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EPZ companies push for power, labour cost cuts

Wednesday June 26 2019

Workers at United Aryan EPZ

Workers at United Aryan EPZ Ltd, off Thika Road in 2017. FILE PHOTO | NMG 

ANTHONY KITIMO
By ANTHONY KITIMO
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Export Processing Zones (EPZ) companies have asked the State to lower labour and electricity costs while also slashing work permit fees for expatriates to boost Kenya’s earnings from the Africa’s Growth and Opportunity Act (Agoa) of the US.

Kenya Export Manufacture Association (Kema) vice chairman Thomas Puthoor says the EPZ has great potential but is held back by inability to attract more investors who prefer neighbouring countries.

“EPZs in the country are not willing to expand due to existing costs despite having available labour. Our competitors such as Ethiopia and Madagascar have attracted more investors after lowering electricity cost and expatriate permit fees,” he said.

Kema has also complained of high wages in Kenya that he rated at an average minimum of Sh22,000 compared to Ethiopia and Madagascar at Sh6,000 and Sh8,000 respectively.

Despite concerns by the firms over high labour costs, a 2017 report by the EPZ Authority showed that there were glaring disparities in what expatriates and local people earn in the economic zones.

According to the data, Kenyans earned an average Sh14,319 a month compared to Sh103,157 for expats.

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Majority in EPZs work for apparel enterprises, with recent Kenya National Bureau of Statistics (KNBS) data indicating that 22 clothes firms employ 46,248 Kenyans.

Mr Puthoor, who is also Simba Apparel EPZ managing director, says despite having more than 6,000 items trading under Agoa, Kenya is only exporting apparels, horticulture and processed food, an under-investment in the sector.

“We have orders exceeding our produce because of our stability and sustainability in the apparel sector but efficiency in production is hindering us from producing more,” said Mr Puthoor.

He also asked the government to reorganise the market for citizens to buy the locally manufactured clothes.

“We started very well with the concept of ‘Buy Kenya, Build Kenya’ but for the past one year, the promotion has ceased yet we had set aside more than 20 percent of our produce to the local market. Our clothes are of best quality compared to imported second hand clothes (mitumba),” he said.

Apparels have dominated as Kenya’s biggest export earner in the US with products such as processed food, home décor, fresh fruits and vegetables remaining unexploited.

Total sales by EPZ enterprises increased by 14.7 percent to Sh77.2 billion in 2018 from Sh67.3 billion a year earlier.

According to the Economic Survey 2019, the number of gazetted zones increased by one to 72 in 2018, with most being privately owned and operated.