As the finance, communications and transportation center of the region with 430 million consumers in overall, Kenya is a country of very important geo-strategic position ,because of this position the country is a natural attraction center for investors. In this context, being the door opened to the East Africa region, many international companies have selected Kenya as their regional center. In Kenya, there is a robust private sector consisting of a large number of foreign investors.
Good Reasons to Invest in Kenya
• A Range of Tax Treaties and Investment Promotion and Protection Agreements.
• A Stable Pro-Investment Government
• Business Friendly Regulatory Reforms
• Large Pool of Skilled English Speaking Enterprising Workers
• Strategic Location as a Regional Financial, Communication and Transportation Hub
• Well Developed Social and Physical Infrastructure
• Fully Liberalized Economy
• Preferential Market Access within the Region the E.U., Americas and Asia
• Well Established Local and Foreign Private Sector
Textile Market in Kenya
The textile industry in Kenya is relatively diverse and can be divided broadly into four main
areas of production as follows:
Cotton growing and ginning
Yarn and thread production
Local textile manufacturers supply only 45% of the Kenyan textile market requirements while imported new and used clothes account for about 37% of the market.
Demand for textile products in the country is estimated to be growing at 3.8% annually.
Currently there are 35 textile mills in the country. If they were to operate at their installed capacity, they would create demand for cotton lint of 60,000 bales per annum, on top of the current annual demand of 120,000 bales to be able to meet the increasing demand for the increasing Kenyan population.
Textile & Apparel Sector
The textile industry has made a sizeable contribution to income generation in rural areas by providing a market for cotton. The cotton sub-sector has significant linkages with not only the textile processing and manufacturing industry but also with manufacturers of soaps and detergents, animal feeds, chemicals, fats and oils.
These direct linkages with the textile processing and manufacturing firms are particularly important for the exploitation of new market opportunities presented by AGOA, European Union and other markets where Kenya can export the cotton products.
According to the Economic Survey 2010, production in the textile sub-sector continued on a downward trend registering a decline of 17.6 per cent in 2009. While on one hand the production of knitted fabrics, gunny bags, blankets and cotton woven fabrics dropped by 58.3, 29.9, 12.3 and 10.7 per cent in that order, cardigans and toweling materials production increased by 7.4 and 7.0 per cent respectively during the same period.
The clothing industry recorded a decline of 15.7 per cent in 2009. This was caused by the decline in the production of vests, singlets and underwear; trousers and; shirts and t-shirts by 39.3, 26.7 and 22.9 per cent in that order. However, production of uniforms and overalls and suits for men and boys went up by various margins in 2009.
The Export Processing Zones (EPZ) programme recorded a downward trend in the performance of key indicators in 2009, as a result of adverse effects of global economic recession, especially in the US Market which is a prime destination of EPZ exports. The situation was further aggravated by unfavorable business environment characterised by high costs of production and stiff competition from Asian countries. The EPZ programme is undergoing transformation to Special Economic Zones (SEZ) with a wider scope of activities envisaged to meet the objectives of the Vision 2030.
The number of Enterprises operating under the EPZ rose to 83 in 2009 from 74 in 2008. Local ownership of investment within the EPZ increased from 14.3 per cent in 2008 to 19.3 per cent in 2009. Joint ventures went up by 24.1 per cent compared to 24.7 per cent in 2008 while foreign investments constituted 56.6 per cent in 2009 compared to 60 per cent reported in 2008. The authority has started implementing an incubator project in order to attract and nurture local business.
Issues affecting the sector
The major factor inhibiting the growth of a textile industry in Kenya is the high cost of electricity and it reliability which accounts for about 35 per cent of the cost of fabric production in Kenya, compared to 16 per cent in India.
Delays caused by congestion at the port of Mombasa and poor road conditions have also been blamed for cancelled orders from apparel buyers or other penalties incurred by the Kenyan Producers.
• The influx of cheap imports from Asia which pose unfair competition to local producers.
RESOURCE: KENYA ASSOCIATION OF MANUFACTURERS
• Importation of second hand garments
• Influx of uncustomed goods
• Sourcing of raw material also poses a major problem to local producers because it results in delays in the delivery of products to the markets. This is also linked to the upcoming raw material rule under AGOA.