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Ethiopia Primes Itself for Growth in Footwear Manufacturing

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As Ethiopia makes a name for itself as the next apparel sourcing destination, the country wants brands to consider it for footwear production, too.

And what’s perhaps among its greatest selling points: footwear from the country comes into the United States duty free. It’s also duty free into the EU, Canada and Japan.

China is still, by far, the largest source of footwear for the U.S., though Vietnam is slowly chipping away at that market share. Last year, Vietnam held 16.2% of the market for U.S. footwear imports, up from 5 percent 10 years ago, and according to the Footwear Distributors and Retailers of America (FDRA), that number could jump to 22 percent by 2020, bringing China’s share down to 65 percent.

But with prices rising in China, buyers aren’t just eyeing elsewhere for apparel manufacturing, but for footwear as well.

And according to the FDRA, Ethiopia could be the next place to source shoes.

“From what we see in the data, we see what we think is a potential opportunity. And that’s the country of Ethiopia,” FDRA president Matt Priest said at a Footwear Sourcing at Magic discussion this week.

This year, the U.S. is on pace to import more than 2 million pairs of shoes from the eastern African nation, a 30 percent increase over last year.

“We all know what’s going on in China and Vietnam…but do we really know what’s happening in Ethiopia?” Priest posed. “Most of our top 10 footwear suppliers don’t have duty free access to the U.S. market, but Ethiopia does and it will for the next nine years. And I can probably guarantee you it will have it after that under the African Growth and Opportunity Act.”

AGOA, as the act is more commonly known, allows duty free access for goods coming into the U.S. market from sub-Saharan African countries, Ethiopia one among them. The act was renewed as part of the trade preferences bill passed last year, extending benefits under AGOA for 10 years.

“There’s no other country in Africa—in regard to footwear—that’s taking advantage of AGOA like Ethiopia.”

For now, Ethiopia has four major footwear manufacturers, many of whom are multigenerational footwear producers with years of knowledge in the craft, and the country produces more than 7 million leather hides per year. Many of those tanneries also have treatment plants as the country aims to maintain compliance in its production.

“The most competitive advantage for our shoe production is our labor force. We are competitive with Vietnam and China,” said Ato Wondu Legesse, director general of the country’s Leather Industry Development Institute (LIDI).

The average monthly wage for factory workers in Ethiopia ranges from $60 for most entry-level employees, to $150, which, according to Legesse, is higher than the minimum wage and considered a living wage for workers in the country. That coupled with the duty savings means the country can compete with the bigger players when it comes to cost.

But cost aside, compliance and conditions in the country have also been touted among its strong suits.

“What’s causing companies to leave many countries today are values (not value),” said Mel Lewis, chief capacity officer for Made by Ethiopia, a venture geared toward facilitating exports from the country. “We know we have child labor laws, we know we have building codes, we’re not going to have buildings falling down.”

Factory inspections for safety have been consistent, much of Ethiopia’s power is hydro-electric and with a population base close to 100 million, the labor force is far from dwindling. There are labor unions in the country, but labor militancy and strikes have not been a problem in Ethiopia at all.

Add to that, Ethiopia has the largest herds of cattle and sheep in Africa, and is one of the 10 largest leather suppliers in the world, according to Lewis, which makes for ease of access to one of the major raw materials needed for footwear production.

And, as Lewis said, “We are working with factories on lean manufacturing because we do not want Ethiopia to catch the same disease as Asia that says, ‘When there’s a problem, just add a head. Labor’s cheap so just add another person.’”

Clarks and Ecco are already making footwear in the country and more brands have expressed interest in Ethiopia for footwear manufacturing.

For first production, lead times range from 100 to 120 days from start to distribution center, and repeat orders can be as low as 80 days. For now, the country’s monthly capacity in local factories is roughly 450,000 pairs, which doesn’t include production from Foreign Direct Investment (FDI) facilities that are already making there.

Next month, FDRA will take a delegation of buyers and other interested stakeholders to visit the country’s footwear factories and tanneries.

“When you combine the wage with the raw material cost in a country that is a major producer of cattle and sheep you will look at a country that’s very competitive,” Lewis said. “The phenomenal growth that you have seen in Vietnam can be replicated if the buyers and companies are able to step outside their Asia-centric focus.”

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