Fashion

Ethiopia and Kenya: choice destinations for apparel manufacturing

Retailers like H&M, Primark and Tesco established offices in the country in 2012, and are now buying finished clothing products from Ethiopian manufacturers.
The inside of a manufacturing facility.

Ethiopia apparel manufacturing on a fast track

The Ethiopian garment industry currently employs around 37,000 workers. Several major players in the apparel industry source large volumes of basic items, such as T-shirts and trousers, from the up-and-coming nation.

Acknowledging the government’s investment-friendly policy, and the variety of incentive schemes, the European Union receives 70% of the country’s apparel exports, with as much as 60% going to Germany. In contrast, only 10% of the country’s apparel exports are destined for the US.

Despite the huge increase in exports over recent years, Ethiopia still only accounts for a mere 0.01% of total global apparel exports. But this is set to change in the near future.

 

Significant progress in five years

Yarns, grey fabric, garments and traditional handloom exports totaled just over US$160 million in 2014/2015 – this is US$100 million more than five years earlier. And the Ethiopian textile and apparel industry has grown 51% on average over this short period of time.

In terms of Foreign Direct Investments (FDI), foreign investors have received licenses for 65 international textile projects. Retailers like H&M, Primark and Tesco established offices in the country in 2012, and are now buying finished clothing products from Ethiopian manufacturers.

Textile and apparel FDIs have grown significantly since the establishment of Ayka Addis, a subsidiary of Turkish textile giant Ayka Textiles,  in 2010 for US$140 million. Other investors are also present, notably from Bangladesh and India. Bangladeshi group DBL is currently constructing a US$30 million vertically-integrated garment factory. In fact, at present 37 out of the 130 medium and large apparel factories are foreign owned.

 

Ethiopia: Massive future potential 

Upstream, only 5 to 6% of the country's 2.6 million hectares suited for cotton is used by the textile industry. In the coming years, foreign investors are expected to tap into this opportunity.

Downstream, the Ethiopian government continues efforts to boost apparel manufacturing in the country. They recently built the US$250 million Bole Lemmi industrial park on the outskirts of Addis Ababa, exclusively for foreign investors in the garment industry.

KEY FIGURES

Ethiopia, a growing market

Kenya: growing in popularity as source for garments

Similar to Ethiopia, Kenya’s apparel industry currently specializes in supplying high-volumes of bulk basic items, such as trousers. Minimum order sizes range from 10,000 to 50,000 pieces for the country’s larger apparel companies.

East Africa’s biggest economy has significantly benefited from the African Growth and Opportunity Act (AGOA) signed in 2000 and renewed in 2015. In 2013, apparel accounted for 58% of Kenya’s exports to the US, and 92% of Kenya’s apparel exports went to the US. In 2014, Kenya exported US$423 million worth of apparel to the US.

Kenya’s apparel industry is nevertheless still small, compared to the US$23 billion industry in Bangladesh that employs 4.2 million people, for example. In Kenya, the industry employs an estimated 30,000 workers and comprises only 6% of the small manufacturing sector, according to the World Bank.

The capacity of Kenya’s garment factories has grown markedly in recent years. This is partly a result of FDI from Asia and the Middle East, but also thanks to the Export Processing Zones developed by the Kenyan government. Factories have grown larger and more efficient and they now have an average of 1,500 employees, compared to 560 in 2000.