With AGOA set to expire in September 2025 a few months away, growing concern is mounting among American buyers and manufacturers about the uncertainty surrounding its renewal. The delay in extending AGOA threatens to undo the progress made in shifting production away from strategic adversaries, as there are currently no viable alternatives for mass-market, price-sensitive product categories. CNBC Africa’s Aby Agina spoke with the Kenya Association of Manufacturers CEO, Tobias Alando for more.
With AGOA set to expire in September 2025 a few months away, growing concern is mounting among American buyers and manufacturers about the uncertainty surrounding its renewal. The delay in extending AGOA threatens to undo the progress made in shifting production away from strategic adversaries, as there are currently no viable alternatives for mass-market, price-sensitive product categories. CNBC Africa is now joined live by the Kenya Association of Manufacturers CEO, Tobias Alando. Thank you so much for joining us from Nairobi, Kenya. Thank you. Thank you for having me, Aby. Well, it is a momentous moment for Africa. Right now, US President Donald Trump has been on record saying he will be reviewing quite a number of the agreements that the US government had gotten into in the past. And we are not seeing any indications so far for a renewal of AGOA. Are you worried about this? And what is the potential impact it may have for manufacturers? Definitely we are concerned because AGOA is crucial for the country. It's crucial for the manufacturing sector. AGOA, just in terms of employment, it employs about 58,000 people directly and another about 150,000 indirectly. So given the dependency ratio in this country, which is one to four, so we'd say at least 600,000 individual jobs have been sustained in the past just by AGOA. In terms of the monetary value on export through AGOA, we've done export of at least 600,000 dollars annually. So that really shows you that AGOA is important for the manufacturing sector in terms of employment and in terms of revenue generation to the government. And so it would be a concern for any government that this renewal is not done. But we are hopeful, and based on the conversation we've had with the government, there is conversation that is currently ongoing to see if this renewal will be done as soon as possible. Quite some interesting numbers you shared there, Tobias. And just looking at the impact this is going to have in the event that it is not renewed, for argument's sake, what are the alternatives? Considering right now AGOA has been quite instrumental for not only Kenya, we've seen Ethiopia, as well as Uganda and South Africa. So if you look at it critically, the alternative would be only an agreement that supports duty free exports. And currently the only agreement that we have to support duty free export is EUEPA, that gives us access to about 300 million people in the European market. However, in terms of specific sector that AGOA supported, we are not seeing a replacement. And so AGOA still remains the biggest employer for the textile and apparel sector, because majority of the workers were women, basically. 70% of people who are employed are women. That shows you in terms of equality, we are considering women and a lot of them will lose their jobs. But saying there is a substitute, I wouldn't say there is a direct one, although there are agreements that have been signed. And if it doesn't work out, it is not renewed, then the government will have to think on their feet and we get another market to export our products. Well, as the body representing manufacturers, what would be your asks to the government of the day, considering that as it stands, different countries are already charting out their own path. We did see the South Africans looking towards the EU. We're also seeing a different tangent being taken by Ethiopians. What is the case for Kenyans? The reality is that we've had long relations with the US. So in terms of this agreement not being renewed, it will affect the balance of trade between the two countries. And I don't think they would want the balance of trade to be affected because losing a market of $600 million annually will not be good for both parties in terms of that relation. So our ask is that they need to have a diplomatic engagement to ensure this renewal is done. And if it is not done, because the advocacy towards renewal is being done by like-minded countries who are benefiting under the AGOA scheme. But if this is not done, our ask is that we need to consider another alternative so that we don't lose this number of people in terms of employment, losing about 150,000 direct jobs. It will be bad for the country, particularly the youth and the women. And Tobias, we do know that Kenya already has another form of arrangement that they are working with the US government. And how crucial will this be in terms of making it gain ground to become operational? The conversations are on, I would say, a high stage for conclusion. And those modalities would, because Kenya is very strategic for the US also in terms of the geopolitics in this region. So it's not only about imports and exports, but it's also about the security of the region. So we play a crucial role. And therefore, that relationship that stabilizes the conversation in terms of security of the region, but also in terms of market access, the US market access duty-free is important for us. For the Kenyan government, I think what we cannot lose is that US market. We need to do what we can in order to gain that market. However, if it happens that we are not able to come into an agreement and we lose the market, then we need to think of an alternative. And the alternatives are like what I've mentioned, other trade agreements that we have signed under the EU EPA, under the AFCFTA, and also consider other continent in terms of market access. All right. And give or take, if you had the chance to speak to the president, what would be your main priority right now to safeguard this very important market access that Kenya already is enjoying? My take is to remind the president that we are likely to lose quite a number of people in terms of employment. And also, we are likely to lose a lot of money in terms of money generated towards export for textile and other products under the AGOA. And therefore, we'd ask the president to either move towards extension of this program or seek other alternatives within the continent, because there could be other potential buyers of already textile and other products that are being produced in this country and other fresh produce. So my take to the president is that this is a priority. What we need to protect is the loss of jobs. As the economy is today, I don't think we would want to lose any more jobs. And as the manufacturing sector is also stagnating in terms of the contribution to the GDP, we would not want to lose this sector.
Theme: Uncertainty Looms Over AGOA Renewal and Its Impact on African Manufacturers
The renewal of the African Growth and Opportunity Act (AGOA) is causing jitters among African countries as the deadline fast approaches. With AGOA set to expire in September 2025, there is growing concern among American buyers and manufacturers about the uncertainty surrounding its extension. The delay in renewing AGOA threatens to undo the progress made in shifting production away from strategic adversaries, as there are currently no viable alternatives for mass-market, price-sensitive product categories. The Kenya Association of Manufacturers CEO, Tobias Alando, highlighted the significance of AGOA for the country, particularly the manufacturing sector. AGOA has been crucial in terms of employment, directly employing about 58,000 people and indirectly supporting another 150,000 jobs. The monetary value of exports through AGOA amounts to at least $600,000 annually. The potential impact of not renewing AGOA could result in a loss of hundreds of thousands of jobs and a significant blow to revenue generation for the government. Alando emphasized the lack of viable alternatives in case AGOA is not renewed. The only current agreement that supports duty-free exports is the Economic Partnership Agreement with the European Union (EUEPA), which grants access to about 300 million people in the European market. However, there is no direct replacement for AGOA in terms of supporting specific sectors like the textile and apparel industry, which heavily relies on AGOA for employment, particularly for women. As countries like South Africa and Ethiopia are exploring alternative trade agreements in anticipation of AGOA's expiration, Kenya's longstanding relationship with the US makes it crucial to secure AGOA's renewal. Alando stressed the need for diplomatic engagement with the US government to ensure the continuation of AGOA or to consider alternative trade agreements to prevent job losses and revenue decline. The discussions between Kenya and the US for a new trade agreement are at an advanced stage, with the importance of market access for both countries highlighted. Kenya's strategic position in the region not only influences trade dynamics but also plays a significant role in regional security. Alando underlined the importance of maintaining duty-free access to the US market and exploring other trade agreements under the EU EPA and the African Continental Free Trade Area (AfCFTA) if AGOA is not renewed. If given the opportunity to address the president, Alando would prioritize the protection of jobs and revenue generated from exports under AGOA. He would urge the president to extend the program or seek alternative market access within the continent to prevent further job losses and secure the future of the manufacturing sector.
"My take to the president is that this is a priority. What we need to protect is the loss of jobs. As the economy is today, I don't think we would want to lose any more jobs."
['AGOA', 'renewal', 'African countries', 'manufacturing sector', 'employment', 'trade agreements', 'Kenya', 'US market access']