Ethiopia knows its current potential for apparel sourcing, and it’s working to build up the more robust supply chain necessary to reach that potential.
Benefitting greatly from the attention major companies like PVH and H&M have brought to the country in their moves to establish supply chains there, Ethiopia has been top of mind when it comes to talk of sourcing in Africa.
But, as some have noted, the country is not quite yet ready to accommodate the demands of the modern-day apparel supply chain, where speed is vital and verticality is necessary to deliver it.
“Right now, we more or less have every supplier in the supply chain, but not with the quality level we need, particularly on the accessories,” said Abebe Abebayehu, deputy commissioner for the Ethiopian Investment Commission, during an interview at Sourcing at MAGIC.
As such, the Ethiopian government has placed an emphasis on bringing in more fabric manufacturers, more that make interlinings and more suppliers for things like zippers and labels to complete the sourcing ecosystem.
“I think within 12 months or so we should have a fully integrated supply chain,” Abebayehu said. “We are very proactive in our approach.”
Ethiopia’s ascent as an apparel making nation has been a quick one, fueled in large part by major companies’ commitments to developing manufacturing capabilities there.
For Roy Ashurst, international consultant for textiles and apparel, who led PVH’s mission to establish sourcing in Ethiopia, the country showed potential when he first visited in 2012—thanks to its low-cost labor, some of the cheapest renewable energy in the world and a government on board with expanding on Ethiopia’s manufacturing potential—but there was little there at the time.
“Before I got there, H&M was there, and after six years they were only working with one factory because they couldn’t find the factories that could meet their standards,” Ashurst said.
So PVH, in its desire to reduce dependency on Bangladesh for manufacturing, set out to build a supply chain in Ethiopia.
“We didn’t just want to build factories. What we wanted was to build a sustainable, compliant supply chain,” Ashurst said.
PVH focused on working with three of its supplier mills that were interested in doing something in Ethiopia, and in partnership with the government and other donor groups, broke ground on the Hawassa Industrial Park in 2015, finishing it in 2016. And things have been fruitful since then.
“We’ve taken Ethiopia from less than $100 million in 2016 to potentially $1 billion in 2018, and the objective now is $30 billion by 2025,” Ashurst said.
China, long considered the world’s manufacturer, has been part of fueling that growth, as major manufacturers from the country have been keen to establish operations in Ethiopia. Jiangsu Sunshine Group, one among them, is investing upward of $945 million to set up a wool factory in Ethiopia. China’s Kingdom, one of the world’s largest linen suppliers, has also made its way to Ethiopia. For cotton textiles, China’s Wixu Jinmao is there too.
Why the extra interest from China?
According to Ashurst, “Local demand in China means they don’t have capacity to export anymore. They are not closing down their businesses in China, they are using their mills in China to produce for the local market and they are building new mills to support their exports.”
Wuxi Jinmao is the investing Chinese parent for JP Textiles, a mill that became operational in the Hawassa industrial park last July and became fully operational in January. The facility can now produce 900,000 yards of yarn dye fabric each month. And that number is expected to increase substantially once the company completes phase two of its development in about a year’s time.
“It’s all geared to support the wide range of fabric demand of manufacturers who are in the industrial park as well as in other AGOA countries,” William Narva, director of strategic planning and business development for Wuxi, said. “We could reproduce the same ranges in Ethiopia that we produce currently in China. This does not replace our China production, this complements it.”
For JP Textiles, the biggest opportunity in Ethiopia has been the duty free trade status it enjoys with the U.S. under the African Growth and Opportunity Act (AGOA) and with the European Union as part of its Everything But Arms trade privilege program.
What’s more, Narva said, “By investing in fabric production to complement the garment production, it largely offsets concerns that any customer might have about longer lead times in terms of fabric transit from other countries to Ethiopia.”
Beyond being able to improve lead times, there was a lot that made Ethiopia a draw for China’s Sunshine Group.
“Ethiopia now has a rich labor source and they are duty free to developed countries—to the U.S., EU, Japan—and these are our main markets, so I think this is also the big advantage for Ethiopia,” said Sunshine’s Henry Jiang, who works in the company’s foreign trade department. “Made in China now is not cheap anymore, the cost in China has become higher and higher, so I think this is the main reason we want to invest in Ethiopia to be more competitive.”
Sunshine’s Ethiopia setup is still under construction and expected to be complete by the end of this year. Once fully operational, the facility will be able to produce 10 million meters of worsted wool fabrics and 1.5 million sets of suits.
“That will mean almost every major fabric manufacturer will have a fabric mill in Ethiopia,” Abebayehu said. “We have almost everything that Bangladesh has plus a stable government.”
Now, for Ethiopia, it’s just about filling in the blanks in its supply chain.
“We’re trying to get all the support in place,” Ashurst said. “I don’t want to have my fabric come from 50 meters away and then have to import labels from China.”
If the country’s growth in manufacturing thus far is any indication of where it’s headed, it may not be long before Ethiopia has everything the industry needs.
“From 2014 to where we are in 2018 in terms of building an industry is no time at all,” Ashurst said. “We turned sourcing on its head. It’s a brand-drive initiative partnering with the government and that’s really what’s made the difference. That’s why Ethiopia will overtake every other country in terms of exports.”