The textile industry in Ethiopia and Ethiopian garment production
Ethiopia’s government wants to diversify exports from an agricultural product to strategic sectors like textile and garment manufacturing.
Ethiopia’s long history in textiles began in 1939 when the first garment factory was established. Based on Ethiopian country data, in the last 5 to 6 years, the textile, and apparel industry have grown at an average of 51% and more than 65 international textile investment projects have been licensed for foreign investors, during this period.
The growth in the textile industry is directly linked to the Government’s move to set up an industrial development strategy. This step of the Ethiopian Government to prioritize designing incentives and policies to attract investment in view of worldwide competition has played a big role in the development of their economic status.
How to Invest in Ethiopia?
As indicated in their country data, the textile industry in Ethiopia appeals to foreign investors mainly due of the three major components of a successful investment:
- Low manpower cost
- Raw materials and
- Low energy costs
A foreign firm with an interest in investing in Ethiopia has to go through the Ethiopian Investment Commission or EIC.
The steps before starting a business in Ethiopia include:
- Obtaining an Investment License and a construction permit
- Notarization of required documents
- Grading of construction contractor
- Securing land for the project
- Challenges faced by the Ethiopian Textile Industry
Although Ethiopia is a recommended market for investment in textiles, there are still a lot of challenges that the country and investors are facing.
One of these challenges is the efficiency in factories which is as slow as 40 to 45% in production both in textile or garment assembly units. This problem is mainly due to underdeveloped processes and lack of education amongst manpower.
Another challenge is the cycle time and delivery. Cycle time can extend up to 150 days due to the lack of available raw materials. Country data indicates only 40% of the total needed materials are available in Ethiopia while 60% are imported. As compared to other countries, production in Ethiopia takes about 45 to 60 days longer.
The lack of marketing is also a concern for the textile industry in Ethiopia. Many factories with state-of-the-art machinery are currently idle. Ethiopian companies need to adopt a more aggressive marketing strategy to eradicate this concern.
Challenges also include restrictions in technology specifically in the underdeveloped digital processing of transactions. Manual arrangements via phone and lack of efficient systems using basic technology tools such as emails etc is a hampering factor too. Hopefully, in the years to come, the government will see bigger opportunities associated with better technology and make these available to its people.
Hence, the textile industry in Ethiopia has much room for development. This can be achieved with the help of the government and its vision. An improved political and economic environment that includes industrial upgrading and customs advancement is sure to make the Ethiopian business environment more inviting for international players.
Two new industrial parks for the textile and apparel industry planned in Ethiopia
The Ethiopian Industrial Development Corporation (IPDC) has awarded the construction of two new industrial parks for textile and apparel industry in Addis Ababa and Jimma to two Chinese construction firms, in a deal worth around ETB 5 bn (US$221.2m).
CGCOC will construct the Bole Lemi II industrial park, an extension of the Bole Lemi I, while CCCC will build the Jimma industrial park.
The Bole Lemi II Industrial Park will be constructed at a cost of 3.5 billion birr in southern part of Addis Ababa. IPDC has selected CGCOC to undertake the construction which will take 12 months, while the South Korean firm DOHWA will be the consultant of the project.
The Jimma Industrial Park will be built in the Oromia Regional State in Jimma town at cost of 1.5 billion birr. CCCC, the Chinese construction firm, which has accomplished several major construction projects in Ethiopia, will construct the industry park within nine months. A local consulting firm, MH Engineering, will supervise the construction project.
During the contract signing ceremony, IPDC CEO Sisay Gemechu said that the government gave number one priority to the textile and garment industry. It is a light industry which is labour intensive and it uses locally produced raw materials.
Mr.Sisay said that the Bole Lemi and Kilinto Industrial Parks will be built with 158 million dollars loan secured from the World Bank. These two projects are under one category and they followed the World Bank procurement proceduress.
Managers of the Chinese construction firms appreciated the Ethiopian governmentâ€™s commitment to develop industrial parks and create job opportunities and boost the export sector. They assured that the construction of the projects would be completed according to schedule and high-quality standards.
Ethiopian textile Industry undergoing major development
Ethiopian textile industry aided by the availability of a skilled and highly motivated workforce is undergoing major development. This surge has been helped by the country’s impressive economic growth over the past years. The country determined to expand and develop cotton plantation and apparel industries in order to realize the national economic development ambition. This can also help the country to benefit from the growing international market since the major target of the government for the industry is the export market.