Business

Kenyan Govt Sets Up Textile Investors Near Power Plants to Cut Costs

Kenya will set up investors near geothermal plants to cut the cost of electricity and offer subsidies in order to compete with her neighbours. Government officials said that they will set up investors at the shores of Lake Naivasha near the geothermal power plant to cut transmission charges to make Kenya attractive. This was announced when a trade delegation composed of investors from China, the US, Australia, the Netherlands and Bangladesh were visiting Tanzania and Ethiopia recently. Ethiopia is the leading investor destination of choice because of low labour costs with low minimum wage (Sh6,000). Furthermore, it is easier for foreigners to obtain work permit in the country. Ethiopia also has low electricity prices and the government is building a separate grid for new industrial zones currently under development. Following the extension of the African Growth and Development Act (AGOA) trade agreement with the USA for the next ten years, Kenya has been tipped to enjoy a boom as companies in the apparel industry target the East African economies to enjoy the duty free access to America. A survey by McKinsey and Company shows that East Africa--in particular, Ethiopia, Kenya, Tanzania, and Uganda have the potential to trade Sh300 billion in the garments and apparel industry by 2025.

LABOUR COSTS

In 2013, these four countries' apparel exports totalled only Sh34 billion. There is a structural shift in the global apparel industry, which is looking to move factories from China and South-East Asia in response to rising labour costs. Even though Kenyan workers demand twice as much in wages as Ethiopians they are still far below labour wages in East Asia making the East Africa's largest economy attractive. Kenya's monthly wages for textile workers are Sh12,240 - Sh15,300 (US$120-150), less than a third of China's average of Sh51,000 (US$500). The 15-member delegation was organised by VF Corporation and was in the country to engage the government and the private sector in order to understand the investment opportunities available in the manufacturing of textiles and apparels. VF Corporation is a worldwide apparel and footwear company with more than 30 brands, 60,000 associates and US$12.3 billion in revenue. Kenya expects to set up a major industrial park in the next two years at Naivasha which will serve as the main location for textile and apparel industries. Epic Designs and CNH Apparel have already committed to take up 300 square feet of space at Athi river.