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LOGO OF THE
NEWS & RESEARCH FROM THE AFRICAN CONTINENT
(#15 / 2019  -  11 July 2019)
www.africantextilesandapparel.com
AGOA Country Eligibility Review Commences
The EDCON Bailout
Saga Continues
Billion Dollar Corruption Hits Angolan Textile Plants
NEWS


ETHIOPIA - LABOUR LAW AMENDMENT PASSED,  6 July 2019
The Ethiopian House of People's Representatives (HPR) has approved a draft law to revise the country's existing Labour Proclamation.

The new draft law - Labour Proclamation No.1156/2019 - provides for:
  • female workers to have 120 days of maternity leave (one-month pre-natal leave and a three-month-long post-natal leave).
  • the extension period of probationary employment (from 45 days to 60 days - if a worker, during the probation period, proves to be unfit for the post the employer can terminate the contract of employment without notice, and without being obliged to pay severance pay.
  • procedures for the expeditious settlement of labour disputes.
  • a strengthening of the powers and duties of the government organ charged with the responsibility of inspecting labour administration, particularly labour conditions, occupational safety, health and work environment.
Comment:
In spite of speculation, the draft legislation does not introduce a mechanism related to the setting of minimum wages in Ethiopia's textile and apparel manufacturing industry (or minimum wages in any other sector of the economy).

The Ethiopian News Agency - the official news agency of the Government of Ethiopia - stated that the revised Labour Proclamation attempts to "synchronise the law with the country's economic growth, development policies and strategies along with industrial developments."  READ HERE >>

Hmmmmmm!  Seems awfully like a phrase "we will do XXX in the "national interest"!  I ask the question who determines the "national interest"?  As I said in a previous blog post, it is going to be interesting to see which side of the class divide will win the most from this draft legislation.

The hard reality, according to Nebil Kellow of Enterprise Partners (a British taxpayer-funded economic development project operating in Ethiopia - SEE >>) is that some degree of "generational sacrifice needs to take place" in Ethiopia.  According to the authors of a study on Ethiopia's textile and garment sector "he [Kellow] meant today's workers likely will have to endure exceptionally low wages and inhospitable living arrangements while they accumulate industrial skills and achieve productivity levels that in the future will bring them, and their children, higher pay and better circumstances" (the NY Stern Report: "Made in Ethiopia: Challenges in the Garment Industry's New Frontier"  (May 2019; pg 14).  READ HERE >>)

In other words, Ethiopia's current "industrial revolution" will be heavily subsidised by the sons and daughters of rural peasants!  Then, I suppose, clothing manufacturers and their buyers will find another cheaper place closer to the wages bottom ... or maybe they will use robots!

In my view this does not have to be the case - there are perhaps better ways in which an ambitious industrialisation programme can be pursued - yes not the most perfect ... but more considered ... caring ... better ... and one which will ensure better and more productive factories!

While the precise details of the current labour law amendments are unknown, it does raise some questions:

On probation for textile and apparel workers some issues (and this is not exhaustive):
  • will garment workers be provided with more than five days soft skills training and then two weeks "hand-on training" as reported by the NY Stern report.  If an employer thinks that someone is incapable of doing a job, then more than 15 days of training must be required for a machine operator.
  • because of reported clashes between expatriate supervisors and local blue-collar workers lengthening the period of probation seems very harsh.  Expatriate supervisors who are not sensitive to Ethiopian culture and who cannot speak the local language will have enormous control; while local indigenous supervisors will have considerable control of workers lives - friends and relatives will no doubt be employed; while enemies and perhaps those from other ethnic groups could see their work contracts terminated.

On maternity leave for textile and apparel workers (and this list is not exhaustive) will:
  • the maternity leave be paid maternity leave?
  • there be a limit to the number of confinements?
  • women have to have worked for a minimum period with the same employer before they could qualify for maternity leave?  [Undoubtedly workers whose pregnancy becomes known while they are serving probation will be dismissed!]

On paternity leave for textile and apparel workers
  • it appears as if there is none!
 
More analysis when an English version of the amendments becomes available.


SUB-SAHARAN AFRICA - AGOA COUNTRY ELIGIBILITY REVIEW,  28 June 2019
The Office of the US Trade Representative (USTR) has announced the initiation of the annual review of the eligibility of the sub-Saharan African countries to receive the benefits of the African Growth & Opportunity Act (AGOA).  The AGOA Implementation Subcommittee of the Trade Policy Staff Committee (Subcommittee) is developing recommendations for the President on AGOA country eligibility for the calendar year 2020.  The Subcommittee has requested comments for this review and will conduct a public hearing on this matter.  READ HERE >>

Comment:
Section 104 of AGOA provides for a number of country eligibility requirements.  In this regard countries must prove they have established or are making continual progress toward establishing the following: a market-based economy; the rule of law; political pluralism; the right to due process; the elimination of barriers to US trade and investment; economic policies to reduce poverty; a system to combat corruption and bribery; and protection of internationally recognised worker rights.  The country may also not engage in activities that undermine US national security or foreign policy interests or engage in gross violations of internationally recognised human rights. 

It will be interesting to see how this review unfolds.  Who will make representations; and involving what issues?  Will the US's Solidarity Centre (the international arm of the US's American Federation of Labour & Congress of Industrial Organisations (AFL-CIO) - SEE >>) be making an input? - they have recently been running a range of seminars, and undertaking visits, in East and Southern Africa.  READ HERE >>   In my view, it is possible that the following countries could be spotlighted by the Solidarity Centre - Kenya, Ethiopia, eSwatini/Swaziland and Lesotho. 
-----------------------------------------
 
THE 18TH 2019 AGOA FORUM
The AGOA legislation makes provision for the establishment of a United States-Sub-Saharan Africa Trade & Economic Cooperation Forum (a.k.a. the "AGOA Forum").  The legislation directs the US President to convene "annual high-level meetings between appropriate officials of the US Government and officials of the governments of sub-Saharan African countries in order to foster close economic ties between the United States and sub-Saharan Africa".

The next Ministerial Forum is scheduled to take place in Abidjan, Cote d'Ivoire on 5-6 August 2019 - a civil society event will be held on 3-4 August, and a private sector session will be held on 4 August.

It's understood that at a planning meeting for the Forum convened by the US State Department in late April 2019 that there was a significant discussion on labour rights and the AGOA labour eligibility standards as topics for discussion at all elements of the AGOA Forum.  It was suggested that the International Labour Organisation's (ILO) regional headquarters in Abidjan should lead to labour being a central issue.


SOUTH AFRICA - STATE BAILOUT OF EDCON FASHION RETAILER UNDER SCRUTINY,  27 June - 4 July 2019
The Congress of South African Trade Unions (COSATU - SEE >>) signalled a "massive fight" with the ruling African National Congress (ANC) if the state-owned fund manager failed to rescue South Africa's second-largest clothing retailer, EDCON Holdings (SEE >>).  COSATU wanted the government to use public servants' retirement funds (estimated to be worth R2-trillion (US$141bn) - which is managed by the Public Investment Corporation (PIC - SEE >> ).  READ HERE >>

The bailout saved some 140,000 jobs in the South African value chain - staff in EDCON stores and including the local manufacturers that supply them with product.  In response to the significant public debate on the EDCON bailout the PIC - whose previous operating modalities are currently being probed by a commission of enquiry which is looking at the possibility that some PIC decisions are being driven by political considerations - stated: 

"From a governance point of view, the investment in EDCON was made on behalf of the Unemployment Insurance Fund (UIF) and was in line with the client's investment mandate.  The PIC had an extensive engagement with all the stakeholders, including the UIF, labour unions and EDCON before making the final investment decision.  In making the investment decision, the PIC subjected the transaction to the PIC's rigorous internal investment processes and did not succumb to any external political or union pressure as suggested by some media houses." 

"The PIC confirms that binding agreements have been concluded amongst EDCON Limited's existing secured lenders, the PIC on behalf of the UIF and participating landlords, which will result in the implementation of a recapitalisation programme for EDCON in terms of which the debt and capital structure of EDCON was restructured.  This programme includes the contribution of new cash commitments and rent reductions totalling approximately R2.7bn (US$190.4m) into the EDCON group, with PIC investment totalling an aggregate amount of R1.2bn (US$84.6m)."  READ HERE >>

And now the former Head of the PIC - Dr Matjila - has claimed that one of the reasons why the PIC fired him was because he did not want to endorse the PIC funding the EDCON rescue.  READ HERE >>

Comment:
I have a suspicion that this story may still have some legs!

Of course, the state bailout does raise some questions.  I have no problem when the state gets involved in saving massive enterprises whose collapse could cause tens of thousands of job losses, or the state intervening to rescue firms that are critical for the efficient operation of a value chain.  Hey - if the capitalist system and major shareholders want their banks saving by the state - then why not save companies which employ large numbers of people?

However, unless there are clear criteria that would guide intervention strategies, then the Government can expect a queue of people demanding the rescue of failed businesses.  This is something South Africa's Industrial Development Corporation (IDC) will need to address too.  What should determine its interventions to save companies - should it rescue companies and then operate these companies in competition to existing private sector owned and operated enterprises?  Should it only support private sector led interventions?  Should it get involved when it is clear the company has no chance of survival?

I have heard rumours that as a contribution to the saving of EDCON that the South African National Bargaining Council for the Clothing Manufacturing Industry used funds in its "Industry Protection Fund" - a pot of funds accumulated by contributions from workers and employers - to underwrite some of the costs related to putting the EDCON rescue package.  It would be interesting to see how much funds were utilised; and what amounts were given to parties for what tasks related to the EDCON rescue.


SOUTH AFRICA - EDCON'S RESTRUCTURING,  1 July 2019
Some vignettes from the EDCON CEO:
  • "With the closure of poor-performing stores and the international brand stores as part of the turnaround plan, about 1,000 permanent staff were affected; however, most chose to move to other stores.  Only about 100 staff chose not to move and took retrenchment packages."
  • "We've closed about 150 stores as part of the restructuring and now have about 1,200 stores operating.  While the store closures and rightsizing as part of the restructuring have been finalised, we may close other stores in the future depending on each store's profitability, and as and when leases come up for renewal."
  • When asked how much floor space EDCON has given up as part of the consolidation: "about 10% over the last 18 months.  This represents around 140,000m2."
  • "EDCON may get to between 900 and 1,000 stores if we sell CNA and our Edgars Active business,"  ...  "We said at the start that we may get to this number of stores through closures and disposals.  However, I am not saying that we are selling CNA or Edgars Active right now, but I have always said CNA is not core or a strategic part of our business in the long term."  READ HERE >>

Comment:
A report now also says that as part of the sale agreement - Celrose, which makes woven clothing and footwear manufacturer Eddels Shoes - secured a new "merchandise supply agreement" with EDCON.  It would be interesting to know what the precise details of this supply agreement are?  Would it stand the scrutiny of the country's competition authorities?

As was reported in the last edition of this newsletter, the IDC will now be spending millions upgrading both plants - I hope that this fact was taken into consideration when they purchased the Celrose Group?  So why will the IDC not reveal how much they paid for Celrose - folk have asked this question?  It's public money the IDC used?

And now we hear the IDC is going to pump in mega cash into the operation as an upgrading exercise.  This begs the follow-up question - how can rival clothing and footwear manufacturers compete with a company with so much state resources behind it?  In the last edition of this blog, I raised this question related to KwaZulu-Natal towelling manufacturer Zorbatex, which now has to compete with an IDC (i.e. public) wholly-owned conglomerate comprising Colibri and Glodina towelling.


ANGOLA - GOVERNMENT TO SEIZE TEXTILE MILLS DUE TO CORRUPTION,  14 June 2019
An Angolan court has ordered the seizure of three textile factories located in the provinces of Benguela, Kwanza Norte and Luanda, the National Recovery Service of the Attorney General's Office (PGR) has announced.  The three factories subject to precautionary measures for seizure are the fabric factories of Mahinajethu-Satec, located in Dondo, Kwanza Norte province, Alassola-África Têxtil in Benguela and New Textang II in Luanda.  The statement said that the measure is part of ongoing work to investigate public funding granted to private companies, "some of which is an irregular privatisation process," without the voluntary repayment of these funds to date.  The PGR reported that the three factories seized were financed through a credit line of the Bank of Japan for International Cooperation in the amount of US$1,011,258,925, which loans are being charged to the Angolan state.  READ HERE >>

More details on the resuscitation of the three Angolan textile plants - whose upgrades cost an eyewatering US$1bn plus - can be seen in a previous copy of the "African Cotton, Textiles & Apparel Monitor" - Vol1. No6.


ETHIOPIA - AYKA ADDIS INTEGRATED PLANT TO BE AUCTIONED,  29 June 2019
The ill-fated Ayka Addis Textile & Investment Group, a textile manufacturer who went bankrupt, will be sold by auction in July 2019 - to recover loans the manufacturer received from the embattled the Development Bank of Ethiopia (DBE).  The company used to owe some ETb2.3bn (US$ 79.7m).  The textile plant which entered into operation in 2010 with a total investment of US$240 million at Alemgena, some 20km west of Addis Ababa stretching on a 205,000sqm land, used to have a capacity of making 70,000 pieces of readymade clothing and various types of garments.  READ HERE >>

Issues relating to the sale may be found on the Development Bank of Ethiopia's web site: www.DBE.com.et (but it rarely works).  For a good overview of the DBE's woes.  READ HERE >>


TANZANIA - COTTON SCALE CHECKED FOR ACCURACY,  1 July 2019
The Weights & Measures Agency (WMA) in the Shinyanga Region has embarked on an awareness campaign for Kahama cotton farmers over the identification of accurate weighing scales verified by the agency.  Scales verified by the WMA must have a government seal and stickers to avoid tampering by unscrupulous traders.  READ HERE >>


MALAWI - COTTON,  June-July 2019
CHINESE COMPANY RAMPS UP COTTON PRODUCTION
Malawi has called in Chinese to ramp up cotton production - and they are making a significant impact but at a cost, and skills transfers are not taking place.  China-Africa Cotton is committed to invest and develop the African agriculture industry.  The company has established seven ginneries and two cotton seed oil extracting mills and one special seed plant in Africa.  READ HERE >>

SUB-STANDARD COTTON SEED BLAMED FOR LOW PRODUCTION
The Cotton Council of Malawi board chairperson has attributed the dwindling production of cotton in the country to the continued use of sub-standard seeds that other companies supply to farmers.  Currently, Malawian farmers produce less than 20,000 tonnes of cotton against the 600,000 tonnes of cotton ginners capacity.  READ HERE >>


MOZAMBIQUE - COTTON HARVEST DATA,  2 July 2019
The oscillation of cotton prices on the world market, plus the impact of natural disasters, explains the reduction in Mozambican cotton production in the 2018-2019 agricultural year, according to Agriculture Minister.  Speaking at the launch of this year's cotton marketing campaign, the Minister stated the amount of raw cotton that should be sold during the campaign is estimated at 60,000 tonnes, which is a reduction of 8.7% on the previous year.  READ HERE >>


ETHIOPIA - GOVERNMENT DEBT
Ethiopian government total debt from foreign and local lenders surpasses US$52.3bn, the Ministry of Finance of Ethiopia said in a report for the 11 months report for the Ethiopian fiscal year started 8 July 2018.  In January 2019 the total debt of Ethiopia was around US$50bn.  READ HERE >>

Recently, the Ethiopian Prime Minister stated that the country had been fortunate to restructure 47% of the Chinese debt that the country had - changing from "commercial" to "concessional" loans - thereby saving US$400m per year.  (READ HERE >>)


Comment:
A significant part of this debt must relate to the government's industrialisation drive - the development of industrial parks, the construction of road and rail infrastructure that will connect manufacturers to ports, to improved power and water supplies, etc.  One of the main problems causing such a large debt must be government planners getting it wrong - many unrealistic growth targets have been set and this has impacted upon the ability of the country to be able to start paying back what it has borrowed (for example: cotton production and exports).  This week the Ethiopian Prime Minister stated that he envisaged that the three million jobs would be created.  (READ HERE >>) - a highly unlikely claim.


ETHIOPIA - INDUSTRIAL PARKS ... SOME STATS,  6 JULY 2019
According to the CEO of Ethiopia's Industrial Parks Development Corporation (IPDC SEE  >>) for the financial year 2018/19:
  • seven industrial parks are operational; three of these (Adama, Jimma, Debre Birhan) were inaugurated in the current financial year.  Four more industrial parks (Bole Lemi II, Bahir Dar, Dire Dawa, and Kilinare)  are (apparently) soon to be ready for operation.
  • five of these industrial Parks are producing exportable items (not only garments - but other goods). In the current financial year they exported product worth US$110m.
  • 50,000 manufacturing jobs had been created; 39,000 temporary jobs during the construction phase.
  • the IPDC had collected ETb316m (US$11m) from renting of sheds and selling of services, which has shown ETB161m (US$5.6m) increase compared to the last financial year.
The CEO stated: “We didn’t encounter power interruption in this year and this played a great role for our export achievement”, she said, adding that the corporation is doing research, in collaboration with the Ethiopian Ministry of Mines & Petroleum, to seek alternative sources of power.  READ HERE >>


LESOTHO - GOVERNMENT ALLOWS WOOL FARMERS TO TEMPORARILY EXPORT THEIR OWN CLIP,  1-3 July 2019
A three-month grace period temporarily lifting government's ban of the independent export of Lesotho's wool and mohair announced by country's Prime Minister was condemned by disgruntled farmers as a cover that continues Chinese monopoly over the country's precious products.  READ HERE >>  and  READ HERE >>

Comment:
The link between select members of Tom Thabane's government, the foreign owned Lesotho wool and mohair trading house, and select politicians is worthy of a probe.  There is an unpleasant odour to all of this - and somehow I think its not one in the direction of the national interest!


LESOTHO & EGYPT - LEVI STRAUSS & INTERNATIONAL FINANCE CORPORATION ENVIRONMENTAL COMPACT,  27 June 2019
"By 2025, Levis Strauss (LS&Co.) is committed to achieving a 90% reduction in greenhouse gas emissions in its owned-and-operated facilities, 100% renewable energy in its owned-and-operated facilities and a 40% reduction in greenhouse gas emissions across its entire global supply chain.

"As part of Levi Strauss' efforts to reach that latter goal, it has signed a US$2.3m cooperation agreement with the International Finance Corporation (IFC), a member of the World Bank Group, to help it meet it's corporate sustainability objectives to reduce Greenhouse Gas (GHG) emissions and water use in its supply chain.

"Under this agreement, which follows IFC’s Partnership for Cleaner Textiles (PaCT - SEE >>) approach, IFC will work with 42 designated LS&Co. suppliers and mills to reduce GHG emissions by helping suppliers identify and implement appropriate renewable energy and water-saving interventions across ten countries – including in Lesotho and Egypt.  READ HERE >>


EASTERN AFRICA - TEXTILE FIRMS SHINE AT KAIZEN AWARDS,  29 June 2019
Tanzanian's A-to-Z Textile Mills (SEE >>) and Ethiopia's MAA Garment & Textiles (SEE >>) claimed top positions in the first African Kaizen award held in Tunis, Tunisia in late June 2019.  MAA Garment shared the "Outstanding" level award with A-to-Z textile Mills for registering significant improvements in quality and waste management after practical application of Kaizen (SEE >>) programme.  READ HERE >> and  READ HERE >>

Comment:
It's known that one of A-to-Z Textiles technology partners is the Japanese Sumitomo Corporation.


EGYPT - US AWARD OVER HOME TEXTILE FRAUD,  26 June 2019
A home textile conglomerate has agreed to a proposed settlement of a class action over claims it mislabeled bed linen and other products.  The agreement, between members of the class and Indian-headquartered Welspun, along with its United States subsidiary, must be signed off by a St. Clair County Circuit Court judge.

Welspun was sued in St. Clair County over its alleged mislabeling of products, including pillowcases and towels, which the company described as being made from "Egyptian" and "Pima" cotton.  If the agreement is approved, Welspun will pay out an amount not exceeding US$36m to a potential seven to eight million class members, who will receive either a certain amount of money up to a maximum of US$8, a discount, or a credit.  The lead plaintiffs in the class will receive US$750 each if the agreement is signed off by the judge.  READ HERE >>

Comment:
It would be interesting to know if US customers were the only victims in this scam.  Were there European or South African customers buying products falsely labelled "Egyptian Cotton"?  What do retailers in both these destinations know?


KENYA - RIVATEX AND A KENYAN COTTON RENAISSANCE,  30 June 2019
A presidential view:
The quest to return Kenya's cotton farming to profitability has received a vital jolt with the recent reopening of textile factories in the country.  The resumption of local textile processing at RIVATEX is the fruition of deliberate Government interventions targeting the revival and growth of local industries.  For instance, by declaring a reduction of 50% of electricity consumed by textile firms, the Government intends to cut down production costs.  Businesses will, in return, be expected to plough back part of their profits, thereby expanding the relevant demand and supply chain.

An immediate and long-term effect of the reopening of textile firms is a surge in demand for locally grown cotton.  Such demand is good news for a crop whose farming has shrunk to isolated pockets as frustrated farmers abandoned it for more rewarding ventures.

At an annual maximum production capacity of 20,000 bales, Kenya lags acres behind its East African neighbours in cotton production according to the Agriculture & Food Authority (AFA).  The comparative figures for Tanzania and Uganda are 700,000 and 200,000 bales, respectively.  The AFA projects an annual capacity of 420,000 bales annually.  The production could go higher with the adoption of modern farming technologies.

As the President noted, Rivatex alone can consume 100,000 bales of lint. Even better for farmers and a resurgent textile industry, the annual local demand for lint is considered to be around 140,000 bales. READ HERE >>

Comment:
I think that the Kenyan leadership will be dining-out on this story for a long time to come.

The government of India extended a line of credit worth US$29.95m to facilitate the revival of RIVATEX (aka Rift Valley Textile Mills - located in Eldoret - SEE >>) - a line of credit not without strings.  Obviously the funds have to be repaid; while the contract to upgrade the factory was awarded to an Indian private company, Lakshmi Machine Works  (SEE >>).  In other press reports the Kenyan President has now stated that the country will be "relaunching Thika Mills and Kenya Cotton Mills"... "amongst others".  READ HERE >>


ETHIOPIA - POLITICAL TENSIONS,  4 July 2018
What's new?  Officials representing the Sidama, southern Ethiopia's largest ethnic group, are threatening to unilaterally declare the formation of a new regional state within Ethiopia's federation on 18 July, unless the government meets a constitutionally mandated deadline to organise a referendum on the issue before that date.

Why does it matter?  Prime Minister Abiy Ahmed's planned transition toward multi-party democracy has already been marred by violence.  If the federal government accedes to the Sidama's constitutional demands without proper preparation, it could aggravate deadly unrest.  However, seeking to frustrate the demands is equally perilous.

What should be done?  Abiy should offer Sidama leaders a referendum date that is the earliest operationally feasible. If the Sidama still declare their state unilaterally on 18 July, they should delay its formation until sensitive issues, particularly relating to multi-ethnic Hawassa city, are resolved.  READ HERE >>   For a less analytical approah  READ HERE >>.  For a succinct overview on latest national political developments in Ethiopia, post the assassinations in June 2019  READ HERE >>.

Comment:
This blog/newsletter has covered many issues related to the politics of Ethiopia - as the various extra-factory tensions do impact on investments in the country's textile and apparel sector. 

For example:
In 2016 through to early 2018, various Ethiopian "states of emergency" resulted in severe disruptions to factory operations.  So bad was the politics of Ethiopia that the US, behind the scenes, allegedly threatened to withdraw Ethiopia's AGOA market access privileges - in a panic the Ethiopian government hired a US based lobby company that cost it a shit-ton of money.

More recently the attempted "coup" (perhaps one could call it something else - "the attempted succession of an ethnic state") resulted in curfews, road-blocks, the cutting of various forms of telecommunications ... all of which severely disrupted factory production, the import of raw materials and the export of finished goods.  The Sidama ethnic group are located in the Southern Nations, Nationalities, and People's Region (SNPPR).  They are centred in the Hawassa area - where Ethiopia's flagship industrial park is located. Hawassa city could become a flashpoint - now the SNPPR regional capital - but it is also a place which the Sidama intends to designate as their capital.

This could potentially provoke opposition and trigger a fraught contest for what are currently also SNPPR claims.  Minorities in the city and elsewhere could resist the new Sidama state.  Unless the Ethiopian federal state and the Sidama sort out governance issues factory production will be disrupted - worse still tensions will spill onto the shop floor. It's possible that ethnic groups could claim that only their people should have the right to work in the Hawassa Industrial Park.  With more conflict, and more travel warnings, it's possible that there will be other consequences - international retailers and brands will not let their staff (QA/QC, social and labour compliance monitors, merchandisers; etc.) travel to the region.

I was a South African trade unionist that lived through battles between the extra-parliamentary opposition and the ruling racist state, and it's collaborator black allies.  Political conflicts severely disrupted factory production - rolling work stay-aways/general strikes, squads dispatched to assassinate my union's President and General Secretary, worse still some of my union's members were killed in battles on factory premises.  I know how rough, costly and inhumane actions can get.


SOUTH AFRICA - SUSTAINABLE COTTON CLUSTER IS DREAMING, 25 June 2019
Apparently. The local Sustainable Cotton Cluster (SCC) is dreaming big. It is planning to launch a sustainable and transparent cotton production and beneficiation pipeline in South Africa, successfully connect it to offshore supply chains, and tap into a growing global consumer conscience.

With a level playing field, the CEO of Cotton SA thinks the local industry is up to the task.  The SCC programme has brought together the entire cotton value chain and was formed as a coordinated platform for cotton, textile and retail value chain stakeholders to formulate strategies which would ensure growth and stability in the sector.

The cluster is made up of cotton farmers, ginners, spinners, fabric producers, manufacturers and retailers.  The government strongly supports this initiative.  The SCC was established in June 2014, funded by an initial grant of R200m (US$14.1m) from the South African Department of Trade & Industry (DTI).  The grant supports a five-year plan to establish a strong momentum for the growth and development of the southern African cotton sub-national cluster.  The SCC is the only national cluster that has delivered on its mandate, and still in existence after the DTI closed shop to new applications two years ago.  It is even in talks with the DTI to potentially extend the incentive for another five years.  The cluster has also reported that 7,000 additional jobs have been created in the textile and retail industry and 1,240 small, medium-size enterprises created.  READ HERE >>

Comment:
Some fairly contentious claims made here!  However, more of this in the next edition of the "African Cotton, Textiles & Apparel Monitor"!


CAMEROON - COTTON GINNING PROBLEMS,  25 June 2019
Giant agribusiness company Société de Dévelopement du Coton (Sodecoton) is having difficulties processing the 320,000 tonnes of seed cotton produced in the 2018-2019 season as it does not have enough capacity.  READ HERE >>


KENYA - LOWER LABOUR COSTS PLEA,  26 June 2019
The Kenya Export Manufacturers' Association (KEMA) vice-chairman has stated that the country's Export Processing Zones have great potential, but they are held back by an inability to attract more investors who prefer neighbouring countries.  "EPZs in the country are not willing to expand due to existing costs despite having available labour.  Our competitors such as Ethiopia and Madagascar have attracted more investors after lowering electricity cost and expatriate permit fees," he said. 

KEMA has also complained of high wages in Kenya that he rated at an average minimum of Sh22,000 (US$214) compared to Ethiopia and Madagascar at Sh6,000 (US$58.50) and Sh8,000 (US$78) respectively. READ HERE >>

Comment:
As the newspaper article pointed out:  "Despite concerns by the firms over high labour costs, a 2017 report by the EPZ Authority showed that there were glaring disparities in what expatriates and local people earn in the economic zones.  According to the data, Kenyans earned an average Sh14,319 (US$139.56) a month compared to Sh103,157 (US$1,005)for expats".  I assume that 2017 will be the last time the EPZ Authority collects and published data on this wage disparity!

It will be interesting to see how this year's tussle on minimum wages will play out in Kenya.  The new minimum wages have still not been gazetted.  New rates should have come into effect on 1 May 2019.  For the 2018 minimum wage adjustment, the Kenyan Prime Minister announced a 5% increase on 1 May 2018 - but the increase was only gazetted nine months later (with retrospective effect) in January 2019.

Does the Kenyan government - or for that matter any other government in sub-Saharan Africa - realise what kind of effect delays in setting minimum wages may have on the owners of businesses as they have to know their labour costs when they conclude deals with garment buyers?  Do government Ministers ever appreciate the fact that most blue-collar workers live from hand to mouth and that they need wage increments to maintain their family and themselves?


ZIMBABWE - COTTON SIDE MARKETING,  5 July 2019
Side marketing is threatening to put a damper on the presidential inputs scheme with 52 growers out of 73 who were selling cotton at a buying point in Chiredzi being caught diverting cotton to other companies instead of selling to the Cotton Company of Zimbabwe (COTTCO).  READ HERE >>

Comment:
If COTTCO is doing a bad job, then they should expect that farmers will sell to people that they perceive as better buyers.  However, if COTTCO is responsibly meeting its obligations, then the government should clamp down hard on the operators (and their agents) buying the cotton out of contract.


ZIMBABWE - DAVID WHITEHEADS TO REOPEN OPERATIONS, 4 July 2019
DAVID Whitehead Textiles (DWT) intends to "immediately" restart operations at Chegutu factory after several years of intermittent operations, following the acquisition of the company's majority shareholding by Agri Value Chain Zimbabwe (AVCZ).  READ HERE >>

Comment:
Now, where have I heard of the recommencement of operations at DWT before?


BOTSWANA - MANUFACTURERS PLEA FOR ASSISTANCE,  24 June 2019
A member of the Botswana Textile & Clothing Association has raised a concern over the deteriorating state of the textile and apparel industry locally.  "The industry needs some urgent attention; otherwise, there will be a few factories left in the country with a lot of unemployment.  Government has to support export and supply local markets," he stated.  He suggested that the government should consider giving them investment grants to buy new machinery, which will, in return, reduce the costs of labour.  Touching on the challenges, he said transport costs for both inland and freight are very high to both imports and exports.  READ HERE >>

Comment:
Almost ever since I can remember have local Botswana textile and apparel manufacturers been appealing for more government support.  Perhaps some of them need it because they have poorly managed their companies; but its time that some of them stopped whining. 

With some of the lowest labour costs in the Southern Africa region; and the fact that some of the key urban Botswana industrial centres are located on a border that is close to South Africa's economic heartland of Johannesburg / Pretoria Botswana's apparel manufacturers should be doing well.  In my view should the Botswana government change its policy related to issuing work permits for expatriates that will work in manufacturing firms; should it upgrade some of the government-owned structures that could locate apparel factories; and then, should it undertake an aggressive investment promotion programme they could make a garment manufacturing industry in their country thrive.


GHANA - GOVERNMENT SUPPORT FOR TEXTILE INDUSTRY,  26 June 2019
The Minister of Trade & Industry has said there is a steady recovery of the nation's textile industry since the government started implementing its stimulus package for ailing textile manufacturers in July 2018.  The Ghana cabinet has approved the following policy measures to protect local textile manufacturers: tax stamps for locally manufactured and imported textiles; Tema Port being designated as a single-entry corridor for textiles; the implementation of a textile import management system; and, the establishment of a textile task force.  READ HERE >>


GHANA - UK PARTNERSHIP TO HELP TEXTILE PRODUCTION,  6 July 2019
The United Kingdom High Commissioner to Ghana has pledged the UK government's support to the Kumasi Metropolitan Assembly to make Kumasi a leading industrial hub of West Africa.  The strategic partnership agreement focusses on six economic areas of mutual benefits under the UK-Ghana Business Council (UK-GBC).  The manufacture of textiles and apparel will be one of the priority sectors.  READ HERE >>


RWANDA - TEXTILE INDUSTRY IN THE WORN CLOTHING AFTERMATH, 25 June 2019
Some vignettes:
On 24 May 2019, the Rwandan security forces gunned down two people, including a Ugandan national, for trying to smuggle used clothes into the country.
"These are all legally imported goods.  However, the raised tariff has made them so pricey that a bale of used clothes now costs US$422 compared to US$56 two years ago.  If we pass this cost on to customers, we risk losing sales.  If not, we incur heavy losses."
"Earlier, one could buy a second-hand garment for 100 Rwandan franc ($0.11).  Now, one has to shell out at least Rwf4,000 (U$5) for a piece.  This is almost a week's salary for a farm worker or 10 days' salary for a domestic help,"
The government ... is also urging traders to shift from used clothing to Made-in-Rwanda clothing.  At present, the Rwandan textile industry relies on imported raw materials such as polyester and cotton, making locally produced clothes expensive.  Polyester and cotton make up 40% of the raw materials used in textile manufacturing, according to the MD of UTEXRWA, a Kigali-based textile firm.  "This reliance makes local garments uncompetitive in the market.  A shirt made by UTEXRWA sells for US$5 in the market, which is still expensive compared to second-hand shirts,"  READ HERE >>


ETHIOPIA - NEW INDUSTRIAL PARK CONSTRUCTION ALMOST COMPLETE,  23 June 2019
The construction of Ethiopia's Dire Dawa Industrial Park is nearing completion, says the project's Chinese contractor.  "As it stands, close to 97% of the work has been completed, with only remaining water treatment and landscaping works.".  The park cost US$158m to construct and will accommodate investors from such sectors as heavy industries, textile and apparel, vehicle assembly, food processing, electronics, and chemicals.  It is expected that once the park is fully operational that it will create direct and indirect job opportunities for close to 40,000 Ethiopians.  READ HERE >>

Chinese investors from the city of Kunshan, located in the Jiangsu province of China, are to build an industrial park solely for textile production in the Ethiopian town of Dire Dawa.  The project will cost about US$500m.  READ HERE >>


EGYPT - TEXTILE MACHINERY CONTRACTS,  24-26 June 2019
Cotton and Textile Industries Holding Company (CTIHC) of Egypt kicked off the implementation of a major modernisation programme at the 2019 international textile machinery exhibition in Barcelona, Spain.  The restructuring programme, performed and supervised by Werner International, aims to restore Egypt's prominent position in the world markets, capitalising on the globally renowned fine Egyptian cotton fibre.  The programme includes the modernisation of spinning, weaving, knitting, dyeing, finishing, printing and confection, based on a product line definition which brings forth added value to Egyptian cotton, from cotton farming to readymade goods with 'world-class' levels in terms of quality and efficiency – aiming to support Egypt Private Sector upstream manufacturers' competitiveness in the world markets.

The total value of the programme is around €1bn (US$1.1bn), which includes approximately 780,000 new spindles and 1,250 new looms, dyeing, printing and finishing machinery and state-of-the-art cutting and sewing equipment.  READ HERE >>

At the Barcelona show the Rieter Group signed seven contracts worth Sfr180 (US$181.5m) with the Egyptian Cotton & Textile Industries Holding Company.  The agreement comprises the delivery of compact and ring spinning systems over the next two years.  READ HERE >>
DONORS

IDH MOZAMBIQUE COTTON PROJECT EXPANDS
IDH (SEE >>) achieved a new milestone in its partnership with Olam Mozambique, as both parties signed an MoU with the Lalaua District Administration to expand the IDH Climate Resilience Program to an additional area in the Nampula province in North-East Mozambique.  Since 2017, the IDH Mozambique Climate Resilience Program has worked in collaboration with four of Mozambique’s key cotton concessionaires (Olam, Plexus, San JFS and SANAM) to enhance smallholder farmer livelihoods through a multi-pillar approach that creates access to water, technology, energy, markets, and supports alternative livelihoods activities, gender empowerment and community capacity building in cotton growing areas across the provinces of Nampula, Niassa, Cabo Delgado, Cuamba and Ribaue.  READ HERE >>

Some elements of IDH's Mozambican cotton intervention can be  READ HERE >>  (pg15 - 20).

 
ILO ETHIOPIA ADVANCING DECENT WORK AND INCLUSIVE INDUSTRIALISATION IN ETHIOPIA
Duration: 1 April 2019 - 31 December 2023 - the programme was formally launched on 3 July 2019
Development Partner(s): DFID, BMZ, SECO, NORAD, GIZ, Siemens, EC, Governments of France, Sweden and Netherlands
Budget:  US$5,000,000
Synopsis:  With an initial focus on the garment and textile industries, the ILO has launched a comprehensive and coordinated programme involving ILO’s key components (BetterWork, Vision Zero Fund, SCORE and LABADMIN) to promote decent work and inclusive industrialization in Ethiopia.  The textile and garment industry is one of the priorities of the Ethiopian Government under the Growth & Transformation Plan (GTPII) in the move of lifting Ethiopia to a middle-income country by 2025.  However, poor working conditions resulting in low productivity, high turnover and absentee as well as weak regulatory institutions, coupled with the limited capacity of the workers’ and employers’ organisations, creates a poorly functioning labour market and uncompetitive businesses.  READ HERE >>


WORLD BANK TVET PROGRAMME IN ETHIOPIA, KENYA & TANZANIA
Synopsis:  The Eastern Africa Skills for Transformation and Regional Integration Project (EASTRIP) has been launched in Addis Ababa, Ethiopia.  Three East African countries will participate in the project including Ethiopia, Kenya and Tanzania.  The project supports the development of highly specialized Technical & Vocational Education and Training (TVET) programs as well as industry-recognised short term certificate level training, and will target regional priority sectors in transport, energy, manufacturing and ICT.  EASTRIP will be financed by the World Bank as an IDA loan of US$210m and a grant of US$83m. US$8m of the grant will go to the Inter-University Council for East Africa (IUCEA) to facilitate and coordinate the project and implement regional initiatives that would promote the mobility of students and faculty within and beyond the region and to establish a community of practice of TVET in the region.  SEE HERE >>  and  SEE HERE >>   and  SEE HERE >>.

Elements of the programme will specifically address textiles and apparel TVET.  In Ethiopia Textile/garment training via the Hawassa TVET Polytechnic College; and in Kenya training in textiles via the Kisumu National Polytechnic
.
EAST AFRICAN INCENTIVES
 
2019/2020 - EAST AFRICAN BUDGET HIGHLIGHTS
COTTON, TEXTILE & APPAREL ELEMENTS
BUDGETS DELIVERED ON 22 JUNE 2019

KENYA
The following was committed to:
  • an allocation of KSh1.1bn (US$10.8m) for the development of textile and leather industrial park, the Naivasha Industrial Park, and the Cotton Development subsidy.
  • reduce the import declaration fee on intermediate goods and raw materials used by manufacturers from 2% to 1.5%, while increasing the rate on finished goods from 2% to 3.5%.
  • to promote local industries through the ‘Buy Kenya Build Kenya’ initiative catalogue of items that are locally manufactured, assembled, mined or grown in Kenya will be developed and these will be given priority in public procurement.
  • changes to the customs tariffs of select value chain imports.
The Finance Minister confirmed an electricity rebate would be operationalised which would be expected to reduce the cost of electricity to manufacturers by about 20%.  Details of the Kenyan Electricity Rebate scheme can be SEEN HERE >>. For the FULL BUDGET HERE >>

UGANDA
The following was committed to:
  • fast-track feasibility studies, including engineering designs, for proposed industrial parks.
  • reduce the minimum investment threshold that allows developers of free zones and industrial parks to be eligible for tax incentive from US$100m to US$50m.
  • reduce the minimum investment threshold that allows operators within industrial parks to be eligible for tax incentives to US$10m for foreigners and US$1m for local investors.
  • income derived from leasing or letting facilities in industrial parks exempted from income tax for 10 years from the date of commencement of construction.
  • changes to the customs tariffs of select value chain imports.  FULL BUDGET HERE >>

No important industrial incentives impacting / potentially impacting on the development of Tanzania's and Rwanda's cotton, textile and apparel industries were announced.  Most of their budget interventions related to them promoting theor industries involved adjustments to the East African Community's Common External Tariff.  TANZANIA - FULL BUDGET HERE >>  and the  RWANDA - FULL BUDGET HERE >>.
 
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The East Africa Community (EAC) Member States agreed to effect changes to the Common External Tariff (CET) and amend the EAC Customs Management Act (EAC-CMA), 2004.  The theme remains “Transforming Lives through industrialisation and job creation for shared property among the people of the East African Community”.  The proposed fiscal changes were done to promote investment and industrialisation, import tariffs on products which are locally manufactured have been increased.  The EAC Gazette (30 June 2019) can be  READ HERE >>.

Comment:
Kenya is slowly putting in place a set of industrial and related incentives that will further develop its textile and apparel value chain.  Other countries in sub-Saharan Africa that have already have sizeable industries or have ambition to develop one (e.g. Lesotho, Swaziland, Tanzania, Ghana, Madagascar) will need to pay attention to what countries like Kenya (and in this case Uganda) are doing.  Should they not they not develop appropriate incentive packages many of the plants that they already have or they intend to attract will look for cheaper cost investment destinations.
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RESEARCH

"Comparative Country Study of the Development of Textile and Garment Sectors: Lessons for Tanzania".  Neil Balchin and Linda Calabrese.  This research was done by two researchers from the UK's ODI and was funded by Gatsby Africa.  May 2019.
Synopsis:  This research aims to identify the main actors and factors necessary to develop the textile and garment sector in the United Republic of Tanzania.  It draws on the varying experiences of six countries – Bangladesh, Cambodia, Ethiopia, India, Lesotho and Madagascar – to pinpoint what is required to establish an integrated value chain, from cotton to clothing, and raise local ownership of textile and garment manufacturing.  The report shows, through the varied experiences of the case study countries, that no single model can be isolated as a definitive route to success.  Nevertheless, these models provide key lessons for Tanzania.  The full report can be  READ HERE >>


"A Study on Strategy for Development of a Competitive Textile Sector in Tanzania".  Danford Mahwera.  Doctoral thesis, University of Huddersfield. 2019.
Synopsis:  Tanzania is one among the largest producer countries of cotton lint in Africa and also among the giant producer of organic cotton in the World.  With this abundant supply of cotton lint, availability of cheap manpower and duty-free access to key markets make Tanzania an attractive textile and apparel investment destination; several structural challenges have prevented the country from leveraging these advantages.  The challenges need to be addressed, coupled with strong political will and aggressive marketing efforts in order to attract and retain investments in the sector.  The full thesis can be  READ HERE >>.
UPCOMING EVENTS
  • 3rd Pan-African Cotton Conference - Conference - 26-28 September 2019.  Abuja, Nigeria.  For more information: www.cotton-house-africa.org
  • Origin Africa 2019 - Trade Show - 28-30 October 2019.  Dar es Salaam, Tanzania.  For more information:  www.originafrica.org
  • Destination Africa - Trade Show - 9-11 November 2019.  Cairo, Egypt.  For more information:  www.destination-africa.org
  • Messe Frankfurt Africa Sourcing & Fashion Week (ASFW) - Trade Show - 9-12 November 2019.  Addis Ababa, Ethiopia.  For more information:  www.asfw-online.com
  • International Textile Machinery Exhibition - Africa - Trade Show - 14-16 February 2020.  Addis Ababa, Ethiopia.  For more information:  www.itme-africa.com

Apparently Messe Frankfurt is studying the possibility of establishing a textile trade show in Egypt.
If it does it will add to its existing African portfolio of textile and apparel trade shows (it already owns value chain trade shows in Ethiopia, and two in South Africa).
What will then become of Egypt’s Destination Africa?
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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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