Ethiopia is targeting US$30bn in textile exports by 2025, with apparel brands queuing up to test sourcing options from the rapidly developing African nation. But is the country looking for too much too soon?
Ethiopia is a country in a rush. This East African nation is developing at a rapid rate of knots – too quickly some would say – and seeking to woo inward investors with a range of tax breaks, subsidies and cheap loans. IMF estimates show that from 2000 to 2016, Ethiopia was the world’s third-fastest growing economy of 10 million or more people. The outlook for the next five years is also bright, with the IMF projecting that Ethiopian GDP per capita will expand at an annual pace of 6.2 per cent through 2022.
These are remarkable figures, not least because they are being achieved against a backdrop of political unrest and, at times, violence. Though the current government has overseen a growing economy, it has also had to stamp down on dissent. There are ongoing claims the government favours certain ethnic groups and regions of the country and that inward investors have, at times, been allowed to develop projects at the expense of indigenous people, with claims of land-grabs. Human Rights Watch has been on Ethiopia’s case for several years regarding these issues, which we believe will continue to rear their head and could damage brand reputation for businesses sourcing from Ethiopia.
In terms of where it is now, Ethiopia’s textile exports currently total around US$140m, a figure which is dwarfed by Vietnam’s US$27 billion, Bangladesh’s US$28 billion and China’s US$273 billion. Even if Ethiopia expands its textile exports at a similar rate to that of China in the 90s and 00s, it will be nowhere remotely near US$30bn in exports by 2025. Hence that figure has to be taken with a large pinch of salt, though as a statement of intent it was hard to ignore. It also provided a huge rallying call to would-be inward investors, not that they need wooing, given the low raw material, energy and labour costs in Ethiopia.
Indeed, the minimum wage for Ethiopian textile workers ranges between US$35 to US$40 per month, much lower than Bangladesh’s entry-level wage of US$68 per month and China’s US$500 per month in the textile sector. The country also produces high-quality cotton which is cultivated over more than 50 000 hectares of land, predominantly in the Awash Valley and 45,000 hectares on small-scale farms. Cotton output in Ethiopia is expanding, and the country also recently licensed its first organic cotton farmers.
Foreign investment is flooding into the textile sector, much if from China but also Bangladesh and India.
A key moment has been the development of Hawassa Industrial Park (pictured), a pilot, eco-friendly, green industrial park opened in 2016 and which it is hoped will provide a blueprint future industrial parks across the country.
PVH is the lead apparel business on the park. Mark Green, PVH’s executive vice president of global supply, has said he believes HIP could potentially provide a springboard for the textiles and apparel industry in Ethiopia. He said: “You have in Hawassa some of the best manufacturers in the world. The world is watching with huge interest and anticipation …. We believe that it is a model that could be taken to work not in just parts of Ethiopia but throughout Africa. In time, we are sure Ethiopia will become the major apparel hub for Africa and an exporter of talent as well.”
As well as PVH, owner of the Calvin Klein and Tommy Hilfiger brands, H&M and Gap have also been sourcing locally for some time from Ethiopia.
Other organisations to have set up their own operations include Dubai-based Velocity Apparelz Companies, a supplier go Levi‘s, Zara and Under Armour, and China‘s Jiangsu Sunshine Group, whose customers include Giorgio Armani and Hugo Boss. French retailer Decathlon and more than 150 companies from China and India will also begin sourcing production from Ethiopia in the coming montgs according to the Ethiopian Investment Commission.
Most recently, British company Intrade UK Ltd has concluded an agreement to build a US$100m textile and garment factory at Mekele Industrial Park. The agreement is part of a US$200 million Memorandum of Understanding (MoU) to invest in textile and garment, pharmaceuticals, and agricultural products processing sectors.
But why Ethiopia now and why not in previous years? There are various factors at play here. A major stumbling block for Ethiopia has previously been one of basic logistics; it still is to some extent. However, that picture has improved lately, thanks largely to better links between Ethiopia and the Port of Djibouti. The port is strategically located at the crossroads of one of the busiest shipping routes in the world, linking Europe, the Far East, the Horn of Africa and the Persian Gulf. It is the main maritime outlet for imports to and exports from neighbouring Ethiopia.
Ethiopia’s road link with the port in Djibouti has become run down and congested, slowing supply chains and reducing the benefits Ethiopia might have of being closer to European markets than Asian competitors. It takes around 44 days from the time a clothing consignment leaves the factory to when it reaches buyers in Europe, compared to an average 28 days in Bangladesh and 21 days in China, according to a report from the Ethiopian Textile Development Institute – upping costs to US$1,870 to export a 40-foot container from Ethiopia compared with US$1,290 in Bangladesh and US$679 in Vietnam.
However Ethiopia is set to open a US$4 billion electric railway between Addis Ababa and the Red Sea which will reduce the transit time to the Port of Djibouti from 2-3 days to eight hours. In logistical terms, this is a major step for Ethiopia’s textile industry and has been a key factor in convincing apparel industry executives that Ethiopia really means business.
There are, of course, other factors at play. Much of the investment in Ethiopia – upwards of 150 textile projects in the past two years – has come from China. China’s textile industry is consolidating and investors there recognise that Ethiopia will be well placed to take up some of the slack moving forwards.
While Ethiopia’s economic development is to be welcomed, as does the textile industry’s role in that, we believe – hope – investors and apparel brands will not rush in at all costs, and will carry out appropriate due diligence checks, particularly with regards to worker rights and also on issues of pollution. China’s textile industry grew way too fast, its anti-pollution enforcement agencies couldn’t keep up and, as a result, many of the country’s waterways are now hideously polluted due to years of having untreated textile effluent dumped in them. China, for all its economic success, is not a model Ethiopia should be aspiring to.
Some of the early signs are good. In 2006, Swedish development financier Swedfund and the industry group DBL established a textile factory in Mekelle, Ethiopia which provides job opportunities for 4,000 people. H&M is a long time buyer and supports the project with expert knowledge in sustainable textile production.
Decent working conditions, job creation for women and environmental considerations are some of the most important goals with the project, according to Swedfund. Factors such as these were certainly not the case when China was embarking on its rapid textile industry growth in the early 1990s.
Another major positive is the presence of a significant number of NGOs and other agencies in Ethiopia. The increasingly influential Industriall Global Union, already a major force for good in Bangladesh and Vietnam’s textile industry, is playing a role.
IndustriaLL’s affiliate, the Industrial Federation of Ethiopian Textile, Leather and Garment Workers Trade Unions (IFETLGWU), recently announced it had increased its membership in Ethiopia by 13,922 workers. The recruitment drive was supported by the Confederation of Ethiopian Trade Unions, FNV Mondiall, ILO, IndustriALL, and Solidaridad.
The new members came from 27 companies in the Bole Lemi industrial park in the capital, Addis Ababa, Dukem, and Kombolcha in the North East. The focus at these parks is on apparel, textile and leather production and most of the new members work in these industries.
Meanwhile, late last year, a meeting of a new IndustriALL union building project was held in Addis Ababa with participation from FNV Mondiaal, Solidaridad, and the ILO, where it was agreed to continue supporting the case for workers’ rights in the garment and textile sector. Collective bargaining agreements and promoting health and safety at factories were the other key areas discussed.
While unions have been welcoming of new industrial parks and investments generally in the Ethiopian garment and textile sector, some have expressed concerns that wages are too low and not enough to meet basic needs. The Ethiopian Investment commission proclaims that the country has among the lowest minimum wages in Africa. While this may be a boon to investors, it would be hoped that workers themselves will get to share some of the spoils as Ethiopia hits the economic good times, in terms of some semblance of a living wage.
Unions themselves have also said they want workers’ rights to be protected and for factories to be safe as the industry grows.
Said Mesfin Adenew, IFETLGWU president, says: “The federation is working hard to ensure the country’s constitution, and ILO Conventions 87 and 98 on the right to organise and collective bargaining are respected. We want workers’ rights and benefits to be protected. Otherwise there won’t be industrial peace.”
Fabian Nkomo, IndustriALL regional secretary for Sub Saharan Africa, adds: “We welcome the Ethiopian government policies promoting industrialisation, but it should not be at the workers’ expense. Industrialisation should bring better wages to workers and take their lives out of poverty; this cannot happen when wages are as low as US$40 per month. We are calling for better wages in the garment and textile sector.”
Other actors are also now present in Ethiopia. In a hugely encouraging sign, earlier this year, GIZ (the German Association for International Cooperation) announced the creation of a programme for sustainable textiles in Ethiopia (eTex) and has now started a closer mentorship initiative for the Ethiopian Textile and Garment Manufacturers Association and the Ethiopian Textile Industry Development Institute with their counterparts in Germany.
“If (Ethiopia) wants to gain a foothold in the global marketplace for apparel, its textile and garment industry needs to meet international environment and social standards,” the agency said in a statement.
Let’s hope that it does, and that as it embarks on its growth path Ethiopia learns from the mistakes of some its its predecessors in the textile industry – China and Bangladesh most notably – and chooses the path of sustainable growth rather than growth at all costs.
