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NEWS & RESEARCH FROM THE AFRICAN CONTINENT
(#4 / 2018 - 10 April 2018)
www.africantextilesandapparel.com
Ethiopia’s textiles and apparel exports to the world in 2016 were US$108.6m
Ethiopia’s textiles and apparel exports to the EU in 2016 were
US$39.5m
Ethiopia’s textiles and apparel exports to the US in 2016 were US$34.7m
 

NEWS
SOUTH AFRICA – STATE TENDER PRICE COLLUSION, 4 April 2018
The parent of one of the companies accused of engaging in anti-competitive practices with regards a rigging a tender for the supply of fabrics to make prisoner and military uniforms – Motseng Trading - has admitted price collusion and will pay a fine of about US$16,700 (in local currency R200k). READ HERE >>

KENYA – NEW GARMENT PLANT TO USE THERMAL POWER, 1 April 2018
A Dubai-based textiles company, United Aryan (EPZ), plans to build a factory that could employ up to 10,000 workers at Olkaria geothermal fields in Naivasha to take advantage of lower electricity costs. READ HERE >>
ETHIOPIA - VALUE CHAIN SKILLS DEVELOPMENT, #1 / 2018
Ethiopia’s textile industry is booming. Growing numbers of people are set to benefit from the new jobs it is creating, and an alliance with companies is helping to ensure that they have the right skills for the labour market. A German development organisation’s perspective on what they see as the skills challenges of Ethiopia – and how they are addressing them how to addressing them. READ HERE >> (p35-9)

ETHIOPIA – GERMAN COMPANIES DOING WELL, 24 March 2018
Ethiopia's textile industry is on the upswing, and a few German companies are working to further bolster its growth. This news (rosy) news' report comments upon the sourcing of two German retail companies active in Ethiopia – Tchibo and Kik. READ HERE >>


UNITED STATES – ISSUES FACED BY US FIRMS IN AFRICA, 2 APRIL 2018
The United States' President's Advisory Council on Doing Business in Africa will soon meet to deliberate and adopt a report containing recommendations to the President on actions the US Government could take to mitigate obstacles US companies face in doing business in Kenya, Côte d'Ivoire, Ethiopia and Ghana. These are countries the Council has identified as holding particular promise of business opportunities for US firms. The report of recommendations will be a follow-up to the Council's analysis, adopted in November 2017, which identified the top issues US companies face in approaching African markets for the first time, the issues they face when competing for business opportunities on the continent, and when they run their African business operations. READ HERE >>
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Comment

I assume this structure must be deliberating the final report – “US Trade & Investment with Sub-Saharan Africa: Recent Developments” – which was commissioned by the US Trade Representative in October 2017. This report will be made public – but has not been released. READ HERE >>

​Given that one of Kenya's largest exports to the US is apparel; and that Ethiopia has ambitions to export huge volumes of garments to the US it is possible that the US may place textile and apparel trade on the table in order to strong arm these countries to be more receptive to US businesses active in other economic sectors. If they were to do so this it could pitch one US business interest group against the interest of others – those firms that want to supply goods and services into Africa against those that make a healthy profit from buying African made apparel!


RWANDA – WORN CLOTHING & AGOA RESPONSE, 3 April 2018
"Statement on suspension of Rwanda’s AGOA eligibility for apparel exports, in response to restrictions on second-hand clothing."
“The notification by the United States on suspension of duty-free status for Rwandan apparel products under the African Growth & Opportunity Act (AGOA) follows a decision by East African countries to raise tariffs on second-hand clothing imports, in order to promote local manufacturing capacity in garment and other industries. AGOA is a commendable unilateral gesture to African countries, including Rwanda, meant to promote trade and development through exports. The withdrawal of AGOA benefits is at the discretion of the United States. READ HERE >>
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Comment
 
Rwanda's total exports (not only apparel exports) to the United States in 2017 totaled US$43.7m. Exports fell under three categories, namely those:
- claiming no US trade preferences = US$39.1m
- under US GSP trade preferences = US$2.4m
- under AGOA trade preferences = US$2.2m
The only garment (knit) exports to the US fell under the AGOA trade preference regime and were worth US$1.5m.

In 2016 (the ComTrade trade database does not have available 2017 data) showed that Rwanda imported about US$5.8m worth of worn clothes (incl. shoes) - approximately US$3.8m came from the EU, and US$150k came from the US.

Thus the Rwanda decision to abandon AGOA, on the face of it, comes down the fact that it does not want to be forced to allow for the import of US worn clothes - as was shown in 2016 about US150k worth of American worn clothes (US export trade data showed that Rwanda bought US$112k of US worn apparel).

The decision by Rwanda to thumb its nose at the US is in part influenced by its “Domestic Market Recapturing Strategy” (March 2015). READ HERE >> Rwanda wants to build up its own domestically focused manufacturing base. According to the Rwanda government the Strategy rests on three pillars of activities: i) horizontal activities aim at supporting local production for the domestic market across all sectors; ii) policy measures aim at removing obstacles to production or getting products to market in specific sectors; and iii) the Strategy foreseeing the development of specific investment projects where supply side constraints or market opportunities are identified.

The Rwandan government must surely also have done a calculation as to how it could divert its US AGOA sales to other markets; or re-orientate the production at existing facilities towards the local market place. It may have also done a calculation as to how the folk engaged in the worn clothing trade (which may be many thousands) could be absorbed into other parts of the economy.

Rwanda will also have to put significant effort into developing a manufacturing sector that is capable of making clothes for local suppliers otherwise the local population will have to buy imported - new - clothes! Such a situation will not make anyone better off!

Of course the US gave Rwanda a deadline of 60 days to remove impediments to US worn clothing imports. It is of course highly likely that one party (or both) may blink and cut a deal. So much at stake - business opportunities, jobs and lives - over a paltry US$150 000 worth of US waste! Of course defending US business interests worth this much may be something that appeals to the unpredictable DNA of the sitting US President.
 
NOTE
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FEATURES
ETHIOPIAN INVESTMENT INCENTIVES
Ethiopia offers a detailed set of investment incentives for cotton, textile and apparel value chain entrepreneurs. The incentives include:

Business & Personal Tax Incentives
INDUSTRY – a business income tax exemption of up to 6 years for textile/apparel manufacturers. Incentives may be reduced depending on the geographic location of investment (i.e. reduced by two years if the investment is in Addis Ababa or the Special Zone of Oromia). But the tax breaks may be extended:
  • if the business is in an industrial park: an additional 2 to 4 years for those firms with plans to export 100% of production and who achieve at least 80% in exports. If the company is in an industrial park in Addis Ababa or the Special Zone of Oromia area it will get a 2 year extension; while being located in industrial parks in all other areas will get a 4 year extension
  • for exporters an export-linked business income tax exemption of another two years for those that export at least 60% of theoir output or who supply to an exporter.

AGRICULTURE – a business income tax exemption of up to 6 years for crop production (i.e. cotton). Incentives may be reduced depending on the geographic location of investment – reduced by up to 3 years if the investment is in Addis Ababa or the Special Zone of Oromia.

INDUSTRIAL PARK DEVELOPERS – a business income tax exemption for between 10 and 15 years applies to industrial park developers. 10 years if the park is in Addis Ababa or the Special Zone of Oromia; and, 15 years for parks in other areas.


PERSONAL INCOME TAX – an exemption for up to 5 years for expatriate employees of sourcing companies located in industrial parks.

Customs Duties & Related Tax Incentives
Customs duty exemption for producer exporters, indirect producer exporters, raw material suppliers, and/or, exporters applicable through duty draw-back, voucher, and bonded export factory and similar schemes.

An exemption from customs duties and other taxes (VAT, sur-tax, withholding and excise tax) on:
  • imported capital goods, construction materials, select automotive vehicles
  • select imported spare parts used by the textile and apparel manufacturing industry
  • on the import of personal effects by industrial park residents.

For further details on incentives available to those active in the cotton-textile-apparel value chain in Ethiopia. READ HERE >>


Want to invest in Ethiopia?
Contact the
Ethiopian Investment Commission (EIC)

www.investethiopia.gov.et

ETHIOPIA'S INDUSTRIAL PARKS
OPERATIONAL INDUSTRIAL PARKS
(Note: the Hawassa Industrial Parkwas profiled in last week's Monitor newsletter- #3 / 2018)

Bole Lemi I Industrial Park (phase 1)
Location: SE part of Addis Ababa (approx. 823km from port of Djibouti)
Land Area: 156ha
Cluster: textiles/apparel (and footwear)
Industrial Structures: 10 sheds of 5,000m/2; 10 sheds of 11,000m/2

Dire Dawa Industrial Park (phase 1)
Location: eastern part of Ethiopia (approx. 380km from port of Djibouti)
Land Area: 150 ha (3,000ha available)
Cluster: multiple sectors including textiles/apparel
Industrial Structures: 5 sheds of 11,000m/2; 6 sheds of 5,500m/2; 4 sheds of 3,000m/2 (park cost approx. US$190m to develop)

Adama Industrial Park (phase 1)
Proximity to Port of Djibouti: 678km
Land Area: 120ha (2,000ha available)
Cluster: multiple sectors including textiles/apparel
Industrial Structures: In March 2018 it was reported that the park - with 19 structures - was 86% complete (park cost approx. US$120m to develop).


PLANNED INDUSTRIAL PARKS THAT WILL FOCUS ON TEXTILES & APPAREL

Bole Lemi II Industrial Park (phase 2)
Location: SE part of Addis Ababa (approx. 823km from port of Djibouti)
Land Area: 186ha
Cluster: textiles/apparel

Mekelle Industrial Park (phase 1)
Proximity to Port of Djibouti: 750km
Land area: 75ha (1,000ha available)
Cluster: multiple sectors including textiles/apparel

Kombolcha Industrial Park (phase 1)
Proximity to Port of Djibouti: 480 km,
Land area: 75ha (700ha available)
Cluster: multiple sectors including textiles/apparel


The above information must be regarded as provisional. This information was mainly gathered from the (not up to date) websites of the Ethiopian Investment Corporation SEE HERE >> and the Ethiopian Industrial Park Development Corporation. SEE HERE >>
 
Comment

"Ethiopia's focus on manufacturing offers huge promise, but its textile industry must have the world's highest ratio of hype-to-production."
Source - a recent Twitter tweet
In spite of rosy reports about the Ethiopian textile and apparel miracle one constantly also hears negative murmurs about the unhappiness of some textile and apparel plant owners and their frontline managers, as well as from some buyers of garments.

A myriad of problematic have been raised, including: slow and expensive logistics, inefficient customs, relatively unproductive human resources (no where nearly as efficient as Kenya), telecommunications (slow, expensive, prone to shutdown in times of political crisis), power availability (yes its cheap and maybe "green" - but distribution systems are atrocious), landfills that are unable to properly accept factory wastes (an uncomfortable fact when your textile and apparel revolution is based upon trumpeting its "eco" credentials), and, apparently the financial systems (which are expensive) have a range of issues that niggle manufacturers (common complaints often relate to the processing of Letters of Credit.

The Ethiopian Federal Government has thus far managed to keep a lid on private sector dissent. During 2017 it was particularly successful in keeping quiet the US Administration’s hints that there was a real possibility that it could lose its AGOA status due to the country's fractured political environment. Its also highly possible that some of the larger brands/retailers that have committed huge resources to opening up sourcing in Ethiopia have also managed to pressure the firms that manufacture product for them in Ethiopia to tone down their public critiques.

However, its always possible that someone will eventually break ranks - and do so very publicly. Some plants could leave. There are rumours that one global retailer / brand that is already active in Ethiopia is now looking at African expansion plans – but these plans do not include Ethiopia. If true that reveals a lot.

The Ethiopia government should perhaps consider calling for a mini time-out on its future ambition to put in place structured plans, backed with significant resources, to fix some issues. This may mean juggling some budget resources – for example surrendering the resources allocated to build another industrial area and use those funds to develop an appropriate landfill that can accommodate wastes from the garment and textile industry; ensuring that inland logistic bottlenecks and costs are addressed; ensuring that firms have adequate remuneration policies that link productivity improvements with wage incentives; etc. The government could also give more structure to the operations of many of the donors that operate in Ethiopia by requesting them to work at help fixing problems in particular worksteams.

I have spent a long time working in Lesotho - and it did concern me that one manufacturer, who had been in Lesotho for years, started manufacturing operations in Kenya. Lesotho's wages were much lower than that of Kenya's, Lesotho's (then) corporate tax of zero has highly attractive, and, it was connected to South Africa's modern (and fairly efficient) transport infrastructure. But these factors did not sway the firm's head office decision making - the Taiwanese multinational now has at least five plants in Kenya.

In Ethiopia's case having some of the lowest wage rates, the best fiscal incentives, and picturesque eco-friendly industrial parks in the world is no guarantee for success. There are other things that make manufacturers happy. Fewer headaches is highly important. Workplace productivity is another. Ethiopia will have to work hard on urgently addressing these issues.

Its necessary that Ethiopia’s cotton-textile-apparel industrial revolution succeeds. Not only is it important for Ethiopia; but its important for Africa. Huge state led interventions are very important and can be an example of what could be done. The Federal Government should use its inbuilt central planning DNA to list issues of concern and then use all the resources it has (including those of donors and their development projects) to expeditiously fix issues - if it does not do so its industrial revolution will falter.
 

APPAREL SUPPLY CHAIN TRANSPARENCY (PART 3)

In April 2017 a coalition of unions/human/labour rights advocates requested 71 apparel and footwear retailers and brands to sign a transparency pledge that would, if they signed it, require them to reveal core information about the producers that make products for them. The retailers/brands that were approached by the coalition were asked to respond by December 2017.
RETAILERS / BRANDS "TRANSPARENCY PLEDGE" DISCLOSURES
  • Benetton – does not fully comply with the "Transparency Pledge" but it does release some information about factory suppliers - >100 suppliers in Egypt, Morocco, Tunisia. SEE (2016 list)
  • PVH – does not fully comply with the "Transparency Pledge" but it does release some information about factory suppliers - 19 suppliers in Kenya, Lesotho, Madagascar, Mauritius, Ethiopia, Egypt. SEE On their Corporate Social Responsibility site - PVH provides an over view of the initiatives they are undertaking at their own factories / the factories owned by others that make product (its unclear) for them in the Hawassa Industrial Park. READ HERE >>
  • Tchibo – fully complies with "Transparency Pledge" except it does not disclose suppliers' owner enterprise - 4 suppliers in Egypt, Ethiopia, Tunisia. SEE
  • VF Corporation – does not fully comply with the "Transparency Pledge" but it does release some information about factory suppliers - 24 suppliers in Egypt, Kenya, Mauritius, Lesotho, Tunisia. SEE
The African producers identified above may include some footwear and fashion accessory manufacturers; as well as external/internal services suppliers (e.g. commission embroidery, laundry, garment screen-printing services, etc).
 

FACT OF THE WEEK
ETHIOPIA'S TOP GARMENT EXPORTS TO THE EU IN 2017
ETHIOPIA'S GARMENT EXPORTS TO THE EU (2013-17)
Source: Eurostat
 
AFRICAN VALUE CHAIN PROJECTS & ORGANISATIONS


SUPPORTING INDIAN TRADE & INVESTMENT FOR AFRICA (SITA)

About: Established in March 2014 and planned to run through to 2020, the regional project claims that it will improve the business environment through public-private dialogue and partnerships; improve the services provided by regional and national trade and investment supporting institutions; enhance the competitiveness of East African businesses; ensure greater export flows from East Africa to India and, increase investments, knowledge and technology transfer from India to East Africa. SITA is funded (GBP19m plus a further GBP2.4m) by the UK’s Department for International Development (DFID) and is implemented by the International Trade Centre (ITC). READ HERE >>

Cotton, Clothing & Textile Activities: SITA interventions have focused on the following kinds of activities: i) the development of value chain roadmaps / strategies; ii) interventions to reduce cotton contamination and improve ginning practices; iii) improve the marketing of cotton lint; iv) facilitate textile and apparel sector investment via promotion activities; v) upgrade the operations of textile and apparel plants; vi) improve the working of the handloom sector.

Operations: SITA is operating in the cotton, textiles, and apparel value chain in India, and in Ethiopia, Kenya, Tanzania and Uganda. It also runs other sector programmes affecting coffee, pulses, spices, oil seeds, leather and information technology/business process out sourcing. It also operates in Rwanda.

HQ: Geneva (Switzerland).

Website: www.intracen.org/sita (for broader programme) and for some anecdotal cotton-textile-apparel value chain material. READ HERE >>
 
RESEARCH & REPORTS
"Ethiopia: Textile & Clothing Value Chain Roadmap 2016 - 2020". Formulated by the Ethiopian Textile Industry Development Institute (ETIDI) and the Ethiopian Textile & Garment Manufacturers' Association (ETGAMA). 2015. Research guided by the International Trade Centre (ITC) and funded by the Ul's Department for International Development (DFID) Addis Ababa, Ethiopia.

Synopsis: The goal of the "Ethiopia: Textile & Clothing Value Chain Roadmap" is to set the sector on the course of strategic development by addressing constraints in a comprehensive manner and defining concrete opportunities that can be realised through the specific steps detailed in its Plan of Action (PoA). Ethiopia’s current model has performed well, yielding strong economic and social returns. Even so, performance has fallen short of the sector’s targets and it has become clear that the industry must unite and evolve in order to leapfrog into higher growth and value addition.

The sector’s strategic orientation should follow a twofold approach. Firstly, Ethiopia can build on its current success and leverage its cost competitiveness to expand market diversification and penetration. Secondly, the sector can capture greater value by pursuing full value chain integration, first by bridging the skill gap to increase productivity, especially considering upcoming wage increases, and later by enhancing weak upstream capacities. The PoA responds to this vision by setting four strategic objectives to support its implementation. i.) Improve productivity and employment outcomes through skills development. ii.) Strengthen the enabling environment to favour sector development. iii.) Establish conditions to harness foreign direct investment (FDI) as an engine for growth in T & C. iv.) Foster product and market development through the use of trade information. v.) Enable market penetration and product development through trade intelligence. Full paper can be READ HERE >>
 
UPCOMING EVENTS
  • Africa Occupational Safety & Health (A-OSH) - Trade Show - 22-24 May 2018. Johannesburg, South Africa. For more information: www.aosh.co.za
  • Source Africa - Trade Show - 20-21 June 2018. Cape Town, South Africa. For more information: www.sourceafrica.co.za
  • 14th Symposium of the Southern & East Africa Cotton Forum - Workshop - 4-6 July 2018. Harare, Zimbabwe. For more information: SEACF
  • Apparel Sourcing New York - Trade Show - 23-25 July 2018. New York, United States. For more information: www.apparel-sourcing-usa.us
  • Sourcing at Magic - Trade Show - 12-15 August 2018. Las Vegas, United States. For more information: www.ubmfashion.com
  • International Textile Manufacturers' Federation (ITMF) - Annual Conference - 7-9 September 2018. Nairobi, Kenya. For more information: www.itmf.org
  • Origin Africa – Trade Show - 9-11 September 2018. Nairobi, Kenya. For more information: www.originafrica.org
  • Apparel Sourcing Paris - Trade Show - 17-20 September 2018. Paris, France. For more information: www.apparelsourcing.fr.messefrankfurt.com
  • Africa Sourcing & Fashion Week (ASFW) - Trade Show - 1-4 October 2018. Addis Ababa, Ethiopia. For more information: www.asfw-online.com
  • Textile Exchange Sustainability Conference - Annual Conference - 22-24 October 2018. Milan, Italy. For more Information: www.textileexchange.org
  • Destination Africa - Trade Show - 17-19 November 2018. Cairo, Egypt. For more information: www.destination-africa.org
  • ATF Expo - Trade Show - 20-23 November 2018. Cape Town, South Africa. For more information: www.atfexpo.co.za
  • 77th Plenary Meeting - International Cotton Advisory Committee (ICAC) - Annual Conference - 2-7 December 2018. Abidjan, Ivory Coast. For more information: www.icac.org
 
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CLASSIFIEDS
JOBS
TENDERS & PROCUREMENT
MANUFACTURING EQUIPMENT WANTED / FOR SALE
Looking for staff? Want to engage a consultant? Have equipment to sell? Do you need 2nd hand machinery? Have a tender? For a limited period the "African Cotton, Textiles & Apparel Monitor" will publish (free of charge) select classified advertisements from firms / development organisations active in the Africa's crop to shop value chain. Adverts limited to 50 words / 300 characters (and may include a mini logo).
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Africa New Confection, one of Ethical Apparel Africa’s partner factories based in Benin (West Africa) is looking for (1) Senior Mechanic (2) Supervisor. Please look at the job descriptions on www.ethicalapparelafrica.com/careers. Send your resume and cover letter to info@ethicalapparelafrica.com.

Ethical Apparel Africa is looking for talented and passionate individuals to fill new roles as Production Manager, Quality Assurance Manager, Technical Manager and Technical Director based in Benin and Ghana (West Africa) so do not hesitate to send your resume and cover letter to info@ethicalapparelafrica.com.
 
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about Mark Bennett - Editor
"The African Cotton, Textiles & Apparel Monitor"
I have almost 30 years' experience working in Africa's cotton, textiles and apparel value chain. Initially I was, for 15 years, a sector trade unionist in South Africa; then, from 2004 onwards, I worked as a development consultant for various Southern / Eastern African governments, and domestic private sectors. In my development activities I have been engaged by private sector foundations, and by DFID and USAID funded contractors. I find it rewarding creating development interventions that help cotton, textiles and apparel stakeholders to better processes, improve productivity, increase sales and add investment. See my full CV at Devex or LinkedIn.
 
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