Three countries in Africa are top contenders for apparel production in the coming years, according to Edwin Keh, supply chain expert at the Wharton School and former VP Sourcing for Wal-Mart. They are Ghana, Ethiopia, and Kenya.
Those countries combine competent, technocratic governance with a functioning court system, and infrastructure that is being augmented by recent Chinese investments in ports, rail, and electricity.
African sourcing is not a plug and play relationship, however. Firms looking to source in Africa have to commit to building long-term relationships with local partners. Haggar brought in capital and training and allowed workers to practice on patterns before beginning actual production. In exchange, the firm gets a dedicated source of production in a low labor cost country.
“Making in Ghana takes resources, patience, and training,” Anzovino said. Haggar is also making dress pants in Bahrain, which has duty free access to the U.S, “There aren’t a lot of factories there, but the ones that are there are good.”
The cost difference in those countries allows Haggar to bring product that private labels can’t, and use the weight of their brand to lift the value.
“If we go to those countries, we go as a wholesaler, and if I’m at J.C. Penney or Kohl’s I’m landing a product and my markup is seen on the sales floor.”
As a wholesaler, Haggar sources directly to factories.
“There are cost and control issues involved in using an agent. Why pay them 5.9% to do something I can do myself?” Anzovino said.
Increasingly, private label makers are sourcing directly to factories as well. That opens up new markets like Africa, because the companies don’t have to rely on intermediaries to set up factories and handle quality control.
“It enables us to have more vendors,” Anzovino said.
It also allows them to dedicate their existing factory capacity in Asia and Mexico to exploring shorter lead-time product lines. Haggar is exploring the use of more stretch fabric, and increasing body consciousness among its male consumers. They’re also exploring more sublimation printing on knits, and making slim fit goods available to their core customer, who has traditionally preferred a more classic cut.
“Slim is about tailoring. If you move someone from classic fit to straight, they’re going to feel it a little, then get used to it. It’s about being modern,” said Anzovino.
Keh says Africa should be part of most firm’s five-year plan. “You have to look for long-term partnerships. Even if you go to Timbuktu, you probably want your supplier to build a factory for you, rather than finding a local manufacturer.”
The development of the garment industry in Africa could take time, but eventually it will flourish, says Keh. “If you look at how these countries evolve, the first generation is always overseas investors bringing in knowhow and management, and as the local partner becomes better at it they eventually take over, first as a raw materials supplier or subcontractor, but eventually as the ones in charge.”
This is a good thing, because it makes room for firms that aren’t as interested in capital intensive relationship building to take advantage of low sourcing costs. At the same time, many countries in Africa offer duty-free exporting to the U.S. and E.U., which can help compensate for long start-up times.
H&M is also eager to commit to Africa, with plans to start opening up factories in Ethiopia. They want to produce over 1 million units annually, to start, based on the fact that costs are lower than in Bangladesh and travel time to Europe is one-third quicker, due to the Suez Canal.
Morocco and Tunisia already have reputations as discount sourcing hubs, but the emergence of new manufacturing destinations in East Africa is due to an external factor — the Arab Spring.
Were it not for the political uncertainty produced by the Arab Spring uprisings, it’s highly likely that more sourcing would be going to Egypt, Libya, and other countries in the region. As it is, the Middle East’s loss is East Africa’s gain, with apparel manufacturers preferring political stability to the relatively more developed infrastructure in the Middle East.