Local cotton industry benefits little from AGOA
Oct 26, 2005
<b>By Jennifer Austin</b><br><br>EVER since Uganda started exporting apparel to the US under the African Growth and Opportunities Act (AGOA), the country has not exported a stitch of locally-produced fabric and AGOA has stimulated little growth in the cotton sector.
By Jennifer Austin
EVER since Uganda started exporting apparel to the US under the African Growth and Opportunities Act (AGOA), the country has not exported a stitch of locally-produced fabric and AGOA has stimulated little growth in the cotton sector.
According to statistics from the Trade Law Centre for Southern Africa, US imports of duty-free textiles under AGOA since 2003 have totalled $7.6m (about sh14b), and all of that is garment exports Apparel Tristar Limited.
Apparel Tristar, a company which makes garments from imported fabric, has created 2,600 jobs at its Bugolobi factory and shown Uganda has the ability to produce quality garments.
Given Uganda’s ability to grow high-quality cotton, the benefits of AGOA have been limited because the local spinning and weaving capacity has not grown in response to AGOA.
In 2007, African exporters will not be allowed to export clothes to the US using textiles imported from third countries. That will automatically disqualify Tri-Star.
This means they may be forced to close shop since the US is currently their only market or they may look to the regional market.
“This factory is a pioneering venture. It was started three years ago under AGOA. It is an export bonded warehouse, which means imported fabric comes directly to the factory and is exported directly from here. There are no taxes involved. These are typical export incentives,†the managing director, Vellupilai Kananathan, said.
Kananathan said since 2003, Tristar has exported garments worth $11.9m (sh22b) to the United States.
“When the AGOA provision which allows sourcing from a third country expires, we will not be able to continue to export to the US. We have been talking to the Government and we expect the deadline to be extended,†he said.
Kananathan did not provide specifics, but said they are in the process of talking to some of their US partners about investment in local spinning and weaving to make fabric from local cotton so that they (Apparel) continue to make garments for duty-free export to America.
US apparel companies are interested in products from Uganda but small local factories either produce low quality materials, or cannot accommodate the large orders and respond quickly enough to satisfy the highly-competitive seasonal US market.
At the recent World Convention on Organic Cotton in Turkey, Yuichi Kashiwada, the managing director of Phenix Logistics, one of the two companies producing garments from local organic cotton, was approached by three big US companies including Nike, that were interested in placing orders.
“We asked them how much they wanted and they said millions. We can’t do that,†he said, throwing up his hands in despair.
Kashiwada cites poor infrastructure in Uganda as a limiting factor.
“Buyers don’t want to hear that a road was washed out by heavy rains, their trucks are stuck, or the electricity went out so the factory is behind schedule,†he said.
Uganda also faces the hurdle of higher transport costs because it is a landlocked country.
The Uganda Investment Authority (UIA) is working to attract investment in spinning and weaving. However, progress has been slow because private investors have been hesitant to invest large sums of money given the challenges of producing in and exporting from Uganda.
According to Hans Muzoora, the principal market information and monitoring officer at the Cotton Development Organisation, “There has not been a very visible trickle-down effect from AGOA. About 95% of the cotton is exported raw. We hope to have more investors coming to take advantage of the raw material.â€
“Our focus is on productivity at the farm level. We regulate the marketing of raw cotton and help ensure that viable seeds get to farmers in a timely manner,†Muzoora said.
Cotton production has recovered since it’s decline to almost zero ten years ago but is still just half of what it was produced in the 1970s. There is a continued challenge.
EVER since Uganda started exporting apparel to the US under the African Growth and Opportunities Act (AGOA), the country has not exported a stitch of locally-produced fabric and AGOA has stimulated little growth in the cotton sector.
According to statistics from the Trade Law Centre for Southern Africa, US imports of duty-free textiles under AGOA since 2003 have totalled $7.6m (about sh14b), and all of that is garment exports Apparel Tristar Limited.
Apparel Tristar, a company which makes garments from imported fabric, has created 2,600 jobs at its Bugolobi factory and shown Uganda has the ability to produce quality garments.
Given Uganda’s ability to grow high-quality cotton, the benefits of AGOA have been limited because the local spinning and weaving capacity has not grown in response to AGOA.
In 2007, African exporters will not be allowed to export clothes to the US using textiles imported from third countries. That will automatically disqualify Tri-Star.
This means they may be forced to close shop since the US is currently their only market or they may look to the regional market.
“This factory is a pioneering venture. It was started three years ago under AGOA. It is an export bonded warehouse, which means imported fabric comes directly to the factory and is exported directly from here. There are no taxes involved. These are typical export incentives,†the managing director, Vellupilai Kananathan, said.
Kananathan said since 2003, Tristar has exported garments worth $11.9m (sh22b) to the United States.
“When the AGOA provision which allows sourcing from a third country expires, we will not be able to continue to export to the US. We have been talking to the Government and we expect the deadline to be extended,†he said.
Kananathan did not provide specifics, but said they are in the process of talking to some of their US partners about investment in local spinning and weaving to make fabric from local cotton so that they (Apparel) continue to make garments for duty-free export to America.
US apparel companies are interested in products from Uganda but small local factories either produce low quality materials, or cannot accommodate the large orders and respond quickly enough to satisfy the highly-competitive seasonal US market.
At the recent World Convention on Organic Cotton in Turkey, Yuichi Kashiwada, the managing director of Phenix Logistics, one of the two companies producing garments from local organic cotton, was approached by three big US companies including Nike, that were interested in placing orders.
“We asked them how much they wanted and they said millions. We can’t do that,†he said, throwing up his hands in despair.
Kashiwada cites poor infrastructure in Uganda as a limiting factor.
“Buyers don’t want to hear that a road was washed out by heavy rains, their trucks are stuck, or the electricity went out so the factory is behind schedule,†he said.
Uganda also faces the hurdle of higher transport costs because it is a landlocked country.
The Uganda Investment Authority (UIA) is working to attract investment in spinning and weaving. However, progress has been slow because private investors have been hesitant to invest large sums of money given the challenges of producing in and exporting from Uganda.
According to Hans Muzoora, the principal market information and monitoring officer at the Cotton Development Organisation, “There has not been a very visible trickle-down effect from AGOA. About 95% of the cotton is exported raw. We hope to have more investors coming to take advantage of the raw material.â€
“Our focus is on productivity at the farm level. We regulate the marketing of raw cotton and help ensure that viable seeds get to farmers in a timely manner,†Muzoora said.
Cotton production has recovered since it’s decline to almost zero ten years ago but is still just half of what it was produced in the 1970s. There is a continued challenge.