The sub-Saharan Africa is slowly but surely converting into the globe’s next ‘sewing room’: Already early last year the Swedish Fast Fashion retailer H&M announced the placement of test orders for garments from Ethiopian and Kenyan suppliers. And they’re not even the first ones: Retailers such as Tesco and Walmart seem to have gone down that lane already some time ago.
Why is Ethiopia (and its close by neighbours Kenya and Tanzania) a ‘good destination’ from these retailer’s perspective? Why has the country’s textile industry started to gain traction, and what is its current situation?
Background
Ethiopia’s already considerable history in textiles began in 1939 when, at a time when the country was under Italian occupation, the first garment factory was established.
In FY2012-13 (07/2012 – 06/2013), Ethiopian textile sector exports fetched US$ 99 million, much below the Government target of US$ 357 million. For the Q1 of FY2013-14 exports amounted to US$ 29 million already – hence showing that indeed the country’s industry is gaining momentum.
Germany is one of the main importers of Ethopian textile products: in 2012 these amounted to €22 million ($29.4 million). This has however to be seen in the bigger: Germany imports in total the equivalent of 13 billion euros ($17.4 billion) per year in clothing and textiles.
Ethiopia currently produces a rather wide-range of products: T-shirts, polo shirts, sportswear, pyjamas, military uniforms, work wear, corporate wear, and woven and knitted fabrics, as well as home textiles including towels, bed sheets and fitted sheets.
Production Capacity
Ethiopia has five public textile factories producing mostly work-wear garments for the domestic market. There existed further some 110 privately owned textile factories (along the entire value chain:?spinning, weaving and processing) as of early 2013.
The country’s current textiles industry encompasses . Numerous privately-owned factories produce shirts, suits, work clothes and uniforms for national and foreign markets. The textile sector in its entirety has <a “=”” title=” Ethiopian textile exports reach $29 mn in first quarter” target=”_blank”>110 companies as of Q4 2013. According to official information, the breakdown of the already existing factories roughly looks as follows: 48 threading, 31 grey textile production, 22 knitting sector, 53 woven, 31 garment and 6 finished textile enterprises.
In mid 2013 (Q1 of FY2013-14) 58 new medium textile factories went operational, and plans have been finalised to establish an Industrial Zone and bring a total of 50 Turkish textile companies to the area. And last but not least, the government run Ethiopian Textile Industry Development Institute (TIDI) is aspiring to open six new factories and expand four others to boost production capacity available in the country.
Challenges
Textile Industry In EthiopiaThis all said, while the number of available factories, and hence the theoretical production capacity in the country is ready for large orders of international retailers, a look at production efficiency figures tells a different story: one of either mismanagement or then of overly optimistic expectations.
At present, the Ethiopian textile sector is operating at around just 54% capacity. In order for the country’s governments aspirations to become reality, and also to indeed deliver to the stringent requirements and deadlines of international brands and retailers, there is a programme being rolled out to increase this figure to 85% within a 2 year time frame.
A further challenge is the fact that the country’s infrastructure is poor: only 14% of household have electricity, roads are bad. With a population of just over 90 million inhabitants, the country produces a meagre 10’000 university graduates a year, and less than half the population is literate.
Import of raw material remains a challenge, for two reasons: availability, and import tax (10% at the very least). At the present moment this also applies, specifically, to the import of cotton.
Opportunities
Ethiopia is Working Hard to Increase Cotton ProductionThe country’s evident challenges (literacy, infrastructure) are balanced by the fact that there is a large pool of cheap, willing labour; very low rate of institutionalized corruption – and last but not least ample availability of fertile land for crop production:
According to official sources ‘there are 3 million hectares available for cotton farming in Ethiopia, but only 30-40,000 hectares are currently being used [around 1% of the available land]. We want to produce much more cotton, but also continue to add value to it through manufacturing, so that we grow in an integrated way.‘
And indeed, local cotton production is what the country’s efforts to develop its textile industry is invariably dependent on – and what large retailers rely on when thinking of their mid-term sourcing scenarios. As a consequence, Ethiopia’s government is heavily promoting the expansion of cotton crop farming, at it can be safely assumed that these activities won’t get unnoticed by organisations such as the Better Cotton Initiative or Cotton Made In Africa.
Conclusion
Even without delving into details, there are right away three principal reasons why Ethiopia is a hugely attractive sourcing destination, specifically for European brands and retailers:
- wages are in the present (still) considerable lower than those at qualified Chinese manufacturers.
- geographically the country is well positioned (close to the sea, and therefore shipping routes). Shipping from Ethopia only takes about a third of the time required to ship from far Eastern destinations.
- Easter African countries, and Ethiopia in particular, offer a climate which will allow for large-scale cotton farming in a not too far away future. Which ultimately would benefit the country’s textile industry as expensive raw material imports will no longer be required.
Indeed, with Primark, H&M, Walmart and Tesco already sourcing from Ethiopia, it can be said without a shade of doubt that the sourcing waggon is already moving into Africa.
Undoubtedly, while there is many an opportunity considering the country’s poor infrastructure and huge numbers of people looking for work, so are the risks that ‘another Bangladesh’ is created on the way. The risk is undoubtedly real. However, at the same time, building sourcing infrastructure nearly from scratch in the time and age we live – in essence, under the scrutinizing eye of NGOs and the public at large – there is a good chance that the failures of the past won’t be repeated and instead the lessons learned implemented right from the beginning.
