Ethiopia has a potential for huge international market, particularly, there is an attractive market for Ethiopian garment and textile products, according to Tadesse Hailu (anonymous) who is a shareholder of textile factory in Sebeta. He witnessed their factory is producing over 30,000 yards of apparel in a day – Ethiopia Ethiopian garment textile products - Arhive

November 18, 2017

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Ethiopia has a potential for huge international market, particularly, there is an attractive market for Ethiopian garment and textile products, according to Tadesse Hailu (anonymous) who is a shareholder of textile factory in Sebeta. He witnessed their factory is producing over 30,000 yards of apparel in a day.

Ethiopia Ethiopian garment textile products He said the factory has generated over 15,000 jobs for individuals. His firm, which is one of the largest garment and textile industries in the outskirts of Addis Ababa, has eyed to maximize its production to 50,000 yards and generate more employment opportunities at the end of the 2^ndGrowth and Transformation Plan (GTP-2).

Many textile factories in Ethiopia are expending many million dollars to purchase cotton from foreign markets in a yearly basis. Hence, according to him, to enhance productivity, more cotton and thread has to be supplied at home. His factory wants to quit importing inputs from abroad and fulfill its need at home (by investing more in cotton farms and producing desirable volume of cotton at home. He believes investing more to produce inputs at home helps to obtain reliable supply and enhance productivity.

He reckons there was time the factory had slowed its production due to shortage of input. The recess had incurred additional cost estimated at many millions of birr to cover salary of employees and other running costs. Now, he said, the factory does not want the same shortage of input to hinder production (and they are making preparations a head of time).

Ethiopian had concluded an agreement with Wuxi No. I (subsidiary of Wuxi Guolian Development Group), a Chinese company head quartered in Jiangsu, on November 8, 2017, to construct a textile factory in DireDawa town. The company is expected to establish a factory and produce textile materials.

The agreement is expected to create additional capacity to the country and strengthen its effort to become hub of African textile manufacturing. Similarly, in a bid to enhance its investment, nation has attracted over 49 investors that register an aggregate capital of over half a billion dollar in the last four months.

Ethiopia’s textile and apparel industry has experienced major development over the past years. However, the sector is not creating as much jobs as possible in recent years, when compared with employment opportunities at the beginning.) Despite the sluggish performance encountered lately, the sector has been promising mainly driven by availability of raw materials in the country, affordable labor, low cost of energy and many bilateral trade agreements with the world’s key markets.

The surge witnessed in Ethiopia’s textile and apparel production and export in the global market shows that nation has huge potential to become one of the leading textile and apparel producers in Africa. After over 80 years of slow-moving experience, Ethiopia’s textile and apparel industry has been transformed from one of the country’s least developed sectors to today’s fully integrated industry and high-value chain generator with a significant contribution to the nation’s GDP.

The government has also been taking actions to encourage investment in this sector and has been providing numerous incentives to support the industry. Nevertheless, according to export documents, Ethiopia’s textile industry generated below 150 USD from exports in the current fiscal year (hence, strenuous effort has to be exerted a head of time to fulfill the wish of the country to obtain over 30 billion USD within 10 years or so).

Before its minor regression at present, the textile and garment exports from Ethiopia had shown substantial increment over the last decade. Nation has set taken the sector as one of the predominant sectors to help realize GTP-II (2015-2020); aiming to boost exports to one billion USD by 2020 and to create up to 350,000 jobs in the sector.

Ethiopia had attracted foreign investments worth over USD 1.2 billion in the first six months of 2016-2017 fiscal year, dominated by Chinese companies. The huge investment opportunity is helping Ethiopia to turn up a flourishing corner of textile investment. Accordingly, 124 foreign investors had expressed interest in Ethiopia’s textile and clothing sector over the past three months, of whom 71 were from China and India.

Particularly, according to Ethiopian Investment Commission (EIC), most of the investment is being made by Chinese companies in the textile and apparel sector. China is building several textile factories in Ethiopia as its investors have preferred to decommission their operation elsewhere and relocate their textile production in Ethiopia.

Chinese textile companies are deliberately moving closer to raw material sources and cotton-producing countries such as Ethiopia. This is part of value chain enhancement strategy being adopted by most Chinese companies; they are also using Africa as a gateway to emerging markets on the continent and to the European market.

Foreign investors have come to understand that all exports of products made in Ethiopia to the U.S. are duty-and quota free under America’s African Growth and Opportunity Act (AGOA). The same benefits are also available for exports to the European Union under its everything but Arms trade access for least developed countries. Furthermore, Ethiopia offers extremely cheap electricity and it is the second largest electricity producer in sub-Saharan Africa, due to its numerous hydropower dams, such as the Blue Nile.

Such cost minimizing mechanisms are particularly attracting Chinese companies. The rising cost of land and labor in their home country has spurred many of its textile and clothing businesses to eye moving production to African countries such as Ethiopia; to exploit its untapped resources and economical labor; wages are also extremely low compared to what Chinese workers are paid.

However, a study conducted by Ethiopian and Japanese researchers has indicated that the productivity of textile and garment in the country has been declining. Accordingly, the textile sector that used to create 29 percent of job opportunities at the start has diminished to 11 percent, since 2016.

Similarly, information gathered from 137 textile and garment producers has indicated that the textile manufacturing sector (including other factories) is gripped by multiple challenges including crunch of electric supply, lack of ample raw materials, unavailability of amply trained human power, shortage of finance, lack of transport facilities and foreign currency.

Despite this very fact, experts are explaining that problems related to electric supply are not major challenges to producers engaged in textile sector of Ethiopia. For instance, KWH electric supply in Ethiopia costs 0.4 USD, compared to Sri Lanka’s 0. 16 USD, and cheap supply of electricity is making Ethiopia preferable destination of investment.

Ethiopia has targeted to export more than a billion dollars’ worth of textile products this year. The textile and apparel sectors (including leather products) have been designated as top priority manufacturing industries in the incumbent five-year development plan. One reason for this is because textile factories have strong linkages with agriculture and agro-processing sector (as they use livestock and cotton as their inputs). Textile factories are also labor intensive and they could absorb bountiful labor from the agricultural sector, have major export potential and low entry barriers.

Currently, nation’s textile and apparel industry has witnessed a growing demand worldwide. Hence, the government has been moving heaven and earth to help domestic textile produce take root in the world market (and make the country niche of continental textile and garment investment, production) through the life-span of GTP-II.

The plan has been reportedly seeing double digit economic growth. And, based on tangible evidences, nation has been assertively forecasting the growth to continue at an 11 percent rate annually, the textile industry sustaining its pioneering role in the future. To this end, the government has attached prime significance to the contribution of the textile and apparel production; prioritized sub-sectors identified by the government in transforming the country’s traditional agriculture-based economy to an industrialized one.

To reliably penetrate in to the much-needed world market, nation has been calling for high-end FDI investors. And the government has invited foreign investors to come with much-needed investment capital and technological capabilities. Accordingly, nation has forwarded bunch of incentives to attract high-tech foreign firms as well as domestic ones that can meet international standards (the incentives include tax -free imports of industrial goods, favorable bank loans, income tax breaks, and provisions of production facilities in the nation’s industrial parks located around the country (incentives include preferential trade deals and land policies, which can give investors profit tax holidays for up to nine years).

Taking the huge opportunities in to account, Ethiopia has set a vision to raise the share of textile industry in the overall economy and eventually changing the style of economy to industry-led, from the current agriculture-led.

Unflagging efforts will continue to burgeon the contribution of manufacturing (including textile and garment) to the overall economic development. Nation has opened its arms to investors interested to engage in manufacturing and investors are expected to exploit the huge investment opportunities made available in Ethiopia.

Currently, Tadesse is working his shareholders to further expand the capacity of his factory. In addition, he is cooperatively striving in the team organized to alleviate the problems of investors in Ethiopia. He said he is hopeful that things will be better with time and stressed on need to exert tireless effort to see light at the end of the tunnel.