Ethiopia’s turbulent political climate stands to hinder its economic growth and destabilize the entire Horn of Africa region, experts say, even as it hope to blossom into an apparel and textile sourcing hub. A civil war between Ethiopian Prime Minister Abiy Ahmed’s state military and the Tigray People’s Liberation Front (TPLF)—a paramilitary group that previously presided over the region—broke out in November when the leader ordered that troops storm Tigray to tamp down rebel forces.
Ahmed’s successful 2018 bid for office was built on promises of stability, ultimately winning the politician a Nobel Peace Prize in 2019 for his efforts to “achieve peace and international cooperation,” with northern neighbor and erstwhile adversary Eritrea. But prolonged military action over the past eight months has resulted in thousands of civilian deaths in Tigray, which has also been cut off from crucial supplies like food and fuel. What’s more, Eritrea—which signed a final peace treaty with Ethiopia in 2018 after two decades of tension—has been responsible for recent attacks on Tigray at the behest of Prime Minister Ahmed.
The Ethiopian government declared a unilateral ceasefire on June 28, withdrawing troops from Tigray shortly after. But Ethiopian forces are said to still be obstructing roads out of the region’s capital city, Mekelle, which has exacerbated shortages of goods, according to Daniela Baron, risk intelligence analyst at Everstream Analytics, a supply-chain risk monitoring firm. “According to aid agencies, many access roads to Tigray, including from Addis Ababa and the neighboring Amhara region, remained blocked as of early July, although some outbound movement is said to be possible,” she said.
Within days of the cease-fire announcement, fighters decimated at least one critical bridge giving Tigray access to the neighboring Amhara region to the west, across the Tekeze River, she added. That event will likely further disrupt the transport of goods between Tigray and the rest of Ethiopia. Meanwhile, the TPLF has said it would continue its effort to oust outside forces from the region, which could result in more obstacles, like road closures, with the potential to slow movement, too.
“We expect that disruptions at production sites across the region will continue as long as the conflict is not resolved,” Baron added, noting that Tigray-based suppliers like Almeda Textiles—one of the country’s leading apparel makers—and Sheba Leather, known for finished leather goods like footwear, handbags and accessories, have been damaged or looted since the fighting began.
Factories that have been able to resume operations are facing worker shortages, she added. “For example, in the Mekelle Industrial Park, a hub for apparel and textile production, less than half of all workers had returned to work by mid-April due to safety concerns amid the conflict,” Baron said. “As the security situation remains volatile and a large number of people remains displaced across the region, some workers may not be able or willing to return to their former places of work any time soon.”
The city of Mekelle has also faced widespread power outages, underscoring pervasive fuel shortages, she added, which will likely stymie future attempts to ramp up production even at factories that remain operational.
Eight months of conflict have weighed on the country’s economy, Baron said. Ethiopia’s trade ministry noted in January that factory and road closures in Tigray were costing the country $20 million per month in exports, while Ethiopia’s finance minister estimated in April that it would cost about $1 billion to repair the damaged infrastructure. “However, the government still expects economic impacts to be limited to Tigray, which accounts for less than 10 percent of Ethiopia’s economy,” Baron said.
Still, the devastating and protracted conflict has been playing out on the global stage for far longer than the mere weeks-long timeline that Prime Minister Ahmed projected in November. “From what we have seen regarding international reactions to the conflict, a prolonged crisis could also hamper future foreign investments in the country if insecurity in the region persists or spreads beyond Tigray,” Baron said.
Notably, the U.S. has started to impose economic and visa sanctions on the country as a means of pushing for a resolution to the conflict—and could opt to withhold much-needed financial aid going forward, she said. According to the U.S. Agency for International Development (USAID), however, the U.S. has committed to provide more than $152 million in additional humanitarian assistance to Ethiopia since April, and remains the country’s largest donor. Nearly $305 million in total funds have been allocated to the Tigray region to mitigate the risk of famine and provide medical support, shelter, and protection for women and girls.
While the ongoing warfare has derailed Tigray’s producers, Ed Hobey-Hamsher, senior Africa analyst at risk intelligence company Verisk Maplecroft, said that Ethiopia’s foremost industrial parks are located in Hawassa and Bole Lemi, more than 700 miles south of the region. “They have not been forced to suspend or close operations, as they are shielded from the conflict by their physical distance from Tigray,” he said.
It will be difficult to accurately gauge the conflict’s cost, including the shuttering of Tigray’s Mekelle Industrial Park, as the Covid crisis had already disrupted the sector’s businesses. The government also introduced a demonetization program last September, swapping out Ethiopia’s old currency for new banknotes in a process that has further “distorted the picture” of economic ramifications based on recent events, he said.
“Until the scale of business disruption becomes clear and international arbitration begins over losses, it is likely to be months before we can start to quantify the impact on the economic contribution of the textile manufacturing sector,” Hobey-Hamsher said.
Tigray’s textile and apparel suppliers had seen a decline prior to the pandemic, he said. “According to the latest publicly available government figures, the state expected to reap $160 million in export revenue during the first eight months of the 2019-2020 fiscal year, but undershot this target by 24 percent,” he continued. Businesses cited structural bottlenecks, including transportation costs.
While airports in Amhara have suffered “both collateral damage and targeted attacks by long-range rockets,” Hobey-Hamsher said that the country’s primary export route, the Ethiopia- Djibouti trunk road, remains operational and has not faced any security incidents, making export out of the country feasible once production rebounds.
A look back—and a path forward
“There is no doubt that Covid-19 and war in the Tigray region have put some serious and long-lasting dents on the shining success of Ethiopia,” according to Dr. Manoj Tiwari, an associate professor at the National Institute of Fashion Technology in Jodhpur, India. Tiwari, who has observed the growth of the textile and apparel sector in Ethiopia since 2013, said that the country’s “centuries-old rich legacy of textiles, where people wear handmade clothes developed on their own,” has developed into a major source of employment for citizens. “Governments consider this as a sector of focus for national growth.”
“It was in the year 1939 when the first garment manufacturing plan was set up, and it can be considered as the formal start point of industrial manufacturing,” he added. The Ethiopian textile and apparel sector has seen notable acceleration more recently, growing 51 percent over the past six years, according to data from the International Labor Organization (ILO). Still, the country’s fashion production sector remains in its nascent stage, Tiwari said. ILO numbers reveal that textile and garment products represent just 17 percent of the country’s total manufacturing value, and 0.6 percent of Ethiopia’s GDP.
Numerous factors have made the sector an attractive investment for the government—and for outside investment. Ethiopian officials are committed to shining a spotlight on its capabilities and strengths, which include “a young, dynamic, and relatively economical workforce,” along with proximity to the U.S. and Europe and raw material sourcing destinations, Tiwari said. In 2017, Bogale Feleke, Ethiopian Deputy Minister of Industry, targeted the creation of 350,000 jobs in the textile industry by 2022, with the aim of generating $1 billion in annual sales and $30 billion by 2030.
Global fashion players—especially those aiming to diversify production away from China due to tariffs, human rights concerns and logistical challenges—have taken note of the country’s growth. “H&M, PVH, and Decathlon are some of the biggest trade partners for Ethiopia’s textile and garment sector,” Tiwari noted, adding that manufacturers have made inroads with brands and retailers from the U.S. and Europe, including Hanes, JCPenney, and The Children’s Place.
Despite this upward mobility, “there is no denying that the war has badly affected the Ethiopian business prospects,” Tiwari said. “It has also negatively impacted the image of Ethiopia as a stable democracy in that region.”
Many factories aren’t ready to resume work, and workers still live in “fear and uncertainty” as the conflict rages on, he added. A June 2020 ILO report estimated that over 60,000 garment workers lost their jobs due to the civil war.
Despite the current challenges, Tiwari firmly believes in Ethiopia’s resurgence should its government commit to addressing factors hindering success beyond the current unrest. The country’s textile sector must advance its social and technical compliance, and target existing labor safety and health concerns. It must standardize wages, upskill its workforce, drive speed to market and integrate its supply chain effectively, he said.
“Ethiopia offers a bright and promising hope to the global textile industry, provided these concerns are addressed efficiently, effectively, and quickly,” he said. As the Ethiopian government continues to solicit interest from foreign investors, the sector will also be pushed to advance its capacity to produce more sustainably.
“Such challenges are always there with any emerging nation,” Tiwari said. “The nation is raring to become the next global sourcing destination giving serious competition to established textile leaders including China, India, and Bangladesh within the next 10 years’ time.”