At the end of the financial year of June 2023, the recently revamped Eldoret-based textile manufacturer Rivatex posted Kes 347.6 million in losses. A new company audit now shows that the state-owned agency’s cumulative losses are close to Kes 3 billion. The firm was relaunched in 2019 by former President Uhuru Kenyatta in his ‘Buy Kenya, Build Kenya’ initiative following its collapse in 2000. Barely five years later, this state-owned agency is on the brink of collapsing once again.
The Revival of Rivatex That Was to Improve the Textile Industry
During his tenure, former president Uhuru Kenyatta was keen on strengthening the manufacturing sector to create more job opportunities, specifically for the youth. One of the projects critical to Kenya’s Vision 2030 became the revival of Rivatex, Kenya’s first textile firm.
Established in June 1975, the government agency was destined to become a major supplier of fabric and clothing both locally and in the region. However, after three successful years, the company fell into the trap of mismanagement for two decades before being placed under receivership in May 1998. The receiver managers closed down the textile firm in 2000.
In 2007, the Moi University Research Centre took over the company to serve as a demonstration facility for its students at the university, as well as to manufacture and supply textile products across East Africa. In 2019, the then-president took an interest in the firm and began his initiative to revive the textile plant. The government approved a Kes 6 billion budget for the modernization and expansion of the firm. The modernization project was geared towards improving production capacity from 5,000 meters to over 30,000 meters of fabric daily. Additionally, the textile firm signed agreements with cotton-producing counties to give the farmers the necessary support to increase production.
In 2021, the then-CEO of Rivatex Prof Thomas Kipkurgat said the company was on the path to creating over 3,000 direct jobs with 92% of the planned modernization and expansion complete. These new jobs were to primarily benefit the youth whose unemployment rate in the country was rising alarmingly. However, three years later these remarks remain just hopes as the company has yet to meet this target. Today, Kenyan youth have turned to generating income through unlikely channels, such as gambling in online casinos and venturing into e-commerce among other online jobs.
Kenya’s Manufacturing Industry’s Dismal Performance
The management of Rivatex has attributed its losses and poor performance to the constant lack of raw materials such as cotton and the high cost of operational inputs such as labor, electricity, water, and fuel. As Rivatex grapples with the reality of a possible collapse, the firm is not the only manufacturer facing such a challenge.
As of the end of 2023, approximately 30 manufacturing companies had shut down their production plants in the country in less than 10 years. Other firms have taken the route of downsizing to manage operation costs and stay afloat. According to the Kenya National Bureau of Statistics (KNBS), the country’s manufacturing sector grew by 1.3% in Q1 2024 compared to 1.7% in the same period last year. These results represented the slowest growth the sector has experienced in 16 years.
The manufacturing sector has struggled to grow since its biggest drop in 2022, when the growth rate dropped to 2.7% from 7.3% in the previous year. Regulatory challenges and high electricity costs remain the top reasons behind the current dismal performance in the manufacturing industry.
Kenyan manufacturers claim to pay about $0.17 per unit, which is almost five times higher than the average of $0.03 per unit manufacturers in Egypt and Ethiopia pay. On the other hand, manufacturers in South Africa pay $0.07 per unit, which is significantly cheaper than Kenya’s rates. Local manufacturers are also continuing to struggle to gain a market base against cheap imports that have flooded the Kenyan market.
While the situation looks bleak, The Kenya Association of Manufacturers (KAM), the country’s representative organization for value-add industries is doing its best to turn it around. In its 2024 Manufacturing Priority Agenda (MPA) and the Agriculture for Industry (A4I) report, the body unveiled a comprehensive roadmap to the competitiveness and growth of the country’s manufacturing sector. Despite the numerous challenges in the sector some progress has been made such as the finalization of the National Tax Policy, the removal of VAT on exported services, and the provision to claim input VAT on KPA charges.
If the comprehensive strategies outlined in the KAM MPA and A4I reports are implemented, scaling up Kenya’s manufacturing sector will be achievable, and a trajectory toward a vigorous manufacturing future will be established. The Kenyan government still hopes to hit its target of having the manufacturing industry contribute up to 20% to the economy by 2030. Additionally, the government aims to have this sector create at least one million jobs annually.
