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Ethiopia’s Garment Factories Get $6.5 Million in Job Relief

U.K., German and Ethiopian authorities have established a “landmark” $6.5-million vehicle to help safeguard thousands of jobs in the East African nation’s embattled garment and textile industry, buttress its economic recovery and preserve and position its manufacturing capacity for a post-Covid-19 future.

The six-month Jobs Protection Facility fund, announced Thursday, brings together multiple collaborators from the public and private sectors, including the Ethiopian Jobs Creation Commission, the Ethiopian Investment Commission, German Cooperation, U.K. Aid, FSD Africa and First Consult, to offer garment and textile factories the opportunity to apply for wage subsidies and business incentives.

To qualify, businesses will have to show that they have experienced an “economic shock” as a result of Covid-19 and that they have a business recovery plan in place. Factories applying for the “innovation incentive” will have to demonstrate efforts to boost their resilience amid the crisis, such as through the development of new production lines or partnerships. The Commercial Bank of Ethiopia will assess applications and disburse funds to successful candidates.

“This facility and other similar programs are crucial as they will support the factories being affected by the pandemic and help protect jobs in industrial parks, while slowing down the harsh economic impact,” Nigussu Tilahun Gebreamanuel, commissioner of the Jobs Creation Commission, said in a statement.

Relief for garment factories could not come soon enough. The Jobs Creation Commission estimates that close to 1.4 million jobs across Ethiopia are under threat and approximately 1.9 million people in vulnerable employment could lose their income due to the fallout from Covid-19. A good number of these could stem from the garment sector, which employed some 95,000 people at textile and apparel factories in Ethiopia’s industrial parks at the outset of the pandemic, 70 percent of them women.

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At least 13 textile firms have ceased operations because of slumping demand for new clothes. Labor groups also say that brands and retailers such as The Children’s Place have canceled millions of dollars worth of garment orders from Ethiopia, leaving factories in debt and workers facing wage cuts or unemployment. At least seven factories in Ethiopia, employing roughly 15,000 workers, were making clothes for The Children’s Place before the pandemic, according to the Worker Rights Consortium.

Workers in Ethiopia are the lowest paid in any garment-producing country. They earn a minimum wage of $26 per month, compared with $95 in Bangladesh and $325 in China, according to a 2019 report from the NYU Stern Center for Business and Human Rights.

“The Covid-19 pandemic has caused an unprecedented disruption to global business and will undoubtedly have a significant impact on the global economy on many fronts,” said Lelise Neme, commissioner of the Ethiopian Investment Commission. “The government of Ethiopia has coordinated efforts with donors to support businesses coping with the impact of Covid-19. This emergency Jobs Protection Facility will help elevate manufacturing companies to sustain their businesses and reduce the impact on their financial performance.”