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High costs affect Kenyan garment businesses

The apparel sector in Kenya has been hard hit by the cost of doing business. This has led to major investors’ shutting down and several others downsizing and reducing their operations. There have been substantial job losses both directly as well as those in the supply and value chains. Factors affecting the sector include: the high cost of energy, cost of labor and logistical challenges which affect the logistics chain including transport and distribution networks.

Investors and the business community have continued to suffer high costs of transportation despite investments in infrastructure. For the business community very little change has been felt in terms of the expected reduction in the real cost of transport for industry. The disorder experienced when it comes to designation of containers has led to huge demurrage charges and unexpected losses for businesses.

The recent eight per cent tax increase on fuel is expected to further drive up the cost of transport, leading to an increase in the cumulative cost of manufacturing in the country. Kenya is among the top exporters of apparel to the US. The country has the capacity to absorb the global shift in manufacturing which is leaning towards African markets.

Kenya is keen to revolutionize manufacturing in the country –the aim is to raise the sector’s contribution to GDP to 15 per cent by 2022 from the current 11 per cent.