Summary of Key Points
Kenya's Export Processing Zones (EPZs) are receiving a steady stream of orders for garment production, capable of manufacturing clothes that meet European and American standards. However, the general public, including the factory workers, cannot afford these locally made garments and instead rely on second-hand clothes (mitumba) imported from China, Europe, and the United States. The issue is not simply due to low incomes but is the result of a combination of factors such as an export-oriented institutional design, a disconnect between production capabilities and sales skills, cost structures (imported raw materials and exchange rate risks), and the established ecosystem of second-hand clothing markets (with a complete supply chain and price advantages). The article compares this with China's "three imports and one supplement" (importing materials, processing, assembling, and providing compensation trade) model, pointing out that while Kenya's outsourcing model represents a starting point for industrial development, it must break free from the low-end trap and overcome barriers to connect the manufacturing sector with local consumers.
Detailed Explanation
1. Export Processing Zones: Manufacturing for Foreigners, Not for the Domestic Market
Kenya's EPZs have a strict rule: more than 80% of the products must be sold to countries outside the East African Community, with a maximum of 20% allowed for domestic sales. This is not because factories do not want to sell to locals; rather, policies force them to export. Importing raw materials and equipment is tax-free, but selling domestically incurs tariffs, additional paperwork, and the need to establish storage, wholesale, and retail networks, which is too cumbersome. For example, a shirt produced in an Asisi River factory is more easily exported to the United States, 10,000 kilometers away, than to Nairobi, just 60 kilometers away. The barrier between factories and Kenyan consumers is not just geographical but also institutional.
2. Knowing How to Make Clothes Does Not Equal Knowing How to Sell Them
Export factories operate under an "outsourcing model": European and American clients provide the design, fabric, and quantity requirements, and the factories are responsible for production. Whether the goods are sold is the client's concern. However, the domestic market is entirely different:
- It is necessary to understand Kenyan consumer preferences (e.g., their body types, taste for bright or plain colors, and budget constraints);
- Local companies must design, pattern, and build brands, and partner with street vendors and markets;
- They also have to deal with risks such as inventory buildup, retailers' credit sales, and competition from counterfeit products.
A factory that can produce 100,000 identical shirts may struggle to sell even 1,000 different styles. Production is one skill, but selling is another.
3. Why Are New Clothes Expensive? Costs Go Beyond Labor
Although Kenyan workers earn less than those in Europe and the United States, the cost of producing new clothes is not low:
- Most raw materials are imported (cotton, spinning, weaving, zippers, dyes, etc.) from China, India, and Turkey, and payments are made in US dollars;
- Other costs are high (electricity, difficult financing, and expensive land rent);
- Exchange rate risks: Goods are sold in Kenyan shillings, but raw materials are purchased in US dollars. When the shilling depreciates, costs increase, yet ordinary people's incomes do not.
4. Second-Hand Clothes: Not a Sign of Poverty, but an Integrated Economic Ecosystem
The second-hand clothing market in Kenya employs 2 million people, with a supply chain that starts from the Mombasa Port and includes wholesalers, sorters, cleaners, and vendors. Its advantages are clear:
- Low prices: European and American consumers have already borne part of the cost of depreciation; when these clothes reach Kenya, they are sold at a much lower price;
- Better quality: Some second-hand garments from European and American brands may have better materials and craftsmanship than newly produced ones;
- A ban on second-hand clothes could lead to problems such as price increases, increased smuggling, and vendor unemployment, which would be a financial burden for low-income families.
5. Outsourcing as a Starting Point, Not an Endpoint
What can Kenya learn from China's "three imports and one supplement" model? Kenya's current EPZs are similar to China's early stages of this model. Chinese workers once produced Nike garments but could not afford them. However, outsourcing is not the ultimate goal:
- Outsourcing serves as a learning opportunity: Foreign companies bring equipment, quality standards, and management systems, and workers learn machine operation and international trade practices;
- China moved from OEM production to developing its own brands (e.g., Putian shoes and Huawei). Kenya should do the same, focusing on building local skills (such as in mechanical repair and pattern making) and encouraging local businesses to enter the supply chain (e.g., producing buttons and zippers). It should also use local orders for school uniforms and safety gear to support local factories and break down barriers to the domestic market.
Conclusion
To solve the problem of Kenyan workers not being able to afford new clothes, Kenya needs to address institutional, capacity, and cost barriers. It should make the most of the outsourcing model as a stepping stone towards true industrialization, rather than simply banning second-hand clothes.