East African countries are aggressively courting foreign investors to revive their textiles and apparel industries

East African countries are aggressively courting foreign investors to revive their textiles and apparel industries

East African countries are aggressively courting foreign investors to revive their textiles and apparel industries.

Speaking to just-style, John Walugembe, executive director of the Uganda Small Scale Industries Association (USSIA), lauded a recent move by the government of Uganda to engage widely with foreign investors through diplomacy.

"The government has organised trade missions with the objective to have bilateral agreements signed between Uganda and these countries," says Walugembe.

And while he admits there have been challenges in connecting effectively with the US (a critical market for Uganda), Walugembe cites contacts made through the American Chamber of Commerce describing Uganda as a "great asset" that could lead to future investment.

While Uganda faces several infrastructural and operational challenges, this landlocked country has a plentiful labour supply and a growing middle class. Also, Uganda is working to lower the cost of doing business in the country, aiming to leverage export market benefits created by the US African Growth and Opportunity Act (AGOA) and the US- East African Community (EAC) Trade and Investment Framework Agreement (TIFA).

Driver of growth
In neighbouring Kenya, the ministry of industrialisation and enterprise development has earmarked the textiles and apparel subsector as a potential driver of major economic growth through its National Industrialisation Roadmap.

To this end, the government has provided land in the Export Processing Zone (EPZ) in Athi River, near the capital Nairobi, to construct a textile manufacturing hub. It has also undertaken and planned infrastructure development such as the upgrading Kenya's 'northern corridor' transport links between Nairobi, the seaport Mombasa and the border port of Malaba, on the Ugandan frontier.

Joseph Wairiuko, assistant executive officer for textiles of the Kenya Association of Manufacturers, sees Kenya as well suited to foreign investment, given its steady overall growth (4.6% in 2013 and 4.7% in 2012).

Pitching enthusiastically, Wairiuko tells just-style: "Kenya is offering the best opportunities in as much as apparel exports is concerned. Kenya is giving investors ten years tax free to recoup their investment with a great potential market abroad."

In April, international apparel giants PVH Corp and VF Corp accepted a ministry of industrialisation and enterprise development invitation to tour the EPZ in Athi River - and PVH has since opened an office in Nairobi.

Li & Fung Ltd may have been unwilling to discuss claims that it was considering investing in the country's planned Athi River export processing zone 'textile city' but the truth is that Africa is increasingly a focus of foreign clothing and textile investment.

According to Nairobi newspapers, Hong Kong-headquartered Li & Fung has also met Kenya industry and enterprise development cabinet secretary Adan Mohamed to discuss textile and clothing investment in east Africa's economic hub.

Discussing the reports, however, a spokesperson for Li & Fung said: "It is not an opportunity we can pursue at the moment."

Kenya has also continued to court Chinese investment, and not just with companies. In May the Kenyan government signed 15 bilateral project and political initiative agreements with China, including investments into the key Nairobi to Mombasa railway line.

Investment into Africa
However, the enthusiasm of Beijing to push investment into Africa is not always mirrored by the continent's longer-standing western partners.

And Julia Hughes, president of the United States Fashion Industry Association (USFIA), warns that the US congress's reluctance to speedily renew AGOA ahead of its September 2015 expiry could deter American investment until this decision is taken.

She stresses that congress has a tendency to "wait until the last minute to extend them, or sometimes they even let programmes temporarily lapse."

She adds that the possibility of such a lapse could deter US firms from sourcing in Africa. "If [American companies] place an order in July 2014, can they develop a long term relationship with that supplier and not worry that it will suddenly be a duty-able product at the end of September?"

Without the protection of AGOA, duties on apparel imports could be as high as 32%, Hughes notes. That said, while African suppliers are sometimes slower in delivery times than other regions, they offer good quality products, and effectively anticipate which products will be in demand by Western buyers, she says.

Kenya, Mauritius and Ethiopia are currently showing the most growth in terms of sourcing by US companies, she adds, with imports from Kenya growing by double digits in the past year.

Hughes said relations between US firms and African suppliers will be discussed at an African Leaders' Summit, hosted by US President Barack Obama at Washington DC from 4-6 August.

With additional reporting by Kylie Kendall and Su Dongxia.