualified for the African Growth Opportunity Act, a duty-free trade agreement first enforced in 2000 and expires on September 30, 2015.

"In principle it is agreed (the extension), but is subject to the normal process of going through the Congress for approval," said Adan Mohamed, Cabinet Secretary for Industrialisation and Enterprise Development.

Under AGOA, the country exports knit and woven apparels, spices, coffee and tea, fruits and nuts and electrical machinery. It imports aircraft, machinery, optic and medical instruments, electrical machinery and cereals (grain sorghum) from the US.

"If it's not extended we might suffer some close downs (of businesses)," Mohamed said.

Direct flights between the US and Kenya are expected to boost two-way market access.

"We had lengthy meetings with the Federal Aviation Authority on Kenya's quest to attain 'Category One' status. This would allow carriers from either country to have direct flights," said Michael Kamau, Transport and Infrastructure Cabinet Secretary.

Kenya affirmed its ongoing programme to build capacity, he said, and expects a green light after evaluation in October.

"Every indication is that we will attain the status," Kamau said.

"The Americans have been helpful, providing a lot of technical support through the embassy and working with us on a daily basis."

He said Delta Airlines and Kenya Airways - in which the state owns about 29 per cent - are the frontrunners to start offering direct flights from Nairobi.

Kenyan apparels are also expected to be relatively more competitive following reduction of electricity costs by 50 per cent per unit to $0.09 (Sh7.93) from $0.18 (Sh15.85) starting July.

"Apparel buyers globally are looking for low-cost regions. One of the thing we are doing is to make sure that our apparel manufacturers are as competitive as possible," Mohamed said.

"We have intense competition from markets like Vietnam, Ethiopia and Uganda ... so we reduced the cost of electricity to the apparel sector starting July."

In the first half of the year, the US moved to Kenya's third largest trade partner after India and China, as two-way volumes surged by 60.5 per cent to Sh69.93 billion compared to Sh43.57 billion a year ago.

Exports to the US were up by 30.2 per cent to Sh18.38 billion in the period from Sh14.12 billion. Imports surged by 75 per cent to Sh51.55 billion from Sh29.45 billion as Kenya Airways shipped in planes from US manufacturer Boeing.


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