Is Ethiopia a rising textile sourcing and production star?

Is Ethiopia a rising textile sourcing and production star?

FashionUnited took a closer look at Ethiopia as a rising sourcing star and TextileFuture takes the opportunity to provide you with the newest facts

The basics on Ethiopia’s economic development

Ethiopia – likewise Bangladesh – has a high population and is with 93.8 million people the second most populous African nation after Nigeria.  Ethiopia and Bangladesh has a young population with over 40 % aged 15 and younger, with 34 % the same is true for Bangladesh. More than 50 % of the population falls into the 15 to 64 age bracket in Ethiopia and 60 % in Bangladesh. The two nations have low wages also in common, with Ethiopia averaging monthly around USD 25.

2004 – 2009, Ethiopia recorded a 10 % economic annual growth, which made the country one of the fastest growing economies in the world, according to IMF International Monetary Fund. In the last five years, growth slowed to seven percent due to less external demand and a private sector that is not yet open enough for international activity. A high inflation rate plagued the country between 2006 and 2013, averaging 20 % and reaching a record high of 64 % in July of 2008, but currently the figure settles at around 8 %.

The ambitious textile and clothing goals of the Ethiopian government

Ethiopia’s Economy is largely dependent on agriculture, providing 85 % of the total employment and around 47 % of GDP Gross Domestic Product. Efforts are underway to change this through government incentives in place, and the textile and clothing industry represents a key priority sector. The projected textile export revenues are estimated at USD one billion during 2014-15, a volume that should create 40000 new jobs.

For 2013-14, the government targeted export revenue of USD 500 million, this seems to be ambitious, because 2013 exports amounted to USD 99 million, and in the first quarter of 2014 the figure was earmarked at USD 29 million. In comparison, Bangladesh’s garment exports amounted to better than USD 27 billion in 2013. It has to be noted, that in the first quarter only 58 of Ethiopia’s 110 textile companies were operational. Industry experts expect production capacity to increase during the reminder of the year.

According to Fasil Taddesse, president of ETGMA, the Ethiopian Textile and Garment Manufacturers’ Association, voices the opinion, that the government’s export target is higher than the capacity of the textile sector. In addition, the two industrial sectors face some problems, such a regular power cuts, poor infrastructure, the need for the import of costly equipment, and rising future costs, thus it seems more than doubtful that the set target can be met.

Attractive factors for international textile investors and buyers

On the other hand, the potential is given and is an attracting factor for international buyers. For instance, the Ethiopian textile and garment industry can take advantage of high quality cotton that is grown in the country, as well as duty free access to US and EU Markets.  Sleshi Lemma, director general of ETIDI, the Textile Industry Development Institute, declares “We have three million hectares available to grow cotton, but we are using only about six to seven percent of this resource”.

Table 1 shows the prospective cotton areas and water availability in different Ethiopian regions

t1t2

It is ETIDI’s aim to become a world class institute by 2024. Its mission is to enable the Ethiopian textile industry to compete globally by providing sustained investment promotion, consultancy, training, research, laboratory, marketing support and services.

The pioneering investors

With the offer to provide competitive prices, Ethiopian textile and apparel manufacturers were generating some interest among international players. British retailer Teco, Irish textile discounter ethiopia2_400Primark, US Wal-Mart , and Swedish fast fashion company H&M Hennes & Mauritz, are already sourcing clothes from Ethiopia. They have learned some lessons from the tragedy in Bangladesh by ensuring beforehand that factory conditions are up to par, or, when necessary by raising these conditions, if needed. Hennes & Mauritz (H&M) became the latest high street giant to begin purchasing textiles and garments from Ethiopia in November. The Ethiopian Textile and Garment Manufacturers Association (ETGMA)has revealed that the Swedish retailer is now sourcing knitwear from the MAA Garment and Textile Factory, based in Mekele in northern Ethiopia, and part of the Kebire Enterprise Group. Tesco and H&M are currently sponsor training for Ethiopian garment workers, proving at the same time, that Ethiopia is on the radar of international brands and retailers.

Bantihun Gessesse, communications director at ETIDI, comments: “They are transferring knowledge and skill to many of our textile and garment companies. Learned by experience in Bangladesh and elsewhere, the companies also invest in safety from day one.” And he adds: “The business objective is first to improve quality and safety, and finally make clothes in Ethiopia. They are now engaged in training on employee and working hour management, quality of products, growth in productivity, as well as environmental protection. “

He also confirmed the growing demand for Ethiopian textiles and garments in Western markets, Germany as an example with 47 % of the national production was exported to that nation in 2013. Over the last eight months, Ethiopia has earned USD 75.28 million from textile exports and is aiming for USD 317 million for the entire year.

An important Turkish textile investment

Turkish textile Group Ayka Addis Textile & Investment Group, a subsidiary of Istanbul based Ayka Textile, is actually planning to invest one billion Ethiopian Birr (around GBP 31 million) in an expansion of its current RMG ready-made garment production unit in Alem Gena, 19 km from Addis Ababa. The expansion will create an additional 13000 jobs, thus tripling employment, and production capacity will be rising to 100 %. The company is also expecting to triple exports to USD 150 million, currently these exports amount to USD 56 million.

ethiopia_400According to Ayka CEO, Amare Teklemariam, the expansion project will increase the present garment production capacity by 50 % upon finalising the first phase of expansion, starting already in April 2014. Ayka has already secured 3.6 ha of land from the Kolfe Keranio District for the first phase, and is in the final stage of leasing an extra 2.6 ha.  The total investment for both stages will cost 962.5 million Birr (or close to GBP 30 million), thereof 221.3 million Birr (around GBP 6.88 million) will be spend on building and civil work carried out by Ayka’s own construction subsidiary. The investment on machinery and equipment is earmarked at 632.2 million Birr (around GBP 19.37 million). The remainder will be used as working capital.

Ayka is a ready-made garment manufacturer and exporter, founded in 1988. The company decided this vertical expansion in Ethiopia and made an initial investment of USD 140 million in 2010 then the Ayka Addis Group was formed. The company currently employs 7500 permanent and 100 temporary workers in five plants in Alem Gena, Ethiopia, operating at 80 to 90 % of capacity, spinning 40 t of cotton, knit 38 t of thread, dye 50 t of fabric and produce 80000 pieces of garments. The company’s main export destination is Germany.

According to ETGMA  ten new additional factories with a combined production capacity of 100 t a day are expected to start production in this fiscal year (2013-14), and an additional three new projects will be realised in the next fiscal year.

In August of 2013, around 50 Turkish texile and apparel companies announced their relocation to Ethiopia to establish an indusrrial zone around the capital Addis Ababa. This woudl crate revenues of USD 2 billion and provide jobs fo9r more than 60’000 people.

www.fashionunited.com

www.africafashionguide.com/tag/ethiopian-textile-and-garment-manufacturers-association/

www.tidi.gov.et/

www.maatextiles.com/

www.aykatextile.com  


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