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Ethiopia: the rising hub of textile manufacturing
Bereket Gebru
The manufacturing sector in Ethiopia has expanded very noticeably during the past fifteen years. The World Bank reported a growth rate of 12.3% in the sector as far back as the year 2009. Aggressive efforts to draw investment from both outside and inside have these days pushed investment activities in the sector to an unchartered territory in the history of the country. Recent international studies have further put Ethiopia among the countries poised to become heavy weights of international manufacturing.
Especially the textile sector has been recognized as one of the rising destinations for international investment across the world. Textile products do not yet make the top list of Ethiopian export items. The 2002 data from the Central Statistical Authority shows that the country earned 28.8 million birr from the export of textile, clothing and apparel in 2000/01. The country has come a long way from that as it made 89.3 million USD in the 2016/17 fiscal year. This figure, however, still runs short of the one billion USD export earnings planned at the end of the Growth and Transformation Plan (GTP).
Ethiopia has enjoyed increased attention from various textile and garment factories located all around the world. A recent report by Reuters states that some have already arrived, most of them sourcing some production locally, like Gap and H&M, but a few building factories themselves. Those to set up factories this year include U.S. fashion giant PVH, whose brands include Calvin Klein and Tommy Hilfiger; Dubai-based Velocity Apparelz Companies, which supplies Levi‘s, Zara and Under Armour; and China‘s Jiangsu Sunshine Group, whose customers include Giorgio Armani and Hugo Boss.
French retailer Decathlon and over 150 companies from China and India will begin sourcing production from Ethiopia soon, said the investment commission.
Some of the major investments carried out earlier include the commissioning of Ayka Addis in April 2010. Built by Turkish investors, Ayka Addis is the biggest textile factory in Ethiopia. The factory has a daily spinning capacity of 20tn and knitting and dyeing capacity of 40tn. It is expected to make up to 100 million USD per year at its optimal operational capacity. Ayka was first established in Istanbul, Turkey, in 1998. It dismantled its plant in Turkey completely in order to move to Ethiopia. Part of the 140 million USD needed to build the factory was provided by the Development Bank of Ethiopia. The factory has provided employment opportunity for 10,000 people.
After three years of operation in Ethiopia, Ayka Addis is currently facilitating the relocation of another 50 Turkish textile and garment companies. Accordingly, Capital newspaper reported, Ayka Addis is expected to build an industrial zone of several five-story buildings that it plans to rent out to the relocating factories. The report further indicates that Ayka Addis is carrying out project preparation and feasibility study. The government, the report further states, is allocating land around Addis Ababa for the construction of the industry zone.
The project aims to export value-added textile products which are considered to be sources of strong export revenue. The relocation of these companies is projected to generate two billion USD in export revenue for the country per annum, surpassing the one billion USD goal set at the end of the last year of the GTP by an astounding 100%. In so doing, the whole package is expected to create more than 60,000 job opportunities.
Capital newspaper also reported that the Ethiopian Textile Industry Development Institute (ETIDI) also revealed that other textile companies are preparing to go into production, such as MNS Textile Company, which has built its factory in Legetafo, 15km northeast of Addis with one billion birr investment. S.V.P is another textile company engaged in building its factory in Ethiopia. The new Indian company has invested around one billion birr for the construction. Nas Foods, one of the leading biscuit manufacturers, is also involved in a new textile factory project located at Yirgalem, with an investment of 890 million birrs. ETIDI said that several South Korean textile companies will also be starting operations at Bole Lemi industry zone, which is under construction at a cost of 900 million birrs by the Ministry of Industry. The construction of this specific project will be concluded this year and the industrial zone will go operational. In June 2012, the Ministry of Industry and Oromia Regional State signed an agreement with Turkish Investors for the development of 640 hectares of land at Legetafo. The contract established that the investment in the land would include pharmaceutical, garment, leather processing and paper and packaging factories, amongst others. The zone is set to include social service institutions such as health care, schools, technical and vocational training and hotels. It will be amongst the series of new industrial parks to be developed around the country.
Clothing retailer H&M (Hennes & Mauritz) is also another one of the foreign companies with textile related activities in Ethiopia. The retail company has established an office in Addis Ababa over a year ago now. It, at first placed test orders with Ethiopian suppliers and large-scale production has begun. H&M is trying to form a cluster of suppliers that could, in aggregate, satisfy its one million pieces per month demand. This move is new for H&M as it does not source any of its range from Africa. The fact that Ethiopia stands as its first source from Africa is indicative of the increasing suitability of the country to invest in the sector.
Three other leading Swedish textile retail companies have also paid a visit to Ethiopian textile factories. Tesco and the British arm of Wal-Mart called George are also buying clothing from Ethiopian manufacturing plants.
