Strategy & Leadership

Made in Ethiopia: The rise of the textile industry

October 28, 2014

Global

October 28, 2014

Global
Sara Mosavi
Contributor, The Economist Intelligence Unit

Sara is a Policy and Research Manager at UK Commission for Employment and Skills working on issues such as youth unemployment, productivity, apprenticeships and further education. Prior to this, Sara worked as an Editor with The Economist Intelligence Unit's Thought Leadership team for over three years researching projects on educuation, talent, risk management and organisational behaviour. Sara holds a MSc in International Public Policy at UCL and read Italian and Linguistics at St Hugh's College, Oxford.

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The Economist Intelligence Unit spoke to Kebire’s chief executive officer, Fassil Tadesse, to find out how the textile industry in Ethiopia has developed and what its future holds.

Based in northern Ethiopia, Kebire Enteprises is a rapidly growing conglomerate, with activities spanning across textiles, shoe making, leather tanning, cotton production and even tourism. The company’s ambition is to become Africa’s leading textile manufacturer by 2017, reaching US$20m in exports, up from US$6m in 2013. The Economist Intelligence Unit spoke to Kebire’s chief executive officer, Fassil Tadesse, to find out how the textile industry in Ethiopia has developed and what its future holds. 

The Economist Intelligence Unit: How has the textile industry in Ethiopia developed, what are the current conditions and where do you see it heading?
Fassil Tadesse, Kebire: The textile tradition in Ethiopia goes back a long way, but the industry has only started to develop in the last three to four years.
Investment flow is very good. It‘s coming from India, Turkey, China, Bangladesh and South Korea, and is still rising. We have big brands like H&M coming here with their suppliers and asking the suppliers to invest in Ethiopia. There is good, strong momentum in the industry at the moment—we hope to keep it up. 

Over the next five years I am expecting Ethiopia to become the epicentre of the textile and garments industry in Africa. 

The textile industry, although fast-growing, is still nascent in Sub-Saharan Africa, compared to more developed centres in the North. So what are the main drivers of growth for the textile industry in Ethiopia?

Above all else Ethiopia needs to become the preferred destination for foreign direct investment. There are a few drivers that are helping.First, Ethiopia has a government committed to growth, and GDP growth has been consistently high over the last 11 years. Second, the cost of inputs such as land, water and power is very low. Third, there are significant investments being made in infrastructure. Fourth, Ethiopia has a land area suitable for cotton plantations that is the same size as that of Pakistan, which is the world’s fourth-largest producer. Finally, the population is very young, with a median age of 17.6 years, and it is highly trainable. 

Why has Ethiopia become attractive all of a sudden?
If you take a look at the big picture, you will see that the growth of the textile industry in Ethiopia is part of a wider pattern of movement for the global industry. Starting in the US, it moved to Europe, then to Japan, South Korea and finally to China. Over the last couple of years the cost of doing business in the textile industry in China has soared, and that is why the focus is now on Africa where the cost of doing business is still very low. As an example, look at electricity, which costs just US$0.03/kw. The cost of leasing land is also low at just US$US0.03 per sq metre per year for 80 years. 

What are the main challenges for the textile industry in Ethiopia and how can they be overcome?
An important challenge is transport logistics. Although our position is quite strategic in terms of serving the European, Asian and American markets, the country’s transport infrastructure development has not grown in a way that meets the needs of business. The government is now constructing highways, railways and roads, and I think in the next few years things will improve.

How would you describe the regulatory framework for the textile industry in Ethiopia?
From the beginning, the regulatory environment in Ethiopia has been strong. From an environmental point of view, for example, water has to be treated and you are not allowed to dump waste anywhere you like. Labour law is well established according to the standards set by the International Labour Organisation. We also have a standards authority tasked with checking that both imports and exports meet the criteria it has set.  

Do the industry’s ambitions include producing its own brands and having them recognised on the global stage? 
There are factories that have already started their own brands and are exporting to Europe. But to get Africa to the next level we need to fight corruption on the continent, make better use of its land and labour, and develop its workforce. 

This interview is part of a series managed by The Economist Intelligence Unit for HSBC Commercial Banking. Visit HSBC Global Connections for more insight on international business. 

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