There has been plenty of talk in the international apparel community about the growth of Ethiopia as the “new kid on the block” in the apparel and textile industries.
The government has commissioned the construction of 15 industrial parks across the country, many of which focus on the textile and apparel industries.
Textile and garments are the top products currently manufactured at Ethiopia’s industrial parks, with 81 out of the 141 active firms (57% as of June 2018). Another 6 percent is focused on leather products (mostly shoes, bags, and gloves).
Factories in the industrial parks supply to big brands and retailers, including Adidas, Marks & Spencer, H&M, Primark, JC Penny, Phillips-Van Heusen, Tesco, Inditex, Tchibo, Kik, VF Corporation, Schöffel, Walmart, Ober Mayer, George (Asda), Levi Strauss and Hugo Boss.
Hawassa Industrial Park
The Hawassa Industrial Park, which the Ethiopian government considers as its flagship in its ambition to transform the country as to become the manufacturing hub of the African continent by the year 2025. It was built by China Civil Engineering Construction Corporation (CCECC) and completed in 2016.
The park currently has 25,000 employees with the potential to employ over 60,000 workers on double shifts. It is expected to generate US$1 billion in exports.
It aims to create jobs and reduce unemployment, especially among youth. With a growing population of over 105 million people, and two million young workers entering the job market every year, the country needs to create more jobs.
Fitsum Ketema, General Manager of Hawassa Industrial Park – “The Hawassa industrial park has become a model for other industrial parks under construction in Ethiopia and elsewhere in Africa, mainly because of its Zero-Liquid Discharge (ZLD) technology, the largest in Africa,”
Dire Dawa industrial park
The Dire Dawa is under construction by CCECC, is currently inviting international investors.
The park focuses on multiple sectors, including heavy industries, textile and apparel, vehicle assembly, food processing, electronics, paper, and allied products according to the Ethiopian Investment Commission (EIC) and the Chinese contractor.
Mekelle Industrial Park
Another Chinese construction company, China Communications Construction Company (CCCC), is building Mekelle.
By developing special economic zones in different parts of the country, the government is working to sustain double-digit economic growth and realize economic and structural transformation. The Mekkelle industrial park is part of this plan. The park, which rests on 100-hectare land, is expected to create jobs for 20,000 individuals.
Most of these parks are various combinations of private-public partnerships (PPP). For research purposes: parks include Kombolcha, Bole Lemi, Adama, Kilinto, Debre-Birhan, Bahir-Dar and privately owned parks Eastern, Georg Shoe, Huajian Group, Vogue, and DBL.
For all industrial parks, the current exports are $150 million with aspirations to climb as high as $30 billion.
Ethiopia’s main competitive advantage is the low labour cost. Creating jobs will reduce poverty, and the apparel and textile sector is labour intensive.
Ethiopia labourers are some of the lowest paid in the world and the country does not have a private sector minimum wage. Basic salaries are USD $26 per month, compared to $207 in Kenya, and $244 in South Africa.
A low wage economy does mean more jobs but never enough to significantly change the living standards of the workers, nor end poverty.
The government promotes ‘industrial harmony’, but the union’s worry that harmony can be attained only through inclusive social dialogue.
To achieve this, the IFTLGWU (Industrial Federation of Textile Leather and Garment Workers Union) is working with the CETU (Confederation of Ethiopian Trade Unions), the International Labour Organization (ILO), Mondiaal FNV, the Friedrich Ebert Stiftung, IndustriALL and other partners to ensure union power through collective bargaining to achieve improved wages, working conditions, and social dialogue.
In today’s world, a garment-sourcing destination can no longer compete simply by telling brands and retailers that it has extremely cheap labour. There has to be more depth in what is being offered, whether it is product integrity, sustainability, environmental credentials, great logistics, or brilliant infrastructure.
Ethiopia’s garment and textile sector have benefitted from preferential trade under the United States African Growth and Opportunity Act (AGOA), as well as the Everything But Arms and duty-free quota-free arrangements. In addition, there are bilateral agreements with China and India to promote the sector.
To support industrialization, the government is developing infrastructure. Roads are being built, airports and railways revamped and extended, and low-cost energy produced. The economic policies also aim to improve social services, including housing, health and education.
Another major factor concern is raw materials, almost all of which, at the current time, need to be imported. The government made available three million acres for cotton cultivation, but only 148,000 acres are being used for this purpose because local farmers get a higher cash yield from sugar, sesame, and other crops. As a consequence, local manufacturers still have to import nearly everything they need to produce finished apparel.
Getting shipments in and out of Ethiopia is not a straightforward task. Exporters have problems trying to consolidate smaller orders into one shipping container, resulting in increased transport costs.
Ethiopia is making unprecedented attempts to improve the life of its citizens in these endeavours. The country does face challenges, mostly political which it must overcome to reach its aspirations.