"Targeting exports worth $30 billion by 2025, Ethiopia is on course to creating a boom in the textile industry. The country’s annual shipments currently value at $115 million. And Arkebe Oqubay, Minister and Special Advisor to Prime Minister Hailemariam Desalegn, shares the bold vision as he believes will transform this East African nation into a compelling new sourcing hub for brands, retailers and their suppliers. By 2025, Ethiopia is aiming to be a leading apparel and textile manufacturing hub in Africa capable of exporting up to $30 billion, says Arkebe."
Targeting exports worth $30 billion by 2025, Ethiopia is on course to creating a boom in the textile industry. The country’s annual shipments currently value at $115 million. And Arkebe Oqubay, Minister and Special Advisor to Prime Minister Hailemariam Desalegn, shares the bold vision as he believes will transform this East African nation into a compelling new sourcing hub for brands, retailers and their suppliers. By 2025, Ethiopia is aiming to be a leading apparel and textile manufacturing hub in Africa capable of exporting up to $30 billion, says Arkebe.
With annual clothing exports of $73,25 million in 2015, there’s no doubt the country does indeed have a massive battle on its hands. Its goal represents a 300-fold rise in shipments in just eight years. Looked at another way, Ethiopia’s combined textile and clothing exports of $114,8 million are just a fraction of the revenues of companies like TAL Apparel ($850 million) and Arvind ($770 million), who are in the process of setting up production facilities in the country.
The country aims to build a sustainable, fully vertical supply chain from scratch and leading players from across the industry are flocking to the country. According to Arkebe, until 2010, the prime focus was agriculture, and even in the last five years it has been in transition. But now the country has accorded high priority to apparel and textiles.
Ethiopia scores well in political stability, macro-economic stability, competitive labour that can help reduce production costs, competitive and efficient energy. The country has invested in long-term infrastructure and in skills; it has more than 50 universities, and more than 1,300 technical schools to train operators and technicians. It is also the second largest electricity producer in sub-Saharan Africa, with a focus on renewable power generation from hydroelectric, wind and geothermal sources.
It enjoys duty-free privileges to the US and EU through AGOA (the African Growth and Opportunity Act) and the Everything But Arms (EBA) deal, as well as preferential duty treatment to markets such as China, India, Japan, Canada and Australia. For investors, favourable benefits to attract clothing and textile companies looking to relocate their manufacturing bases to Africa include duty-free imports of machinery, spare parts and raw materials; along with zero tax on exports and exemptions from income tax for up to ten years.
Treading a tough growth path
Indeed it’s going to require a huge effort, and to achieve this, the country is working on multiple levels. Focus has been on attracting high quality investment from best-in-class buyers and suppliers who are interested to work on the long-term and also high value, rather than those only interested in cheap labour. Another key aspect is to establish specialised industrial parks built with highest international building, fire and electrical safety standards and also with sustainability at their core. Dedicated not only to clothing production but attracting the tier-II and tier-III fabric and fibre mills too, the goal is to ensure an environment where energy will not be a constraint, where transport and logistics will not be a constraint.
Creating a fully vertical supply chain from scratch, encompassing apparel sector, fabric and spinning mills and high quality cotton plantation. Just focusing on garment production would make it easy for companies to park and move to the next destination. Another key component in delivering speed is logistical efficiency. Being vertical is one way to be fast and flexible, but in the meantime, the inputs for apparel made in landlocked Ethiopia — and the finished products themselves — have to be transported by truck to and from the neighbouring Red Sea port of Djibouti, a process that is both slow and expensive.
The level of trust that has developed between the government and industry will certainly play a key role in helping reassure investors. It’s part of a wider and ongoing dialogue between the two sides. A common vision and approach doesn’t evolve by itself, so we argue, discuss, exchange ideas, and ultimately reach a good conclusion, Dr Arkebe explains.