Struggling to make it in Kenya
This sprawling industrial park south of Nairobi was supposed to be a centerpiece of a Clinton-era U.S.-Africa trade program designed to make “Made in Kenya” almost as familiar as clothing labels from China and Taiwan.
Well-known American brands, including wrinkle-free Dockers, Gloria Vanderbilt jeans and Izod polo shirts, roll off sewing assembly lines here before being shipped to Target, Sears and other U.S. retailers.
Yet as the African Growth and Opportunity Act, or AGOA, nears its 10-year anniversary and U.S. Secretary of State Hillary Rodham Clinton arrived in Kenya on Tuesday for an international forum to tout its success, many in Africa and the U.S. say the trade agreement isn’t living up to its promise.
After a brief export boom five years ago, sales, profits and workforces are tumbling for garment manufacturers in Kenya, who produce the bulk of the nation’s AGOA exports. More than a dozen factories have closed.
Other exporters aren’t faring much better. Of about 6,400 products and goods that qualify for duty-free export to the U.S. under the AGOA program, Kenya is shipping only 20, including apparel, flowers and coffee.
The pact “is not realizing its potential,” said Joseph Kosure, acting chief of Kenya’s Export Processing Zones Authority, where most of the East African nation’s exports are produced.
Signed into law by President Clinton in 2000, AGOA waives U.S. duties for 39 qualifying sub-Saharan African countries, allowing them to sell African goods to U.S. customers for 15% to 30% less than rival exporters.
The U.S. program was designed to help free-market African economies diversify their manufacturing bases and create jobs. But critics say it has instead largely subsidized the export of oil to the U.S. by waiving duties for firms in a handful of petroleum-producing nations who hardly needed increased incentives.
More than 92% of AGOA’s $66 billion in exports last year consisted of petroleum products, mostly from Nigeria, Angola and Republic of Congo, according to the U.S. Department of Commerce. Minerals and raw materials, such as gold, diamonds and iron, were the next-largest exports.
Exports of agricultural and apparel goods -- two industries that AGOA was aimed at bolstering -- fell last year 10% and 8%, respectively.
At first, Kenya seemed poised to be a major beneficiary. It bet heavily on its textile industry, and the number of garment factories jumped from six in 2000 to 35 in 2003. Employment grew 500% in the export processing zone, to about 36,000 jobs, during the same period.
But after the U.S. opened its market in 2005 to increased apparel imports from China, India and Southeast Asia, many of Kenya’s budding garment makers found they could not compete, even with the duty-free advantage.
Questions also arose about who receives most of the benefits of the trade agreement. The vast majority of exporters in the nation’s export-processing zone are foreign-owned, usually by investors from China, the Persian Gulf or Southeast Asia, but also some from the U.S.
Of 18 garment makers, only one is Kenyan-owned, and it opened this year.
“AGOA was set up to help Africans and alleviate poverty, but it has mostly benefited foreigners,” said Richard Ndubai, founder of Ricardo International, the sole Kenyan-owned garment maker. “They are taking the profits out of the country.”
Kosure agreed that most of Kenya’s first AGOA-related exporters were foreigners, including “flying investors,” whom he said traveled the world in search of short-term trade breaks and “then take off when opportunities dwindle.”
At the same time, he said foreign investment was crucial in jump-starting Kenya’s textile industry by introducing advanced technologies and international manufacturing practices, constructing factories and training workers. He said most of the speculators left Kenya when profits began to slip four years ago, amid the competition from China and Southeast Asia.
Job creation has been the trade agreement’s biggest contribution to Kenya, Kosure said. Even with the recent declines, apparel sector employment is about 26,000. And salaries and benefits are usually above average because of the stringent labor requirements imposed and audited by U.S. buyers, such as overtime payments, limits on work hours and a ban on child labor.
Budding seamstress Concepter Nyaboke, 28, graduated from trade school this year and promptly moved to Athi River, about 15 miles south of Nairobi. Within two months, she landed a position at Ricardo International, an uncommonly short job search in Kenya, where college graduates routinely remain unemployed for years.
“It’s a great opportunity,” she said. “Even if I fail at the job, I’m getting the experience I’ll need to start my own business one day, which is really what I want to do.”
U.S. officials say such stories demonstrate AGOA’s success. They say that if the program is failing to reach its potential, it’s largely because African governments and investors are not taking full advantage.
But even as AGOA attempts to open the door to more African trade, other U.S. policies have slammed it shut, experts say.
Large subsidies for U.S. cotton growers and other American farmers continue to block African exporters from reaching the U.S. market, said Stephen Hayes, president of the Corporate Council on Africa, a private U.S.-based group that seeks to stimulate trade.
Kenyan officials also complain that trade is hurt by tight U.S. security policies and what they see as unnecessarily strict quality and health regulations for imports.
Citing the risk of terrorism, the U.S. Department of Homeland Security last month suspended what was to be the first direct Kenya-U.S. flight by Delta Airlines, delivering a blow to Kenya’s flower farmers who had hoped to speed up deliveries.
One of the biggest obstacles to increasing African exports is the continent’s lack of adequate infrastructure, including good roads, educated workers, reliable electricity and stable, honest governments.
At Alltex EPZ Ltd., a foreign-owned garment maker that last week was busily churning out thousands of Arrow sweatshirts, electricity costs are twice as high as they would be in Egypt, and frequent outages require costly backup generators, said Sudath Perera, the Sri Lankan general manager.
Workers are paid about $110 a month, four times what comparable garment workers make in Bangladesh, he said. One section of the route leading from the factory to Kenya’s port is still a dirt road with rocks and mud holes.
Without the trade agreement, he said, his company would never have been started and would probably not survive in the current environment. But he said the real test would come in 2015, when AGOA’s trade breaks are set to expire.
He’s optimistic that he can use the next five years to strengthen ties with U.S. retailers and improve his factory’s productivity and profits.
“I think we can do it,” Perera said. “By 2015, we should be able to compete, even without AGOA.”