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African textile exports to US drop on uncertainty

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Reuters
Published
Mar 15, 2010
Reading time
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By Helen Nyambura-Mwaura

NAIROBI (Reuters) - African apparel exports to the United States under a preferential trade arrangement have fallen in the last few years as the expiry date for the deal draws closer, a regional industry body said on Friday 12 March.



The African Growth and Opportunity Act (AGOA), a U.S. trade program that allows countries in sub-Saharan Africa to export thousands of goods to the United States without paying duties, was enacted in 2000 and expires in 2015.

Exports from Kenya, for example, dropped to an estimated $180 million in 2009 from a peak of $272 million in 2006, said Rajeev Arora, executive director of the Africa Cotton & Textile Industries Federation (ACTIF).

"Because of the uncertainty of the renewal of AGOA ... there is a definite drop," he said.

AGOA became an important source of jobs on the impoverished continent, particularly in the clothing sector, where most investment has been on making the end products, not spinning or manufacturing textiles.

"The problem with AGOA was, being a limited timeframe facility ... people did not come with long term investment," Arora said. "What we need is to develop the backward or downstream linkages to develop the fabrics from Africa so we get the value."

Africa produces 12 percent of global cotton demand, Arora said. However, 95 percent of it leaves the continent as lint.

COST OF BUSINESS

Most of the companies taking advantage of AGOA import fabric from countries such as China, Bangladesh, India and Pakistan, stitch them into clothing and then export them duty and quota-free to the United States.

This arrangement is expected to expire in 2012 and the African countries are not ready to continue manufacturing using textiles originating from the continent.

The biggest hindrances to growth have been the cost of finance, cost of doing business, poor logistics and lack of the necessary knowledge to access global markets, Arora said.

It costs $25-30 million to build a viable spinning plant, he added. Financing for that, for example, would be at a 16-17 percent premium in Kenya.

Most of the plants on the continent were operating at 30 percent capacity, Arora said.

"AGOA should be on some sort of permanent nature basis so that we can develop the middle stream industries and challenge the governments to assist in developing easy financing, getting better logistics and cost of doing business," he said.

Actif groups 18 member countries; Uganda, Kenya, Egypt, Tanzania, Lesotho, Ethiopia, South Africa, Malawi and Sudan.

Others are Madagascar -- whose AGOA deal was not renewed this year because of political turmoil -- Mauritius, Swaziland, Zambia, Zimbabwe, Namibia and Mozambique. Nigeria is the only west African producer currently in the body.

Although it seeks an extension of the preferential trade to the U.S. market, Actif acknowledges that the greatest demand can be created at home.

"The biggest growth can happen within the region," Arora said. "You don't have to look outside to sell your product. You can sell within.

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