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COTTON, TEXTILE and APPAREL SECTOR INVESTMENT PROFILE Kenya Investment Authority

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COTTON, TEXTILE and APPAREL SECTOR INVESTMENT PROFILE Kenya Investment Authority COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE Kenya Investment Authority KENYA © shutterstock.com COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE KENYA 2016 ACKNOWLEDGEMENTS This profile has been produced under the framework of Supporting Indian Trade and Investment for Africa (SITA) project, funded by the Department for International Development, Government of the United Kingdom and implemented by the International Trade Centre. SITA is a South-South Trade and Investment project aimed at improving competitiveness of select value chains; and increasing investment in five Eastern African countries through partnerships with institutions and businesses from India. Special contributions to writing this report have been provided by: Ministry of Industrialization and Enterprise Development African Cotton and Textiles Industries Federation Quality Assurance: International Trade Centre (ITC), Trade Facilitation and Policy for Business Section (TFPB) TCA Ranganathan, External consultant, Rajesh Aggarwal, Chief (TFPB), Andrew Huelin, Associate Programme Advisor (TFPB) Author: Varun Vaid Design: Iva Stastny Brosig, Design plus Editor: Vanessa Finaughty The views expressed in this report are those of the authors and do not represent the official position of the International Trade Centre, Kenya Investment Authority and the Government of the United Kingdom. The images used in this profile may not always reflect accurately the country context. © International Trade Centre 2016 KENYA CTA SECTOR INVESTMENT PROFILE: CTA 4 Table of Contents KENYA: AN OVERVIEW 7 DEMOGRAPHICS 8 ECONOMY 8 TRADE SCENARIO 10 BANKING SECTOR 11 RESERVE MANAGEMENT 11 TAXATION STRUCTURE 12 FOREIGN DIRECT INVESTMENT (FDI) 13 INDUSTRIAL ZONES 13 WHY KENYA? 15 COTTON, TEXTILES AND APPAREL INDUSTRY STRUCTURE 17 HISTORICAL OVERVIEW 17 RAW MATERIAL SCENARIO 18 MANUFACTURING VALUE CHAIN 19 Naivasha’s textile city 20 MARKET DEMAND 21 GLOBAL MARKET ACCESS AND EXPORTS 21 REGIONAL MARKET ACCESS 23 DOMESTIC DEMAND 23 BUSINESS ENVIRONMENT 25 LEGAL AND REGULATORY FRAMEWORK 25 LOGISTICS AND CONNECTIVITY 25 Port Roads Airports Railways MANPOWER SCENARIO 26 POWER SCENARIO 26 GOVERNMENT SUPPORT FOR CTA SECTOR 26 KEY INVESTMENT OPPORTUNITIES 27 KENYA USEFUL CONTACTS 28 ANNEXES 29 ANNEX I: LIST OF EPZ UNITS 29 ANNEX II: STARTING A BUSINESS IN KENYA 30 CTA SECTOR INVESTMENT PROFILE: CTA 5 List of Figures FIGURE 1: KENYA’S AGE-WISE POPULATION SEGREGATION (2015 and 2050(P)) 8 FIGURE 2: SUB-SAHARAN AFRICA’S TOP 10 ECONOMIES (2014) 8 FIGURE 3: KENYA’S ECONOMY’S GROWTH TREND (2004–2014) 9 FIGURE 4: KENYA’S OVERALL EXPORTS AND IMPORTS (2009–2013) (US$ billion) 10 FIGURE 5: KENYA’S MAJOR SUPPLIER NATIONS (2013) 10 FIGURE 6: KENYA’S MAJOR EXPORT MARKETS (2013) 10 FIGURE 7: KENYA’S APPAREL EXPORTS UNDER AGOA (2009–2014) 21 FIGURE 8: KENYA’S CTA EXPORTS (2009–2013) 21 FIGURE 9: KENYA’S CTA EXPORTS – MAJOR MARKETS (2013) 22 FIGURE 10: KENYA’S POWER GENERATION MIX 26 List of Tables TABLE 1: KENYA’S KEY FISCAL INDICATORS (2009–2020) 9 TABLE 2: KENYA’S FOREIGN-OWNED BANKS 11 TABLE 3: FDI STATISTICS IN KENYA AND EAST AFRICA (2009–2013) 13 TABLE 4: KENYA’S KEY COTTON STATISTICS (2011–2015) 18 TABLE 5: KENYA’S GARMENT FACTORIES IN EPZA (2009–2013) 19 TABLE 6: BREAK-UP OF KENYA’S CTA EXPORTS (2013) 22 TABLE 7: KENYA’S TOP APPAREL EXPORT CATEGORIES (2013) 22 Abbreviations & Acronyms COMESA Common Market of East and Sothern Africa EAC East African Community EPZA Export Processing Zone Authority FDI Foreign Direct Investment KENYA GDP Gross Domestic Product KIA Kenya Investment Authority KNBS Kenya National Bureau of Statistics KRA Kenya Revenue Authority LAPSSET Lamu Port South Sudan Ethiopia Transport MNC Multinational Corporation SME Small and Medium Enterprise VAT Value Added Tax CTA SECTOR INVESTMENT PROFILE: CTA WB World Bank 6 © shutterstock.com Kenya: An Overview Kenya is an East African country lying across the equator and bordered by the Federal Republic of Somalia in the north-east, the Federal Democratic Republic of Ethiopia in the north, the Republic of South Sudan in the north-west, the Republic of Uganda in the west, the Indian Ocean in the south-east and the United Republic of Tanzania in the south. Kenya is regarded as East Africa’s regional centre for finance and trade. Its capital city, Nairobi, is Kenya’s biggest city. Mombasa is another important city and has the biggest seaport in East Africa. Mombasa port serves as a gateway to many other East and Central African nations as well, many of which are landlocked. Kenya is a presidential representative multiparty democratic republic. There are eight provinces in the country, each one supervised by a president-appointed provincial commissioner. In recent years, Kenya has made significant improvement to its business environment. In the 2015 World Bank Doing Business Report, the country was ranked 108 out of 189 countries globally compared to 136 in 2014, making it the third most improved economy in the world and first in Africa. The jump in places was helped by reforms in business and property registration, electricity connections and access to credit.. Key facts Capital: Nairobi Area: 581,309 km2 Population: 44.86 mm (2014) 0–14 years: 42.00% 15–64 years: 55.00% Labour force (over 15 years): 17.5 mm (2014) Population growth: 2.6% (2014) Youth literacy rate (15–24 years): Male: 83.2% (2008–2012) Female: 81.6% (2008–2012) Urban population: 25% (2014) GDP (nominal): US$ 60.94 bn (2014) GDP per capita (nominal): US$ 1358.3 (2014) GDP growth: 5.3% (2014) Inflation rate: 6.9% (consumer price) (2014) FDI inflow: US$ 944.33 mm (2014) Exports: 16.4% of GDP (2014) Imports: 33.9% of GDP (2014) Exchange rate (per US$): KES 99.73 (2015 est.) Govt. expenditure: US$ 14.55 bn (2015 est.) Govt. revenue: US$ 10.6 bn (2015 est.) Currency: Kenyan shillings (KES) KENYA Other major cities: Mombasa, Kisumu, and Nakuru Language: English, Swahili Source: KenInvest, 2015; World Bank, 2015; UN, 2013; CIA, 2016 CTA SECTOR INVESTMENT PROFILE: CTA 7 DEMOGRAPHICS Kenya’s population is approximately 44.86 million in 2014 and reaches 46 million in 2015, out of which approximately 55% (around 26 million) lies in the working age group of 15–64. Kenya also has one of Africa’s biggest youth populations, with almost 16 million people lying in the age group of 15–34 years. By 2050, it is expected that Kenya’s total population will cross 97 million, with a working age population of approx. 60 million, which is more than 1 the current total population. © shutterstock.com Figure 1: Kenya’s age-wise population segregation (2015 and 2050(P)) 1,3 6,1 60-64 0,8 3,2 2015 population 1,0 3,5 2050 population 50-54 46 million 1,2 4,1 97 million 1,5 5,0 40-44 2,1 5,9 2,7 6,6 2015 30-34 3,5 7,2 2050 (P) 4,0 7,8 20-24 4,2 8,5 4,8 9,1 10-14 5,7 9,7 6,6 10,1 0-14 7,2 10,5 *Source: United Nations Population Division data ECONOMY There has been a substantial improvement in life expectancy at birth in recent years in Kenya, which Kenya is the second largest East African economy improved from 58.6% in 2009 to 63.52% in 2014.2 and fifth largest economy in Sub-Saharan Africa, The Kenya Health Policy 2012–2030, with its vision with a GDP of approximately US$ 61 billion (2014). to attain the highest possible health standards, Kenya has a market-based economy and not is expected to improve it further by providing many state-owned infrastructure establishments. equitable, affordable and quality health and related Kenya’s GDP tripled from 2004 to 2014, making it services. a fast-growing African economy. During this period, Kenya’s status progressed from low-income to The country also has a high youth literacy rate of lower middle-income, driven largely by growth in 85.90% (2015). School life expectancy in Kenya manufacturing, agriculture and real estate sectors. is 11 years, which is higher than most of the other African nations. Moreover, secondary level enrolment rates have also increased by 50% in Kenya is the second largest East African last 10 years. Government is now focussing on and fifth largest Sub-Saharan economy improving the quality of education provided at both primary and secondary level.3 Nigeria 568.51 KENYA South Africa 350.09 Angola 138.36 Sudan 73.81 Kenya 60.94 Ethiopia 55.61 Tanzania 48.06 Ghana 38.62 Côte d’Ivoire 34.25 1 Source: United Nations Population Division data D R Congo 33.12 GDP in US$ billions 2 Source: World Bank Development Indicator 3 Source: UNESCO Education Indicators 4 *Source: World Bank, 2015 CTA SECTOR INVESTMENT PROFILE: CTA Source: ITC, country report, Kenya 8 Figure 3: Kenya’s economy’s growth trend Agriculture is the Kenyan economy’s core, (2004–2014) accounting for about 30% of GDP and employing about 75% of the population (2014). The manufacturing sector has shown only GDP (US$ bn) 8,4% a little, but continuous, growth, contributing approx. GDP growth 12% to GDP, while the services sector has a share 4 61 of 13% in GDP (2014). 5,9% 50 5,2% 40 37 4,6% 4,4% 26 19 0,2% 2004 2006 2008 2010 2012 2014 *Source: World Economic Outlook database 2015, IMF Table 1: Kenya’s key fiscal indicators (2009–2020) Percent of GDP 2009 2010 2011 2012 2013 2014 2020(P) General govt. expenditure 23.13% 24.21% 23.57% 24.21% 25.33% 27.27% 26.29% General govt. revenue 18.79% 19.80% 19.45% 19.17% 19.64% 20.48% 23.11% General govt.
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