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Kenya reaps Sh10 billion after Ethiopia's ban from Agoa deal

BUSINESS
By Dominic Omondi | May 24th 2022 | 3 min read
By Dominic Omondi | May 24th 2022
BUSINESS
Workers at the Hela Intimates Export Processing Zone Ltd factory in Athi River, Machakos County. [Reuters]

Kenya earned an additional Sh10.2 billion from its exports to the US as Nairobi reaped big from Ethiopia’s suspension from a duty-free trade pact.

Last year, Kenya’s exports to the US — mostly apparel were valued at Sh59.6 billion, a jump of more than a fifth from Sh49.4 billion in 2020 as Kenyan traders sold more goods through the African Growth and Opportunity Act (Agoa), a free trade agreement between Washington and select African countries.

This saw the US overtake Pakistan to become Kenya’s third-largest export market behind Uganda and Netherlands. 

Besides the recovery of the US economy, which saw consumers’ demand for Kenyan-made clothes and shoes surge, the increased uptake of Kenyan apparel in the US was also due to the reduced supply of Ethiopian goods due to the Tigrayan war and the subsequent suspension of Addis Ababa from Agoa.

“A lot of exports to the US that used to come from Ethiopia have been disrupted by the war,” said Industrialisation, Trade and Enterprise Development Cabinet Secretary Betty Maina.

Ms Maina added that the government, which had given itself to increasing exports to the US by 25 per cent, was also sending the right “signals for negotiation” next year.

In 2021, Agoa exports were valued at Sh50.7 billion, an increase of 20 per cent from Sh42.3 billion in the previous year.

There was also increased capital investment and the number of employees working for firms at the export processing zones, which produce apparel and garments for export to the US under Agoa.  

In November last year, US authorities said Ethiopia had breached the eligibility requirements of Agoa because of what they termed “gross violations of internationally recognised human rights.” Agoa apparel benefits for Rwanda were also suspended by former US President Donald Trump in July 2018, after Kigali banned second-hand clothes from the US.

Kenya continued to reap the benefits of Ethiopia’s ineligibility from Agoa well into 2022, with the country’s exports to the US in the first three months of this year jumping by Sh1.4 billion to Sh14.8 billion.

In the same period last year, exports to the US were valued at Sh13.4 billion. In August 2020, Kenya and the US began talks on a new trade pact between the two countries.

Other than coffee and nuts, Kenya exports mostly textiles to the US, including non-knit women’s and men’s suits, non-knit and knit men’s shirts, knit sweaters and t-shirts.

A 2019 report by the World Bank painted a bleak picture of Kenya’s attempt at upstaging Ethiopia in creating over 600,000 jobs in the textile and apparel value chain.

Titled “Jobs in Global Value Chain” (GVC), the report showed that from 14 years to 2014, Kenya’s growth of jobs produced by firms engaged in manufacturing activities linked to the global supply chains such as textile and car assembly or food production had been “mediocre.” 

During this period, the report found that the fastest growth in GVC jobs was in Bangladesh and Vietnam followed by Ethiopia and India. “GVC job growth in Kenya was mediocre and comparable to China and Indonesia,” noted the report. 

Kenya’s poor performance in job creation was due to a decline in market share that led to depressed GVC job growth. “Kenya, Senegal and South Africa all lost market share, depressing GVC job growth,” read part of the report. 

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