Kenya’s economy is growing, but hinges on renewal of US trade pact

Kenya has emerged third among the top 20 fastest-growing economies in the world, according to a 2015 survey by Bloomberg. Kenya and Nigeria are the only African countries that made it on the list, which placed China first, followed by the Philippines. However unemployment in Kenya remains high and some industries face a shock unless the US renews a key trade agreement, AGOA.

The sound of this industrial sewing machine fills the air at the United Aryan Limited textiles factory on the outskirts of Nairobi as workers are busy trying to make production deadlines.

Established 13 years ago, the company employs approximately 10,000 people, earning an average income of US$150 a month.

Most of its business is in exports. Each month, it sends goods worth $100m to clients in the US. United Aryan has benefitted from the African Growth and Opportunity Act (AGOA), a US trade programme that provides duty-free import of certain products from sub-Saharan Africa.

But that all may change in September, when the programme is set to expire.

Pankaj Bedi, the founder and chairman of United Aryan Limited, said his company would face serious consequences if AGOA is not renewed.

“It will be disaster. We all have been lobbying, pushing doing whatever we can. In fact government is very proactive, even the Kenyan government has been, you know, following through. If it is not there then we are not there. Simple. We’ll lose all the jobs; there will be social, security all kind of disaster happening,” said Bedi.

According to the Bloomberg survey of 57 countries, Kenya’s projected 6% growth rate this year would see it join China, India, Philippines and Indonesia as the only economies enjoying 5% growth or higher.

However, unemployment in Kenya remains high, and 40% of Kenyans live below the poverty line. Losing the trade agreement could make the situation worse.

Financial analyst Aly Khan Satchu said AGOA adds jobs and revenues to Kenya’s economy.

“There’s been an explosion in what you call the EPZ, Export Processing Zones, where the government has assisted companies who are predominantly exporting textiles. It’s been pretty major and has had a dynamic, positive economic impact in Kenya,” said Satchu.

In the past, Kenya has struggled to attain strong economic growth due to political unrest, periodic droughts and attacks blamed on terrorists. The business community believes fast growth can continue if AGOA continues as well. – VOA