Why it will take more to revive Rivatex and create more jobs

President Uhuru Kenyatta at the relaunch of revamped Rivatex in Eldoret (PHOTO: Courtesy)
Last week, the Government proclaimed it had created thousands of new jobs in Eldoret after President Uhuru Kenyatta commissioned the renovated Rift Valley Textile Factory (Rivatex).

“The estimated 3,000 direct jobs that this project will generate and the tens of thousands of indirect jobs created in support and ancillary activities will go a long way in boosting not just this region but also our national quest for value addition and increase in manufacturing and jobs under the Big Four Agenda,” President Uhuru Kenyatta said.

However, the Government’s assertion that “thousands of new jobs” have been created at Rivatex in addition to its projected impact on the region’s economy is overstated. On the one hand, the revamping of the factory takes care of one roadblock in the country’s textile industry. A study by the Kenya Association of Manufacturers, World Bank, UK Aid and the Ministry of Industrialisation and Enterprise Development found a dearth in the investment of high-end equipment and technology as a hindrance to the thriving of the country’s textile sector. Because of this, Kenya’s textile exports failed to compete favourably with those from other countries in the global markets, and small exporters were locked out of preferential trade deals such as the US Africa Growth and Opportunities Act (Agoa) for failing quality thresholds.

On the other hand, the study, alongside several others on the systemic weaknesses of Kenya’s textile industry, indicates that a cotton-processing factory, even as big as Rivatex, is just a small piece in solving the bigger problem.   In the first place, both the supply and distribution chains in Kenya’s textile and apparel industry are fragmented, leading to high production costs and eventual retail prices that fail to compete with cheap imports. Save for Ethiopia, Kenya has the highest import-export cost among its Asia and African competitors, including Vietnam, India, Bangladesh, China, South Africa, and Lesotho.

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In addition to this, the cost of transporting raw materials and finished products by road is four times the global average. Labour costs are also high compared to regional competitors and since these costs add up to the finished products, Kenyan exports also find it difficult to compete in the international market, leave alone the local market. Data from the Kenya National Bureau of Statistics (KNBS) indicates the value of Kenyan exports of made-up textile materials reduced from Sh3.7 billion in 2014 to Sh1.9 billion last year. The Government might also not be quick to issue a ban on the importation of second-hand clothes and textiles. According to KNBS, import duty collected from textiles has more than doubled from Sh1.8 billion in 2014 to Sh3.9 billion last year. Hard-pressed to meet revenue collection targets, the Kenya Revenue Authority is likely to resist cancelling such a lucrative revenue stream without an alternative.

It is also worth noting that this is not the first capital-intensive revamp that Rivatex has had in the recent past. In 2016, Kenya signed a Sh3 billion deal with India for technical and material support to revive the factory, which failed to deliver the promised jobs.

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RivatexKenya Association of ManufacturersWorld Bank