12 July 2018

Kenya: Slow Delivery Hits Kenya's AGOA Exports to US Market

Kenya's inability to deliver on orders has been blamed for the country's inability to fully benefit from the apparel industry's duty-free access to the US market, trade officials have said.

Jas Bedi, the head of Kenya's Export Promotion Council, told a Washington forum that it takes an average of 135 days to deliver goods to US buyers from the time an order is placed in Kenya.

"That's too long in today's market," Mr Bedi said, adding that China delivers orders from US purchasers in as little as 45 days.

"Speed is becoming the number-one consideration in international trade," Mr Bedi said, noting that it is no longer the case of a US fashion business having summer, winter and spring collections. "Now, there's a new collection every week."

Mr Bedi said the 75 days it takes for fabric from Asia to reach manufacturers in Kenya accounts for most of the lag in delivery of finished products to the US. The varieties of fabrics needed to keep pace with the rapidly changing demand are not made available to Kenyan factories in a timely manner.

Shortening the supply chain would enable Kenyan manufacturers to reap greater gains through the US preferential trade programme known as the Africa Growth and Opportunity Act (Agoa).

Some 40,000 Kenyans currently hold Agoa-related jobs, according to the US trade agency.

Kenya ranks among the top supplier of apparel to the US, having exported Ksh3.4 billion ($340 million) worth of such goods to the US last year.

Kenya's total exports to the US under the Agoa plan peaked at Ksh35.2 billion ($349 million) in 2015, before declining to Ksh32.7 billion ($325 million) last year according to the Economic Survey data.

"Regional integration would make a big difference," Mr Bedi said. If fabric was produced in sufficient quantities in East Africa, Kenyan manufacturers would become far more competitive, Mr Bedi said.

He, however, warned that the investment needed to achieve that goal - up to $100 million - will be difficult to secure due to concerns over long-term returns.

Agoa is set to expire in 2025 and US officials have warned that duty-free exports from Africa are unlikely to continue after that date.

Members of the US Congress are "signalling that they probably will not" extend Agoa's envisioned 25-year lifespan, Constance Hamilton, the top US trade official for Africa, told the forum in Washington.

Interruptions or inadequacies in power supplies are another factor handicapping Kenya's textile-export sector, Mr Bedi said.

Improvements are on the horizon, however, as factories in Naivasha and at other locales begin to tap geothermal energy to run their turbines, he noted.

Kenya

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