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The global fashion business journal

20 Jul 201907:16

Ethiopia on being new’s ‘low cost’ mecca

Its 26 dollars monthly salary turns the country into one of the most competitive ones for clothing manufactures, but when is starting to awake interest within the retail’s giants, Ethiopia need to choose its industrial model.

17 May 2019 — 11:00
S. Riera
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Textile's factory in Ethiopia

 

Chinese model or Bangladeshi model? About to consolidate itself as fashion’s industry productive hub, Ethiopia is in front of a crossroad about deciding which is the best model to rise its textile industrial muscle. It could be to diversify, to extend value’s chain and looking for the added value while ignoring humans rights, or stall themselves in the confection looking for a social agreement.

 

Confection industry has rapidly grown in Ethiopia, because the Asiatic manufacturers, in the majority Chinese, saw the country as the relay of Bangladesh, Cambodia and Vietnam. With a wage of 26 monthly dollars, its labor costs converts this country in the most competitive, against the 95 dollars of Bangladesh or Myanmar, according to the report Made in Ethiopia, challenges of the garment industry new frontier, from New York University (NYU).  

 

Clothing items already represents the forth category that Ethiopia is currently exporting. The coffee is leading the foreign sales with 839 million dollars. It is followed by the colza, with 424 million dollars, and the flowers, whose exportations generate 229 million dollars. Foreign clothing sales contribute 125 million dollars. As well as in China or Bangladesh, the textile will be the driving force to bring the Ethiopian economy from the primary sector to the secondary. The challenge is how to do it, as stated by report’s authors.

 

Ethiopia is one of the poorest countries in the world, with an average annual income of 783 dollars and a population of 105 million of inhabitants, of which is estimated that the 23% of them are under the poverty level. The country’s government firmly committed to the textile in 2014, with the construction of its first specific industrial park for the sector. As it received a good feedback from Asiatic manufacturers and the arrival of the first occidental companies, like H&M or PVH, the country’s government planned thirty more until 2025.

 

That first complex, Hawassa Industrial Park, employs 25,000 people, but the goal is to arrive until 60,000 workers, in different shifts. Production costs have been until now the main attractive of the country, which is facing its two first challenge: an uprising social tension and an increase of the costs because of country’s dependence to the raw material import.

 

Report’s authors alert of a social powder keg if the Ethiopian government resists establishing a minimum wage in line with the standard of living. The 26 monthly dollars of textile's sector sum an annual income of 312 dollars, half of the average per capita income of the country. Bangladesh and Cambodia finally progressed in labor rights in order to continue supplying to retail’s biggest occidental giants.

 

On the other hand, despite Ethiopia being a cotton production country, is lacking of textile’s value chain, and is dependent to raw material’s import. The progress of various industrial processes has been the key into that countries like China or Turkey, despite having a higher salary base, are continuing to be competitive.

 

However, the cotton crop within the African country is also going downwards, for the benefit of other agricultural products, as sugar or sesame, with higher market prices.

 

The authors of the report give recommendations to country’s government to underpin its textile industry, like designing an strategic long term plan, establish a minimum wage and improve in infrastructures and bureaucracy.   

 

They also suggest to foreigner manufacturers and western groups of distribution to define work policies in line with the social and economic country’s reality, to construct more bedrooms for workers with subsidized rents, to train workers and empower them in technical positions and to create works council to guarantee the correct factories’ operation.  

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