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Major Brands Explore AGOA Opportunities at Africa Sourcing Show

Now that the recent 10-year extension of the African Growth and Opportunity Act (AGOA) has firmly secured the continent’s position as the next sourcing destination, major brands are making bigger efforts to uncover opportunities there.

In opening Origin Africa’s Africa Sourcing and Fashion Week 2015 in Addis Ababa, Ethiopia Wednesday, the U.S. Ambassador to Ethiopia Patricia Haslach highlighted the country’s manufacturing potential and the apparel sector’s role in fueling export growth.

“The United States government is proud to support Ethiopia and other African countries as they work to change perceptions about investing in Africa in order to attract the domestic and foreign investment needed to continue driving this growth,” the ambassador said.

In the last year, through the USAID’s East Africa Trade and Investment Hub, the U.S. government helped facilitate $12 million in footwear exports alone under AGOA and Ambassador Haslach said she expects the government’s ongoing support to drive that growth even further.

Brands have in the past been gun-shy about sourcing in the low-cost labor region as opportunities were largely unknown, but now that the region’s capabilities in cotton production, textiles and apparel are becoming apparent, companies are taking notice.

Companies like H&M, Primark and Tesco are already tapping into Ethiopia’s potential—the country has become one of the fastest growing African economies in the last few years—and brands like PVH, J.C. Penney, VF Corp. and Perry Ellis were among the more than 1,000 attendees interested in starting or furthering their sourcing in Africa.

According to Jaswinder Bedi, chairman of the African Cotton and Textile Industries Federation (ACTIF), Africa’s current GDP is $1.6 trillion, and in the next five years that number is expected to grow 60 percent to $2.6 trillion. Add to that a population projected to soon have the world’s largest labor force, already with 70 percent of the population under age 30, and the opportunity in the region is sizeable.

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Africa also grows 6 percent of the world’s cotton but exports 70 percent of the commodity raw cotton, with no value added. Fifty-four percent of the land in Africa is uncultivated arable land, ripe for growing more cotton.

“We’re talking about opportunity everywhere,” Bedi said. “Value addition is the only way forward.”

And with China getting more and more expensive, the Asian powerhouse is becoming less of a threat to Africa and more of an opportunity, Bedi added. China’s consumption patterns are changing too, with domestic demand going up, and Africa is well-positioned to clothe the world’s biggest consumers, the U.S. and Europe, Bedi said.

“China is no longer the factory of the world. China is the market of the world,” he said.

Ethiopia’s president Mulatu Teshome also spoke at the trade show’s opening and said his vision is to make Ethiopia the leading manufacturing country in the region.

Though infrastructure has continuously been a concern surrounding sourcing in Africa, the president said the government is “intensifying” its efforts to improve infrastructure. A new railway is in work—slated to start operation in February—and its presence is expected to drastically improve service delivery, and costs will likely come down too.

At present, Africa holds less than 1 percent share of the U.S. apparel import market, which is less than Bangladesh’s nearly 7 percent, “And we are a whole continent,” Bedi said. “We have an opportunity to grow business here 100-fold.”