Country: Ethiopia

In its bid to invite investments from the Indian garment and textile sector, a contingent of top officials from the Ethiopian textile industry met Southern India Mills’ members at Coimbatore and Dindigul recently.

Sileshi Lemma Bekele, DG, Ethiopian Textile Industry Development Institute and Bogale Feleke Temesgen State Minister for Industry were also a part of the contingent.

During the meeting, Temesgen urged Indian investors to cultivate more cotton in Ethiopia since there is more potential to enhance cotton production in Ethiopia. He also added that excellent infrastructure, cheap power, easy availability of land and duty-free market access to the US and the European countries could be big pluses for the Indian investors.

The delegation also stressed on the importance of industrial parks as they have been instrumental in the development of Ethiopian textile industry. Of the 13 industrial parks, 4 are already operational with buildings that have excellent power supply and easy access to roads. Some Indian companies like Arvind Limited have already invested in the region.

Besides planning to increase the generation of power from 4,370 MW to 17,000 MW in the following 3 years, the country is today offering land on lease for 60-80 years. These are the main reasons that are luring nations like China, Japan, Germany and UK to Ethiopia.

It is worth noting that the garment and textile sector in Ethiopia, of late, has seen significant surge in development that is well supplemented by cheap labour and inspired labour force. The day might not be far when Ethiopia could give Vietnam a run for its money with regard to attracting foreign direct investment in the textile sector.

“Ethiopia’s current focus is on industrialization and building competitive manufacturing industry and China is our top priority as a source of high-quality manufacturing in key labour-intensive sectors,” remarked the Ethiopian Premier Hailemariam Desalegn during the Ethio-Fujian investment cooperation forum, held on 18 May in Fujian Province.

In addition to setting up a centre of the 21st Maritime Silk Road, which is a strategic initiative on part of China to increase investment and foster cooperation across the historic Silk Road, Fujian province has the 10th largest economy in China with US $ 429.3 billion GDP in 2016 and stands 8th in terms of flow of FDI. By the end of last March, 8 Fujian-based enterprises invested in Ethiopia in different sectors with a combined capital of US $ 9 million.

“Ethiopia will continue to be the favourite country for Chinese investors because of low labour cost, cheap energy and land as well as availability of trainable working force,” averred PM. He also added that Government’s attention has also been attracted by the development and management of industrial parks and so he urged the provincial Government and Fujian-based companies to set up a special economic zone in the country.

The Premier’s visit to the provinces to convince companies to invest in the country has been successful, stated Government Communication Affairs Office State Minister Zadeg Abreha. He further added that the firms that have not started their investment are also ready either to change their plans into reality or conduct feasibility study that would enable them to engage in the country. One of the enterprises that has decided to expand investment in Ethiopia is Fashion Flying Group, a Fujian-based company. The investment expansion is being planned in different phases with a total of US $ 20 million, said Chen Geng, President of the company. The enterprise is aspiring to build a full production chain in Ethiopia by moving its fibre and fabric factories, design, printing and embroidery companies as well as sewing machines.

Planning a whole new trade strategy, Ethiopia has set a target to generate US $ 30 billion from export of textile and clothing by the year 2025 as the Government says the industry is one of the country’s key targets for growth. In 2016, the African country could only produce textile and clothing shipments to US worth US $ 33.14 million and nearly US $ 82 million to the rest of the world.

Dr. Arekbe Oqubay, Special Advisor to Prime Minister Hailemariam Desallegn, explained, “The plan will transform Ethiopia to a compelling new sourcing hub for brands, retailers and their suppliers.”

Also Read – Ethiopian delegation visits GPN to learn cotton growing methods

He exclaimed that by 2025 the Government wants to make Ethiopia the leading apparel and textile manufacturing hub in Africa capable of exporting up to US $ 30 billion and that’s the single and bold vision they have. “It is a challenge, but we are confident that we can achieve this target. We believe if Vietnam can do it, if Bangladesh can do it, Ethiopia can do it even better,” explained Arekbe.

It may be noted here that until 2010 the prime focus of Ethiopia was on agriculture but now the country is giving more attention to manufacturing keeping apparel and textiles on top priority because it’s one of the largest employing industries that can help country capture the significant international apparel market.

Adding to the development plan, Ranjan Mahtain, Chairman and CEO of Hong Kong-based Epic Group, commented, “The one thing that is unique in Ethiopia is that there has never been such an organized roadmap dedicated to textile and clothing…, not in any country in the world.”

Also, in addition to the current 50,000 employees in the textile sector, the Government is hoping to create a further 350,000 jobs over the next four years and the number may increase after 4 years.

Ethiopia is rapidly emerging as an apparel and textile manufacturing hub. Low employee wages and cheap power are attracting several international companies to move towards the African nation. The Ethiopian Government too recognizes the strategic importance of garment and textile making, and is not shying away from investing in the sector by constructing large industrial parks like the Hawassa Industrial Park. Also many apparel companies have already set up factories in the country. In fact there are efforts to make it one of the most hospitable places to work for apparel companies.   

However, according to the report released by the risk consultancy firm Verisk Maplecroft, land and human rights problems could thwart the country’s ambition of being an apparel hub. Since 2015, there have been protests over land reform that have led to the death of hundreds of people and detention of several thousands. “The sector remains exposed to a host of political, social and environmental risks. Many of these issues are unlikely to be resolved in next five to ten years,” says Emma Gordon, Senior African Analyst with Verisk.

Also Read – Ethiopia to get two new industrial parks for T&C industry

Also, the country has been under national emergency since last October, following widespread anti-Government demonstrations wherein the Government is being accused of suppressing the political and economic rights. Child labour, water pollution, the exposure of workers to harmful chemicals, and the possibility of resumption of protests could be additional threats.

It is to be noted that fashion retail giants such as H&M, Primark, and Tesco have sourced or set up textile factories in Ethiopia so as to diversify from Asian markets like China and Bangladesh.

Welspun Group, India’s leading textile conglomerate, has shown its interest in investing and joining Ethiopia’s textile industry.

B. K. Goenka, Chairman of the company, recently had discussions with Hailemariam Dessalegn, Prime Minister of Ethiopia on the side-lines of Davos World Economic Forum, which strives in all its efforts to demonstrate entrepreneurship in the global public interest. Speaking at the event, the Chief explained that he realized the favourable investment environment for the textile industry in Ethiopia. He also mentioned that the attention given for the construction of industry parks by the country has made him consider investing in Ethiopia.

Also Read – Ethiopia to get two new industrial parks for T&C industry

It may be noted that Ethiopian Government has signalled the construction the Bole Lemi II Industrial Park and an industrial zone in the Oromia Regional State in Jimma town, for the textile and garment industry. The total cost of the project is worth 5 billion birr.

He further informed of his plans to acquire a shade in one of the industrial parks and commence textile production.

Ethiopia has now become a hotbed for garment manufacturing with upcoming industrial parks. Some of the big giants from India such as Raymond Group, Arvind Limited, Kanoria Africa Textiles, etc. have already invested in the country to reap benefits of competitive labour cost and abundance availability of cotton and hydro-energy.

The Ethiopian Industrial Parks Development Corporation (IPDC) has awarded the construction of two industrial parks in Addis Ababa and Jimma to two Chinese construction firms. The total cost of the project is worth 5 billion birr. The contracts for the three projects were signed by Sisay Gemechu, CEO, IPDC and respective managers of the Chinese construction firms.

IPDC will construct the Bole Lemi II Industrial Park for textile and garment industry, which is the extension of Bole Lemi I at a cost of 3.5 billion birr in southern part of Addis Ababa. The corporation has selected CGCOC to undertake the construction which will take 12 months.

The second industrial zone will be in the Oromia Regional State in Jimma town at cost of 1.5 billion birr and will house textile and garment industries. CCCC, the Chinese construction firm, will construct the industry zone within nine months.

Also Read – Ethiopia’s largest industrial park now open

Sisay informed, “Bole Lemi and Kilinto industrial zones will be built with US $ 158 million loan secured from the World Bank. These two projects are under one category and we followed the World Bank procurement procedures,” adding, “The Government gave number one priority to the textile and garment industry. It is a light industry which is labour-intensive. And it uses locally produced raw materials.”

An Italian textile machinery delegation will be attending the forthcoming multi-industry Addis Chamber International Trade Fair (ACITF), to be held in Addis Ababa from 23 February to 1 March 2017. This delegation includes ACIMIT (Association of Italian Textile Machinery Manufacturer) associated members: Carù, Corino, Fadis, Ferraro, Itema, Marzoli, Mei, Reggiani, Roj, Salvadè, Savio, Sicam and Simet.

It may be noted that Ethiopia is an emerging country as far as textile and garments sectors are concerned. Factors like low labour cost, flexible trade agreements and gradually increasing GDP are attracting T&C manufacturing countries/companies to expand their base there. Also, the growing demand of textile machinery in Ethiopian market drives Ethiopian Government to attract foreign capital. Hence Italy, being a prominent player in textile machinery production, is probing at ACITF ’17 to strengthen its export of textile machinery to Ethiopia.

Also Read – Ethiopian Government plans to boost textile and garment exports

ACIMIT President Raffaella Carabelli is extremely confident about the Ethiopian market. “Our exports have grown significantly over the past five years, although their overall value remains quite modest (Euro 4.4 million in 2015),” she said, adding, “Over the first nine months of 2016, Italy ranked third, right behind China and Turkey, in terms of sales of textile machinery to the Ethiopian market. Our focus is on getting potential buyers to get to know and appreciate the quality of our technology, through opportunities such as the ACITF, as well as through the institutional missions organized in recent years,” Carabelli mentioned.