At least 20 textile and apparel companies from five countries in Asia made a strategic visit to Ethiopia, Kenya and Uganda in April to explore investment opportunities. The mission was organized by Phillips Van Heusen (PVH) and Vanity Fair (VF) in partnership with the African Cotton & Textile Industries Federation (ACTIF), which worked with its member associations in the three countries visited, along with export and investment promotion agencies.
PVH recently opened a regional office in Nairobi, Kenya to enhance its sourcing interest in Africa, and the investment mission was one of the company’s first major moves to underline its commitment to the region.
Both PVH and VF currently source merchandise from China, India, Bangladesh, Indonesia, Vietnam and other Asian nations, and are jointly employing over 1 million workers directly and indirectly in the manufacturing sector. Each company has strategically developed plans to source from Eastern Africa and to move 20 percent of their production to Sub Saharan Africa (SSA) to take advantage of the existing no duty trade provisions with the U.S. under the African Growth and Opportunity Act (AGOA).
The firms visited East Africa to explore investment opportunities and to determine which countries can provide the best policies, trained workforce, cheaper utility costs like electricity and land costs, and logistics support.
It was for these reasons that both companies met with senior government officials led by the Prime Minister of Ethiopia, the President of Kenya and the President of Uganda, all of whom made bold commitments to attract the investors to their respective countries.
A common strength in all three counties is strong environmental and social compliance records, a welcoming factor for the potential investors considering they have faced challenges in countries like Bangladesh where business has been adversely affected due to challenges in compliance. The cost of doing business in China and India is also growing exponentially, and so is domestic demand.
Ethiopia made key promises to provide cheap electricity, as low as $0.35 per kilowatt, and better, affordable logistics considering they are currently developing a railway between Djibouti and Addis Ababa. Ethiopia also currently provides up to 70 percent investment support on capital cost to foreign direct investment (FDI) at less than 8 percent interest cost.
Kenya on the other hand, is strongly committed to lower its electricity costs for FDI to single digits, and are committed to developing special economic zones with cheaper labor, excellent logistics and connectivity to all international destinations by sea and air.
Uganda also committed to providing cheap land and electricity, under $0.05 per kilowatt, and to develop a railway between the Kenyan border and its capital city of Kampala. Uganda is also committed to developing technical training facilities to provide a properly trained workforce.
The potential investors were quite impressed with the countries’ commitments, and said they would be keeping an eye on the three countries to monitor implementation.
Many of the leading global apparel buyers are increasingly turning their attention to Sub-Saharan Africa because of the duty-free quota free privileges the U.S. offers through the AGOA and to the E.U. under the Economic Partnership Agreements (EPAs). Aside from the market access opportunities, most governments in Sub-Saharan Africa are also eager to attract investments and are rolling out appealing policies.
There is no doubt that Africa promises to offer the highest rates of return on investment in the next 10 years, a strong factor to attract investments in textile and garments among other sectors.
PVH and VF are two of the largest branded apparel retailers in the U.S. PVH owns tops labels including Calvin Klein, Tommy Hilfiger, Van Heusen, Arrow and Izod, and VF brands include Wrangler, Lee jeans and Nautica among others.
ACTIF is a nonprofit making regional industry/trade promoting body established in 2005 by the cotton, textile and apparel sectors from Eastern and Southern Africa. Its membership covers the COMESA, SADC and the EAC trading blocks, and national allied associations from 25 African countries.
Mr. Rajeev Arora is an apparel industry executive with more than 36 years of international experience and specifically 26 years in Eastern and Southern Africa region that includes managing 100% export-oriented manufacturing facilities and representing buyers worldwide, expertise on export policies in Africa under various Bilateral Trade agreements, successful development of vendor base and quality assurance & management of vendor performance in over 16 countries in Africa.