Ethiopia has plans in place to position itself as a leading African textile exporter, and the country is now forecasting $1 billion in textile exports by 2025.
As part of its Growth and Transformation Plan (GTP), the Ethiopian government is extending incentives like zero duty on imported machinery and equipment, loans for investors and is also developing industrial zones. The collective moves are expected to generate 170,000 jobs.
“We are working to be a leading country in light manufacturing in Africa which will lay the foundation for heavy and high tech industries by 2025,” said Silesh Lemma, director-general of the Textile Industry Development Institute (TDI), according to The Reporter Ethiopia.
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Lemma noted that the country is building more than 10 industrial zones to accommodate the growth goal.
Ethiopia has some way to go, however, as the present shortage of raw materials, inefficiency and lack of technological applications are affecting the sector, and export earnings have not exceed $100 million during the growth and transformation period.
But a U.S. Department of State Investment Climate Statement last June said Ethiopia is one of the fastest growing economies in the world. Over the last several years, the country registered between 6-12 percent gross domestic product growth, and the World Bank and International Monetary Fund forecast continued average growth of 7 percent over the next two years. Competitive labor and energy costs are key pulls for foreign direct investment, according to the State Department.
As of February this year, Ethiopia—which is eligible and takes advantage of the African Growth and Opportunity Act (AGOA) trade preference program with the U.S.—exported 13.4 million worth of textile and apparel products to the U.S., a 25 percent uptick over February 2014, according to data from the Office of Textiles and Apparel (OTEXA).
The Ethiopian government is optimistic about the future of country’s textile sector. It has also provided other financial incentives including duty free importation of spare parts for 15 percent of capital goods during the first five years of operation, the possibility to hire expatriates income tax free for two years, and reconciliation of value added tax (VAT) for materials bought locally, The Reporter Ethiopia noted.
Africa has been touted as “the next China” as more brands and retailers look to the low-cost continent for manufacturing.
Fast fashion leader H&M is investing in bringing business to Africa and the company opened and office in Ethiopia. The retailer partnered with Swedish state-owned risk capital company Swedfund last year to help grow its supply chain there and contribute to developing the country’s textile industry, set standards for sustainable production, water use, wages, and create jobs with good working conditions.
