Two decades after opening up textile market, what has Kenya gained?

Christopher Onyanje’s neighbours think he is strange. And it will not take you long to discover why.

On his small two-hectare farm, the 67-year-old has grown what to most villagers is a ‘weird’ plant — where most have grown cassava and maize, he has grown cotton.

No one plants cotton around Simba Chai area village, Busia County. Not anymore. Well, there was a time every other farm in Busia County grew the crop.

Mr Onyanje puts on a brave face and says he is not rattled by the village gossip; he is doing what he knows best — planting and selling cotton.

He has been doing this for 51 years, he says, and he is not about to stop.

But if the lines etched deep in his brow could speak, they would tell a story of hardship and agony; the story of his struggles as a farmer. They would tell the story of Kenya’s embattled textile industry.

Onyanje takes his produce to Muluanda and Malikisi, which are quite far. In Amukara, which is a walking distance from Simba Chai, there is a huge ginnery, but its machines have been silent for long.

“The market was there and the pay was good,” Onyanje says of the good old days, admitting that trade in cotton has been a bitter-sweet experience for him.

Opinion is divided on why the garment industry collapsed. Some people trace Onyanje’s problems to the opening up of the market — or what the minsters at the just-concluded World Trade Organisation (WTO) 10th Ministerial Conference (MC10) would call trade liberalisation.

The Export Processing Zones Authority in 2005 noted that until the 1980s, the Government protected the local industry by imposing a 100 per cent duty on imported goods.

“This ensured the rapid growth of the local textile industry, with an average production capacity of over 70 per cent,” reads the report in part.

The industry also received substantial assistance from the Government and donor agencies, it adds. As a result, textiles were the leading manufacturing activity in Kenya — both by size and employment numbers in the 80s.

According to the report, the textile industry employed more than 200,000 households, and about 30 per cent of the labour force in the country’s manufacturing sector.

Then the industry hit a slump — thanks to the “liberalisation of economy in 1990” which saw the “influx of textiles into Kenya”, the export zones authority found.

This reduced the average utilisation of textile mills by about 50 per cent, it adds.

The gospel of trade liberalisation, as advanced by the West through such organisations as the International Monetary Fund (IMF) and recently through the WTO, also saw the Kenyan market become a prime destination for used clothes, locally known as mitumba, the report says.

These clothes, it adds, have led to the collapse of the local textile industry. However, they also set into motion a whole new business sector.

Shopping expedition

Wilberforce Ouma, 28, is a retailer of second-hand clothes. He sells fashionable tops, skirts and shoes, and has been in the business for the last seven years. He has mastered how to recognise the subtle changes in women’s fashion.

When you see his stock neatly stacked at his shop, you would mistake them for new clothes. They are not. He gets them from the sprawling Gikomba market in Nairobi.

Here, nothing but second-hand products are sold, from children’s toys to bedding.

Business Beat accompanied Mr Ouma on one of his shopping expeditions in the wee hours of the morning. Despite the hour, the market was buzzing with commercial activity. Crowds thronged the bridge that goes over Nairobi River and connects one part of the market to the other.

Under the bridge, a group of young men was busy dipping clothes in the water, preparing them for dye.

Ouma kept moving from one stall to another, literally jostling for the best clothes as they were fished out of a bale.

The traders he was buying his stock from had bought the bales from wholesale traders who import the clothes in bulk from North America and Europe.

These imports earn the Government millions of shillings in revenue through custom duties. Imports of mitumba attract a customs levy of $0.20 (Sh20) per kilo, or 35 per cent of the value of the total brought in, whichever is higher.

One such wholesaler is Rose Muthoni, who has been importing clothes for nine years. She buys clothes and shoes from the UK, Canada and Germany three times a month.

At the port, she is charged between Sh1.2 million and Sh1.3 million per 40-foot container she brings in. Ms Muthoni sells her bales to individual traders.

When we had finished buying the clothes, I noticed Ouma did not put the clothes in a bag; instead he tied them around his neck. On the way out of the market, we entered an eatery for a meal of chapati and beans. Every customer inside had clothes tied either around the neck or hips.

Several similar eateries lined the path.

We proceeded to another spot where a man took the 30 or so items Ouma had purchased and laid them on an ironing stand. He pulled out an extraordinarily large iron box, dabbed a piece of cloth with water and laid it on top of the clothes. He then pressed them all at once. It was then that Ouma neatly folded the clothes and put them in a plastic bag.

Again, this section had several other people offering the same service.

There were also tailors to replace missing buttons, fix tears or adjust clothes. Occasionally, someone would pass by and ask out loud if anyone was selling dollars.

Gikomba is a sprawling market that clearly employs a lot of people, including porters who sprint with bales on their back from warehouses to stalls.

According to the Nairobi City County, the market employs about 65,000 people — a conservative estimate as it does not capture people like Ouma. Reuters adds that Kenya imports close to 100,000 tonnes of second-hand clothes each year.

These second-hand clothes that are being traded came in because, well, the Government allowed them to. But this was not always the case.

Ban importation

Between 1987 and 1988, the Government banned the importation of second-hand clothes.

In a 2000 book, We Only Come Here to Struggle: Stories from Berida’s Life, which traces a woman trader’s history, the authors — Berida Ndambuki and Claire Robertson — say this was intended to “foster Kenya’s garment industry”.

However, some economists do not think that the woes of Kenya’s garment industry result from mitumba. Nor can the death — or near death — of the textile industry be blamed on trade liberalisation.

“The cotton and yarn produced in Kenya is not for domestic consumption. We are not able to produce the crop at competitive prices, while developed countries continue to subsidise their cotton farmers,” Emmanuel Manyasa of Twaweza East Africa said.

Dr Manyasa insisted the issue lies in the fact that while farmers in other markets receive subsidies, our cotton farmers were barely motivated. The situation was made even worse by the mismanagement of some textile firms, such as Kikomi and Rivatex.

Scholastica Odhiambo, an economics lecturer at Maseno University, added that because resources go where they earn the highest return, most farmers simply turned their cotton farms into maize or cassava plantations.

“You can also see this in the sugar and coffee industries. A farmer who is hungry will just uproot cane and plant maize,” she said.

Both Dr Odhiambo and Manyasa say trade liberalisation has, generally, been good.

Kenyans have been able to enjoy goods and services that they cannot produce, such as Toyota vehicles from Japan, generic medicines from India and Boeing planes from the US.

Trade has also made us more ‘sophisticated’ as people are now able to afford second-hand Nike shoes, a brand they otherwise would not have been able to buy.

With trade liberalisation, we have also been able to leverage on our competitive advantage. Although we do not have the market for flowers locally, we have the right conditions to grow them. Trade liberalisation has enabled us access the European market and meet its demand for flowers.

Kenya also produces for export coffee and tea, crops it has a comparative advantage in.

But the liberalised market has not worked as envisaged by the WTO.

“Developed countries continue to subsidise their farmers, taking away our comparative advantage. This has skewed international trade,” Manyasa said.

Countries such as the US continue to make production cheaper and easier for farmers. The result has been the flooding of international markets with underpriced US farm produce, which has eroded Africa’s comparative advantage in agriculture.

Comparative advantage

In 1817, the English political economist David Ricardo came up with the theory of comparative advantage.

The idea of a liberalised trade market, or ‘free trade’ as advocated by the WTO, is premised on this theory, which states countries need to concentrate on goods they can produce at a lower relative opportunity cost.

In other words, instead of the US government subsidising its farmers, it should concentrate on what it is ‘relatively’ good at, for instance, the production of vehicles.

However, this is not happening. The US is giving its farmers a total of Sh13.5 trillion — more than six times Kenya’s annual Budget — in agricultural subsidies this year in price loss coverage and agricultural risk coverage. This means farmers will get paid when prices for their produce or their revenues drop below a set benchmark.

Onyanje should have found some reprieve in the renewal of the African Growth and Opportunity Act (Agoa) — a US trade law that gives a few African countries, which includes Kenya, preferential treatment in accessing the American market.

Timothy Wise, the policy research director at Tufts University’s Global Development and Environment Institute, however, says the act has delivered little of its promise.

In an article in The Standard last week, the analyst said, “limited extension of trade preferences to African countries last year provided a paltry $264,000 [Sh27 million] in benefits to the C-4 countries. The projected losses from US cotton dumping are 300 times greater.”

Dr Wise quotes a recent study that puts total cotton subsidies at around $1.5 million (Sh153.4 million). This will increase US exports by 29 per cent and suppress prices by 7 per cent, he said.

All cotton producers in the rest of the world will suffer an estimated $3.3 billion (Sh337.6 billion) in annual losses.

Quality of work

Moreover, for a country like Kenya, most of the yarn used in the production of garments is imported from India, according to Manyasa.

India spends a total of Sh5.1 trillion on agricultural subsidies for its farmers, translating to an average of Sh19,200 per farmer.

Manyasa thinks Agoa benefits Indians more than Kenyans, which is why Onyanje’s cotton is yet to find a suitable buyer.

From his two-hectare plot, Onyanje says he gets a pitiable Sh10,000 at the end of the year. He has a wife and five children.

On a typical business day, Ouma, who is not married, says he makes about Sh800 from selling clothes, and takes home an average of Sh20,000 a month. He earns 24 times more than Onyanje does.

But he is not necessarily better placed.

Trade liberalisation in Kenya has resulted in the growth of the informal sector, such as the Gikomba market, according to a study by Geoffrey Gertz, a senior researcher at Wolfensohn Centre for Development.

Dr Gertz notes that with while the informal sector increases the quantity of work, it decreases the quality of work, with some workers working longer hours, getting poor wages and not being protected by state laws.

Ouma’s earnings are not directly touched by the taxman, but he is not at peace. He is worried about the perennial fires that have been razing the market. Muthoni also adds that business is not too good now, with the dollar strengthening against the shilling and raising the cost of imports.

“I think I need to find a soft landing. There have also been rumours that this market will be brought down,” Ouma, who does not have an insurance cover or savings for his retirement, said.

Next week: What is the way forward for Kenya’s trade?

[email protected]