Even if the African Growth and Opportunity Act (AGOA) trade preference program is renewed beyond 2026, it is unlikely that it will remain in its original form. The U.S. administration has made clear it wants to “modernize” AGOA with a more favorable America-first slant.
In the meantime, what both the fashion industry and the apparel market in Africa must grapple with in the short term calls into question whether the trade preference program can accomplish its stated goal of promoting economic growth and development in the 32 nations currently eligible for duty free access to the U.S. Given the amount of investment inherent in establishing factories and mills as well as the risks associated with rerouting supply chains, fashion would be rightfully wary of adding production in those countries in any meaningful way.
Hertzman Global Intelligence spoke to Jas Bedi, managing director of the 1,100-worker manufacturer Bedi Investments Limited (Kenya) and the chairman of Kenya Private Sector Alliance (KEPSA), about the changes that could strengthen the program for all parties; how he sees his companies, and Africa, strategically moving forward; and why the Trump trade shakeup was a necessary wakeup call.
HGI: Were you concerned when AGOA lapsed in September?
Jas Bedi: I was almost certain that we would be able to get a retrospective inclusion for duties paid and refunds. I’ve been to U.S. Congressional hearings personally twice; I was spearheading the AGOA negotiations since the year 2000 and was involved in the 10 year extension. We told our customers, ‘Don’t worry. It’s a small speed bump on a long road.’
HGI: What did AGOA’s one-year renewal signify to you?
JB: When the Trump administration took over, we realized it’s no longer multilateralism, it’s going to be bilateralism. Considering the current status quo and current U.S. negotiations with the rest of the world, we were only hopeful for one year at that time. Africa is only 3% of the world economy. It’s a non-strategic discussion for the largest economy of the world, which has 97% of the world to worry about. Now we have about 10 months to negotiate a trade agreement, and the Kenya team will be in Washington negotiating a trade agreement in February.
HGI: What do you anticipate for AGOA if renewed in 2027? For instance, what about the third-country provision, which enables manufacturers in qualifying Least Developed Country nations to source yarns and fabrics from outside AGOA for finished goods?
JB: There will be changes. If they had wanted to renew AGOA in its current form, they would have done the three-year renewal, not the one-year it was shortened to. And the U.S. is not wrong in its thinking, ‘Look, over the last 25 years, we’ve had this third-country fabric provision, which is really benefiting China.’ Because 70% of the revenue that Kenya does in apparel, the fabric primarily comes from China. It’s a bigger issue—a China-U.S. issue as opposed to a Kenya issue. Any new negotiations will probably be around, ‘How come you haven’t done this for 25 years, and what surety do you have that you’ll be able to localize, regionalize a whole supply chain on the continent?’
HGI: What about a more heightened yarn-forward provision on AGOA-eligible nations? Or something stipulating U.S. inputs?
JB: Maybe a hybrid of that. Look at what they did with the Bangladesh agreement. They said, if it’s U.S. cotton, you can come down to zero. The MFN [Most Favored Nation duty rate] remains. So right now, the competitive advantage for Kenya is brilliant, because we have an MFN, which is zero, and we have a 10% reciprocal tariff.
HGI: You are also executive director of Fine Spinners Uganda Limited. How do trade policies affect your cotton facility there, since Uganda isn’t part of AGOA?
JB: I have a full value chain in Uganda, from field to fashion. We even make apparel out of Uganda, which we export to Europe as opposed to the U.S. because we were removed out of AGOA by Biden in 2024 due to LGBTQ+ issues. I think the [Trump] administration has a different view and I think Uganda will be re-included back to the current AGOA. Regarding third-country provision, we’re developing fabric in Uganda to sell to Kenya, and garments out of Kenya to sell to the U.S. Those qualify under the third-country provision. It’s something that the U.S. would like to see, as opposed to seeing a China supply chain.
HGI: Businesses require predictability. How are you reacting to all this uncertainty and realignment?
JB: Without predictability, supply chains don’t function. Global supply chains are reorganizing. We see a lot of Chinese investment in Kenya now, a lot of production that might get conducted on the continent. It’s a lot of moving parts. And I don’t think anybody’s got that crystal ball to say where we’re going to go. One year of the Trump presidency is done, but we have three to go. At the end of the tunnel, that may be good, it may be bad. In all honesty, I wouldn’t say I’m for or against, but I think it was a good shake up and wake up call to the rest of the world. Sometimes it’s good to have complete variance in thinking.
HGI: Explain what you mean by wake up call.
JB: That you can’t be too dependent on a single market. And even stable agreements like [the United-States-Mexico-Canada Agreement] are subject to knee-jerk political reactions. We’ve also seen knee-jerk reactions from Europe to U.S. relations that had them signing ‘the mother of all deals’ with India [cutting tariffs on 99.5% of goods imported from India over seven years]. Is it good or bad for Europe? That’s a different discussion.
HGI: Africa needs investment to build up infrastructure and make it a more significant player. Does AGOA’s short renewal make investment precarious?
JB: I don’t think any large investment will happen in the next 12 months, for sure. It’s too short a period for any large investment to get paid up. Textile mills and verticality, these investments cost lots of money, and it’s been done in the past with large U.S. corporations putting their necks to it.
They did that in 2015, 2016 with PVH, and all these guys who went into AGOA, into Ethiopia. They put up a textile mill and a lot of large apparel factories with an offtake agreement. That was the only investment that the buyer put on the table—that we will buy from whatever you make. But when Ethiopia was removed out of AGOA, the same brands were the first ones out of the door.
HGI: Despite the previous arrangements and partnerships?
JB: Even those offtake agreements were not watertight. There’s still a way; it’s there in the small print. They all walk off. At the end of the day, you’re left with this huge facility and you don’t know what to do, because you actually put it up. I did the same in Uganda. I had put up my old factory for PVH. We sunk in $40 million. But when the first LGBTQ legislation came on board, they went to Ethiopia. And then Ethiopia was also removed out of AGOA. But I think you need to think global as well as local. You cannot have a business plan based on one market and one corporation. You need to spread your eggs in various baskets.
HGI: In hindsight, how do you view past global trade deals now?
JB: I think global dynamics are very, very complex. And in that complexity, I would say the Africans have made mistakes. Going back to the year 2005, the African ministers proposed, in a 2005 meeting in Hong Kong at the World Trade Organization (WTO) summit, that all LDC [least developed] countries should be duty free [to major markets like Europe]. But the African ministers forgot that there’s an LDC component in Asia and in South America, giving them the same benefit.
So Bangladesh got this huge European market, and has since grown their apparel business from $4 billion dollars to $42 billion. They never thought they would have duty-free market access to Europe, but they ended up getting it because of the African position.
You need to look at all those dynamics. Unfortunately, everybody looks at it as a black and white situation. It’s not. It’s the ecosystem that you’re operating in. It’s the extra cost of doing business operating in Africa, because we don’t have verticality. It’s high logistics—inbound, outbound cost—which Asia doesn’t even factor in because everything is at their doorstep. You don’t need to hold fabric for three months or two months in the Asian country. You hold it for two weeks. We have to bear that extra cost. And there’s a perception/reality story. Perception is that Africa is high risk; reality being that nobody’s lost money on the continent. But a lot of money has been lost in Asia.
HGI: What are the main cost drivers holding Africa back?
JB: One is the cost of finance and the tenor of finance, meaning how many years is that money available for any investment? And in both cases, you’ll find the costs are high and the tenor is not available. Then there’s logistics. A container from China—Shanghai to Mombasa—will cost you, I would say, $2,000 and that same container from Mombasa to Nairobi, which is only 600 kilometers, will cost you $2,000 and it’s already crossed 6,000 kilometers at the same price.
Then there’s the very high energy cost in Kenya. That’s why the large capex industries, especially spinning in Kenya, doesn’t make sense, because the cost of power is 20 U.S. cents a kilowatt hour. Even in the U.S., textile mills are paying 6 cents a kilowatt hour. So we’re at 300% more. So how do you become competitive with that type of environment? And then, of course, you’re looking at your bill of materials, which is probably at world price.
The biggest driver of competitiveness in the apparel business, however, is productivity. And I want to call it productivity, and not the cost of labor, because the cost of labor in China is high compared to Kenya. We’re $150 a month, but the unit cost of production is much higher. Skill level, training, etcetera, is low in Kenya compared to Asia.
