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ETHOPIA CAN SET UP FURTHER TEXTILE FACTORIES Photo: Pixabay
15.05.2018

ETHOPIA CAN SET UP FURTHER TEXTILE FACTORIES

  • Sudanese and Chinese investors want to secure raw material supplies

Nairobi (GTAI) - Ethiopia has further successes in attracting textile companies: One British company is planning to invest USD 100 million, one Chinese company even plans to invest USD 220 million. This means that the textile sector is increasingly becoming a self-starter, as donors increasingly want to supply domestic industry with pre-products. Meanwhile, those who invest should not only raise the financial means, but also the raw material cotton, according to market experts.

  • Sudanese and Chinese investors want to secure raw material supplies

Nairobi (GTAI) - Ethiopia has further successes in attracting textile companies: One British company is planning to invest USD 100 million, one Chinese company even plans to invest USD 220 million. This means that the textile sector is increasingly becoming a self-starter, as donors increasingly want to supply domestic industry with pre-products. Meanwhile, those who invest should not only raise the financial means, but also the raw material cotton, according to market experts.

The Ethiopian textile and clothing market has two new entrants: the British Intrade Co. UK Ltd. and the Chinese Wuxi No. 1 Cotton Investment Co. Ltd, Intrade intends to build a textile and clothing factory in the Mekelle Industrial Park (Tigray Regional State), which was opened in July 2017. Initial cost estimates are around USD 100 million. Intrade is an offshore company of the Sudanese Mahgoub-Sons Group. The company has reached an agreement with the Ethiopian Investment Commission to invest USD 200 million in three projects. The textile project is to be completed in 16 months.

Security of supply for cotton is becoming an issue
The Sudanese group is not only interested in textile production, but also with lucrative supply transactions for its own cotton. They have the capacity to supply 500,000 tons of long staple quality cotton annually, Wagdi Mirghani Mahgoub, Managing Director of Intrade says. The supply of raw cotton has become an increasing problem for the emerging Ethiopian textile industry since some Asian countries ordered export stops for the raw material, including the PR China and India. The African Plantation, which cultivates 33,000 hectares of agricultural land in Sudan, also belongs to the Mahgoub-Sons Group.

However, Wuxi No. 1 Cotton Investment has announced the second and larger textile investment of 2018: a textile factory will be opened shortly in the Dire Dawa Industrial Park. In a first phase, USD 80 million are planned, followed by further investments totaling USD 140 million. The company intends to install state-of-the-art textile machines to produce and supply goods for the demanding markets in Europe, Japan, South Korea and Southeast Asia. According to their own statements, partners are leading world machinery brands. Wuxi is already pursuing a project in the Ethiopian city of Adama and also has plans to grow cotton in Ethiopia.

Ethiopia is considered the first textile address in Africa
"Clothing companies are nomads," an industry consultant knows, "they go where it is cheapest for them. If wages and ancillary costs rise too much in countries like Bangladesh or the PR China, the caravan moves on." South of the Sahara, only Mauritius has made a name for itself as a producer of high-quality clothing. Attempts to establish larger-scale textile and clothing companies in Namibia and Lesotho have so far been unsuccessful. Meanwhile, Kenya and Ghana have production conditions that are far too expensive.

Ethiopia offers several advantages at the same time: Wages and ancillary costs are extremely low and far below those in China. The US Centre for Global Development found out that a worker in Ethiopian sweatshops earns an average of USD 909 a year. In Bangladesh, however, it is US$ 835 and in Tanzania and Kenya even US$ 1,776 and US$ 2,118 respectively. Another advantage: Ethiopian seamstresses are considered to be extremely hardworking and reliable. In addition, there is a tradition in textile and clothing production as well as in leather processing and thus there is a basic pool of trained specialists.

Infrastructure is making huge progress
Meanwhile, the supply of domestic cotton and leather needs to be expanded, because in the drought years 2016 and partly 2017 the supply of cotton was insufficient. The government is cooperating and is increasingly listening to the needs of producers. The infrastructure is currently undergoing sustained improvement, in particular the transport routes to the neighboring seaport of Djibouti, from where Europe can be reached more quickly than from the Far East. And, last but not least, the Ethiopian capital Addis Ababa has a capable air traffic hub with a dozen direct flights to the EU, including Frankfurt and Vienna. In addition, there is a modern air freight center.

Just as important as the delivery routes are the comparatively modern production conditions in the newly emerging industrial centers throughout the country. Everything here is "Made in China": fences, access controls, roads, electricity and water supply, waste and sewage disposal, workers' settlements. From a European perspective, this may look like Chinese dominance, but from an Ethiopian perspective it creates jobs, feeds families and earns foreign exchange. Under better working conditions than in Bangladesh, experts mean.

According to the ideas of the Ethiopian government, the country is undergoing a transformation process: away from an agrarian-based economy and towards an industrial state. By 2025, the country is expected to reach middle-income status and to become Africa's largest industrial production hub. To achieve this, Ethiopia is investing heavily in roads, railways and power generation, health and education, urban and rural development and the creation of industrial clusters.

Customs advantages in the USA and Europe
Ethiopia has so far benefited from the African Growth and Opportunity Act (AGOA) of the USA, which, for example, allows savings of 16.8 percent in import duties on cotton trousers and 30 percent on synthetic shirts. Ethiopia also has duty-free access to the EU market under the Everything but Arms initiative. Fears that US President Donald Trump might stop AGOA have not yet come true.

Ethiopian exports of textiles, clothing and leather products
(including footwear; in US$ millions)

SITC-Commodity Group
 2014 2015 2016
61 Leather and leather goods    97.51    98.20
78.63  
65 Yarn, fabrics, finished textile products and related articles  39.34  39.12 29.61
84 Clothing and apparel accessories  55.53  77.94  68.25
85 Shoes         
 33.88
 37.69  43.80
Total 226,26 252,95  220,2

Source: Comtrade

German exports can be expanded
German sales representatives of technology for the textile, clothing and leather industry are not yet well positioned in Ethiopia. According to preliminary figures from the Federal Statistical Office (SITC 724), only EUR 2.84 million of relevant technology where sent to Ethiopia in 2017, though 169 percent more than in the previous year.

Ethiopian imports of machinery, equipment and parts for the textile and leather industries
(SITC 724; in USD millions)

Supplying Country 2014    2015 2016
Total 131.30 170.51 111.10
.. PR China  43.87  42.40 62.07
..Italy 6.38 11.75 11.72
..Japan 4.40 10.11 6.89
..Turkey   4.86 19.14 4.92
..Other Asian countries, not specified 1.85 1.87 4.11
..India  6.07 6.49 3.06
..Germany 9.22 9.08 2.44

Source: Comtrade

 

Source:

Martin Böll, Nairobi (GTAI)

12.12.2017

ETHIOPIA FOCUSES ON CLOTHING AND TEXTILE EXPORTS

  • Industrial parks should enable a quantum leap
  • Progress in infrastructure, Deficits in foreign exchange provision

The Ethiopian textile, clothing and leather industry scores not only with comparatively low wages and high-performing personnel, but also with modern industrial parks. In the meantime the technology has to be fully imported and the supply of materials needs to be greatly expanded. There is a great progress in logistics, but unfortunately not in foreign exchange procurement. German suppliers of relevant equipment should definitely consider Ethiopia in their acquisition.

  • Industrial parks should enable a quantum leap
  • Progress in infrastructure, Deficits in foreign exchange provision

The Ethiopian textile, clothing and leather industry scores not only with comparatively low wages and high-performing personnel, but also with modern industrial parks. In the meantime the technology has to be fully imported and the supply of materials needs to be greatly expanded. There is a great progress in logistics, but unfortunately not in foreign exchange procurement. German suppliers of relevant equipment should definitely consider Ethiopia in their acquisition.

So far, only Mauritius has made a name for itself as a producer of high-quality clothing south of the Sahara. Attempts to locate textile and clothing companies in Namibia and Lesotho in a larger style have not been very successful. Meanwhile Kenya and Ghana have far too expensive production conditions. "Clothing companies are nomadic,” says a consultant, who is specializing in the trade, "they go where it's cheapest for them."

Meanwhile, Ethiopia offers several advantages: Wages and additional costs are far below the Chinese ones. A worker in the Ethiopian factories earns an average of USD 909 a year, according to a survey by the US Center for Global Development, compared to USD 835 in Bangladesh, USD 1,776 in Tanzania, and USD 2,118 in Kenya. Another advantage is appreciated by employees: Ethiopia has a long tradition of textile and clothing production as well as in leather processing and thus at least an expandable base of skilled workers.

The supply of native cotton and leather meanwhile is considered strongly expandable. In times of drought, such as in 2016 and partly in 2017, the supply of cotton is insufficient. However, the government is cooperative and increasingly open to the needs of producers. Thus, the infrastructure has been currently sustainably improved, in particular the transport routes to the seaport Djibouti, from where Europe is much faster to reach than from the Far East. In addition, the Ethiopian capital Addis Ababa has a capable aviation hub with a dozen direct flights to the EU, including Frankfurt and Vienna. There is also a modern air freight center.

Modern industrial parks as a game changer

Just as important as the delivery routes are the "modern" production conditions in the emerging industrial centers all over the country, Made by China: pothole-free roads, guaranteed electricity and water supply, proper waste and wastewater disposal, workers' settlements in the vicinity. From the Ethiopian point of view, a great many jobs are created, families are fed and foreign exchange is earned.

According to its government, Ethiopia is in a transformation process away from an agrarian economy and towards an industrialized state. By 2025, the country should reach a "middle-income status" and become the largest industrial production hub in Africa. To achieve this, Ethiopia is investing heavily in roads, railways and power generation, in health and education, in urban and rural development, and in the creation of industrial clusters.

Ambitious export specifications

In July 2016 the Hawassa Industrial Park was officially opened, dedicated to the export of textiles and clothing, and is the largest industrial park in sub-Saharan Africa. As early as 2018, the park is expected to employ 60,000 workers and generate USD 1 billion in exports of clothing and textiles - a steep target given in a view of the current export figures. As early as 2030, Ethiopia wants to reach a total of USD 30 billion by exporting textiles and clothing - but it's still a long way off. At present, 15 in-ternational companies are already investing in Hawassa, including the US PVH Corporation (formerly Phillips-Van Heusen Corporation, prominent brands: Calvin Klein and Tommy Hilfinger) and Epic Group (Hong Kong), a supplier of, among others, Walmart , JC Penny, Levi Strauss, VF Corporation, Tesco, Sansbury's, Marks & Spencer and C & A. Epic wanted to go to Kenya first, but then decided for Ethiopia at the last minute, which, according to Epic boss Ranjan Mahtani, is "still unpolished," but has the most potential.

The challenges are considered to be high: "Our seam-stresses have never got a job before and have never seen a sewing machine," Mahtani says training therefore is a top priority. At the same time, however, his company also relies on state-of-the-art automatic machines, for example for attaching bags. The production halls are also all around computerized with RFID technology. The current efficiency Mahtani estimates at 25 to 30 percent. After experience with other production sites, results of 75 to 80 percent are possible after about ten years.

Wide range of new industrial parks under construction

In July 2017, another industrial park was opened in Kombolcha City. A whole range of other parks are in various stages of realization and all are focused on the apparel, textile, pharmaceutical and medical device manufacturing sectors. According to the Ethiopian Government, there is no shortage of interested investors from the PR of China, India, Turkey, the US, Hong Kong and South Korea. Ethiopia benefits from the African Growth and Opportunity Act of the United States, which, for example, reduces its import duties by 16.8 per cent on cotton pants and 30 per cent on synthetic shirts. In addition, Ethiopia has a duty-free access to the EU market under the Everything-but-Arms initiative.

Ethiopian exports of textiles, clothing and leather goods (including shoes), in USD mio
SITC- product group 2014 2015 2016
61 Leather and leather goods  97.51 98.20 78.63
65 Yarn, fabrics finished textiles and re-lated products 39.34 39.12 29.61
84 Clothing and clothing accessories 55.53 77.94 68.25
85 Shoes   33.88 37.69 43.80
Total      226.26 252.95 220.29

Source: Comtrade, as of 18 October 2017

Ethiopian imports of machinery and equipment for the textile and leather industry and parts thereof (SITC 724, in USD mio, change in%)
Supplying country 2014 2015 2016
Total      131.30

170.51

111.10
PR China 43.87 42.40 62.07
Italy 6.38 11.75 11.72
Japan 4.40 10.11 6.89
Turkey 4.86 19.14 4.92
other Asian countries, not specified 1.85 1.87 4.11
India 6.07 6.49 3.06
Germany 9.22 9.08 2.44

Note: The import figures mentioned above are based on Ethiopian data, which for various reasons are not considered particularly reliable. Equally not reliable are often the relevant export data of the partner countries, because all sea transports go via Djibouti and deliveries statistically are recorded often as exports to Djibouti.
Source: UN Comtrade, as of 18 October 2017

German exports expandable

German exporters of technology for the textile, clothing and leather industries are not yet well positioned in Ethiopia. According to the preliminary figures of the Federal Statistical Office (SITCM 724), in 2016 only EUR 1.06 mio of relevant technology went to Ethiopia, compared to EUR 1.05 mio in the previous year and EUR 5.02 mio in 2015.

More information:
Ethiopia Export Textilindustrie
Source:

Martin Böll, Nairobi (GTAI)

 Ethiopia is considered as investment tip in Sub-Saharan Africa © Pixabay
07.11.2017

ETHIOPIA IS CONSIDERED AS INVESTMENT TIP IN SUB-SAHARAN AFRICA

  • International companies have confidence in government work
  • Chinese set the tone

Nairobi (GTAI) - Foreign companies are flowing into Ethiopia and investing in the textile, clothing and leather sectors. Ethiopia is also interesting for companies that assembling simple technical devices. The country does not look good in various international indices, but that does not have to be a contradiction. For some sectors Ethiopia is highly interesting and hope for improvement is always to be hoped for.

Ethiopia is one of the poorest countries in the world and one of many typical developing countries, as there are many on the African continent. The big difference is: Ethiopia is controlled by a regime that is not satisfied with what it has achieved, but is more ambitious: to become a leading, if not the leading, industrialized nation in sub-Saharan Africa.

Model China

  • International companies have confidence in government work
  • Chinese set the tone

Nairobi (GTAI) - Foreign companies are flowing into Ethiopia and investing in the textile, clothing and leather sectors. Ethiopia is also interesting for companies that assembling simple technical devices. The country does not look good in various international indices, but that does not have to be a contradiction. For some sectors Ethiopia is highly interesting and hope for improvement is always to be hoped for.

Ethiopia is one of the poorest countries in the world and one of many typical developing countries, as there are many on the African continent. The big difference is: Ethiopia is controlled by a regime that is not satisfied with what it has achieved, but is more ambitious: to become a leading, if not the leading, industrialized nation in sub-Saharan Africa.

Model China

Despite its geographical location in Africa, large parts of the country's historical and cultural development are strongly influenced from the Middle East. The big role models are therefore not more successful states in Africa but are coming as the United Arab Emirates and China from the East. Thirty years ago, the economic march that Ethiopia is undergoing today, began there: cheap labor, interesting natural resources, enough free land and rivers for energy and irrigation.

The country is thus attractive for labor-intensive industries, especially the textile, clothing and leather industry. A worker in an Ethiopian sweatshop earns an average of USD 909 a year, based on a survey by the US Center for Global Development, compared to USD 835 in Bangladesh, USD 1,776 in Tanzania, and USD 2,118 in Kenya. Another advantage appreciated by employers: In the African context Ethiopian women are considered to be well-educated and less willing to strike.

Special zones of industrial oases

Another location advantage are the industrial zones, which are mostly built by Chinese companies: fencing, strict access controls, no-hole roads, guaranteed electricity and water supply, proper waste and garbage disposal, workers' housing in the area or nearby, shops, banks, medical care. From a European point of view, it may look like exploitation and "big brother", but from an Ethiopian point of view jobs are created, families are fed and foreign exchange is earned.

In July 2016, the Hawassa Industrial Park was officially opened, the largest in sub-Saharan Africa. From here, textiles and clothing are to be exported. By 2018, the park will employ 60,000 workers and generate USD 1 billion in exports. As early as 2030, Ethiopia wants to earn USD 30 billion in this segment. Even if one should not take the last number too seriously, the ambitions are clear and unambiguous.

Another industrial park was inaugurated in July 2017 in the city of Kombolcha. Meanwhile, a whole range of other parks are in various stages of realization, focusing on apparel, textiles, pharmaceuticals and medical equipment, as well as the agro-industry. According to the Ethiopian Government, there is no shortage of interested investors, primarily from China, India, Turkey, the US, Hong Kong and South Korea.

Cheap electricity soon abound

While some of the industrial parks still have to rely on standby generators and the connection to roads and railways leaves much to be desired, long-term remedies are in sight: several large hydropower plants are under construction nationwide, especially the Grand Ethiopian-Renaissance Dam project, which will start up the first generators in the current financial year (July 8th 2017 to July 7th 2018). Upon final completion, the capacity should reach 6,450 megawatts. It would then be Africa's largest power plant - and one of the cheapest electricity suppliers.

There are notable successes in road construction also: since August 2016, Ethiopia has got a first fully commissioned 85-kilometer three-lane highway from the capital Addis Ababa to Adama. Further sections are under construction. And also with the railway there is something to celebrate with a new, 756 kilometers long and continuously electrified route between the outskirts of Addis Ababa and the container port in neighboring Djibouti.

Foreign exchange shortage a big hurdle

This positive development cannot hide the fact that large parts of the country are not yet connected to the electricity net, that the road network is inadequate and the railway line is only a small start. Moreover, the bureaucracy is inflated and inefficient and lacks a functioning constitutional state. Currently, an acute lack of foreign exchange hinders imports and profit transfers, as the ambitious infrastructure projects absorb every available dollar in the country.

Investors, however, are speculating on tomorrow: because the country is on the right track and wants to maintain its course. A steady influx of foreign direct investment shows that international companies have sufficient confidence and want to be among the first. In addition next to the low wages, they are interested above all in the underdeveloped and untapped consumer market of 105 million people. For the South African Rand Merchant Bank, Ethiopia is therefore the fourth most attractive investment destination in Africa after Egypt, South Africa and Morocco (Where to Invest in Africa 2018).

Poor placement in international rankings

Even if Ethiopia is predicted to get a bright future, current negative assessments may not be ignored: in the Global Competitiveness Index 2017 - 2018 of the World Economic Forum, Ethiopia ranks 108th (out of 137). In the Index of the Economic Freedom of the World Heritage Foundation Ethiopia belongs to the group of largely unfree countries in 2017 ranked 142 (out of 180). And in the Doing Business Ranking of the World Bank (2017), Ethiopia is in a poor position with 159 (out of 190). By contrast, in 2016 in the Transparency International's Corruption Perceptions Index Ethiopia ranked 108 (out of 175), making it a lighthouse in an otherwise corrupt region (last place: Somalia 176, South Sudan 175, Sudan 170, Eritrea 164, Uganda 151, Kenya 145, Djibouti 123).

In the Fragile States Index 2017 of the Fund for Peace, Ethiopia ranks 15th, ranking among the most fragile states in the world (lowest rank 1 = South Sudan, best rank 178 = Finland). Ethiopia also scored poorly on press freedom and the rule of law: ranked 150th out of 178 in the Press Freedom Index in 2017 and 107th in the Rule of Law Index in 2016 (out of 113).

Economic data in a regional context
  2016 20171) 20181)
Gross domestic product, in USD billion      
..Kenya 70,5 80,7 88,2
..Ethiopia 70,3 72,1 75,3
..Tansania 47,7 50,5 52,5
GDP growth, real, in %        
..Kenya 5,8 5,1 6,1
..Ethiopia 7,6 6,1 5,7
..Tansania 7,0 6,4 6,0
Import of goods, in USD billion, fob      
..Kenya 13,62) 14,5 15,1
..Ethiopia 16,02) 16,8 17,0
..Tansania 8,52) 8,6 9,0

1) Prognosis
2) Estimation
Source: Economist Intelligence Unit