The Ministry of Industrialization and Enterprise Development in partnership with World Bank and manufacturing sector stakeholders have launched the Priority Manufacturing sector, value chain reports to stimulate Kenya’s economy.

The reports show that the performance of the timber-furniture, textile-apparel, and leather and leather products value chains in Kenya are significant to the country’s job and wealth creation.

The reports provide an updated and comprehensive analysis of competitiveness for these key manufacturing sectors in Kenya and offer suggestions strategies and policies to accelerate their growth and increase the productivity and innovation of Kenyan firms in them.

According to Cabinet Sectary for Industrialization Adan Mohamed, the launch of the value chain reports provides is in tandem to the realization of Kenya’s Industrial Transformation Programme and Kenya’s Vision 2030.

While Kenya has made some headway in the global apparel market, there is need to focus towards addressing bottlenecks to competitiveness – says the Apparel and Textile Industry report.

With regard to the Apparel and Textile Industry report, Mr. Mohamed disclosed that subsequent to the renewal of AGOA for another 10 years, the textile-apparel sector remains the country’s growth engine for industrial exports.

“We are uniquely positioned to grow and expand this sector more than ten-fold beyond the current market share of 0.4%. We intend to enter new markets and expand our product range into higher value and niche products,” said Mr. Mohamed.

According to the Export Processing Zone (EPZ) Authority, Kenya’s AGOA exports, employment, and investment in the past four years (2010-2014) grew by 17 percent, 12 percent, and 21 percent per year, respectively, taking up a third of all apparel exports from Sub-Saharan Africa to the US.

“Kenya’s textile and apparel sector has the potential to grow, increase its contribution to GDP, and serve as a source of gainful employment for its fast growing, young population – says Diarietou Gaye, the Bank’s Country Director for Kenya.

The Furniture Industry report finds that Kenya is both the largest market for furniture and the largest producer of furniture in East Africa. Its market is expected to grow at an 8 percent Compound Annual Growth Rate (CAGR) between 2013 and 2018, driven by the growing population, urbanization, and increasing purchasing power.

According to the Kenya Leather Industry report, Kenya is the third largest livestock holder in Africa, but a number of factors hinder the growth of its leather industry. Amongst Kenyan tanneries, a major difficulty is the lack of quality effluent facilities, which increase the environmental and health costs associated with processing finished leather.

In the handbag and travel ware sector, where target markets are high-end international tourists and exports markets, challenges include the high cost and low availability of quality hides, scarce design and process skills, difficulties in accessing and understanding export markets, and the insufficient availability of growth capital. In the footwear subsector, where the competition is largely domestic and based on price, Kenya’s market share has been eroded by imports of new low-cost leather footwear (mainly from China and India) and donated, second-hand footwear (mitumba).

On a cost basis, “it is approximately 30 percent more costly to produce a pair of low-cost men’s leather shoes in Kenya than in Ethiopia,” said Maria Paulina Mogollon, World Bank Finance and Private Sector Development Specialist

“For the Leather value chain, we are aware that over 90% of our USD 94 million leather exports are unfinished wet blue leather. This state of affairs denies us the opportunity for over 35,000 jobs and up to USD 250 million in GDP. We want to ensure that we fully take advantage of the largest livestock base of 60 million,” concluded the Cabinet Secretary.

The value chain reports were prepared by the World Bank through the Kenya Investment Climate Program 2, which is generously supported by DFID and the Dutch Government.

This article first appeared in Standard Digital.

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About the reports

Kenya Apparel and Textile Industry

Kenya’s textile and apparel sector has the potential to play a key role in anchoring the country’s deeper movement into middle income status and in serving as a source of gainful employment for its fast growing, young population. As a manufactured good, it offers opportunities for increased value capture and streamlined trade logistics, and for the building of skills and experience from the factory floor to management level. Based on these foundations, it therefore serves as a potential gateway to other manufactured goods, offering opportunities for Kenya to capture an increasing share of global trade and to advance economic diversification.

Such thinking – in terms of the opportunities that textile-apparel presents in and of itself as an economic sector and as a potential spring board to further advancement into manufacturing – played a substantial role in underpinning the African Growth and Opportunity Act (AGOA). AGOA gives most Sub-Saharan Africa (SSA) firms duty free, quota free access to the United States, offering a substantial competitive advantage over other textile-apparel exporting countries. Therefore, the trade agreement has played a pivotal role in the growth of the continent’s textile-apparel sectors.

However, almost 15 years after the launch of AGOA and shortly after its renewal, Sub-Saharan Africa’s trade with the US remains dominated by natural resources. While some manufactured goods feature in the top ten exports from AGOA countries, these are almost wholly from South Africa. Knit and nonknit apparel exports rank 27th and 33rd, respectively, in the value of AGOA countries’ exports, with AGOA countries amounting to under 1 percent of total global apparel trade.

Kenya Leather Industry

In 2014, Kenya’s Ministry of Industrialization requested technical assistance from the World Bank to conduct competitiveness assessments and develop competitiveness strategies for four key industries: textiles and apparel, food processing, furniture, and leather and leather products. The Ministry selected these four industry sectors for serious consideration as priority sectors for industrial development and job creation in Kenya.

The Economic Transformations Group, Inc. (ETG), a sustainable economic development consultancy from New York and Silicon Valley, was contracted to complete the analysis and strategy for the leather industry. ETG built on prior analytical work by Kyram Consultants Ltd.

In the context of Kenya’s long-term vision to become an industrialized middle-income country by 2030, its leather and leather products sector offers an important opportunity for industrialization and diversification of exports. However, value addition in the leather sector has been minimal, and most of Kenya’s exports have been in the form of unprocessed, raw hides and skins. The leather sector can contribute to economic growth through expanding exports of both semi-processed and finished leather goods. The development of the sector involves improving the raw material base (especially the quality of hides and skins), boosting the tanning subsector, producing leather goods, and marketing.

Furniture Industry in Kenya

The Government of Kenya recognizes that the performance of the furniture sector is crucial both to employment and growth in the country. The Ministry of Industrialization and Enterprise Development (MOIED) therefore requested an analysis of both the furniture and timber sectors, in order to understand their current state of development, their main constraints, and the interventions necessary to accelerate their growth.

The objective of this report is to provide a comprehensive value-chain analysis of the Kenyan furniture industry, including the timber sub-sector, in order to assess policy options available to the MOIED and recommend critical interventions to stimulate the industry’ development. By situating Kenya’s furniture industry within the global and regional context, this paper also aims to identify ways in which to boost Kenya’s competiveness in the East African markets and beyond.

The analysis in this report is largely focused on the wooden furniture sector (versus plastics, composites, and other furniture). The bulk of Kenya’s furniture industry is focused on wood, and Kenya has a competitive advantage in wood relative to South Africa, Asian countries, and Europe, which have very competitive value chains in furniture made from other materials.