Analysis: Is Africa the next frontier in apparel sourcing?
Africa is a continent that continues to be described as 'the next frontier
As manufacturing costs continue to rise in China and across Asia, the search is on for alternative apparel sourcing destinations. Many companies are moving elsewhere in the region, but an increasing number want to explore and invest in entirely new countries. And the African continent is being described as "the next frontier."
Marie D'Avignon, manager of government relations for the American Apparel & Footwear Association (AAFA), believes there are three main reasons why Africa is becoming a great option for sourcing. She was speaking on the AAFA webinar: Exploring Africa Trade.
"The first is access to the African market. Companies are looking to produce in South Africa to access major markets there, for example producing products they can sell into South Africa," she said, speaking during a webinar organised by AAFA on Exploring Africa Trade.
"They don't necessarily want to take the huge risk of making stuff here in the US, or China and having to move it over there and having extra costs. If they make it nearby, the cost of shipping drastically reduces so they can just test out the waters in those markets."
She also points to companies wanting to "do the right thing" and have Africa sourcing as "part of their brand story". Firms, she says, want to create jobs in countries that need them, and ensure their factories are in countries where workers are well-treated. "We have seen some brands build their whole story around that."
The third reason she highlights as "probably the strongest": AGOA (the African Growth and Opportunity Act). Originally passed in 2000 and set to expire in September 2015, it aims to provide economic opportunities to countries showing a commitment to good governance and democratic principles.
Angela Dean, director of global business for non-profit social enterprise Partner Africa, adds that the continent's growing population is also a big pull for investors.
"If you look at the population in Africa, it's definitely growing. Right now six out of ten people live in Asia, but in 20 years time that will shift to Africa and this is a huge untapped pool of labour, which is extremely attractive for those looking further down the line, especially for manufacturers moving over into Africa."
In addition to the opportunities, however, there are also challenges, which Dean says include issues with barriers in communication, poor infrastructure, slow border processes and many countries within Africa not having a fast-paced business culture.
She also highlights common issues in the supply chain, but adds: "There has been significant investment in vertical supply chains and I know that is being put in place right now, particularly in Ethiopia."
The AAFA says there is a lot of input from local government to address the issues, expand their markets and attract investment.
"There are certainly a lot of challenges still out there...but companies are finding a way to deal with the issues," says D'Avignon. "The biggest challenges are understanding this might be a completely different business [than] you might have had in other countries."
The AAFA says it is looking to garner more interest in Africa from the US, but adds: "A lot of the investment currently is coming from Asia. In certain African countries, the economy is a little unstable, so that's why you see Asia investment more than US."
As a continent comprising 54 countries, the development of each within Africa will be very different over time. The AAFA, however, says that countries that appear to be benefiting from investor interest most, at the present time, include Swaziland, Kenya, Ghana, South Africa and Ethiopia.
The latter, the AAFA points out, is one country expected to show "significant advancement" over the next five to ten years.
Click here to read just-style's two-part analysis of Ethiopia as a sourcing destination for apparel firms; and here to view details of our research report on 'Ethiopia - the emerging textile and clothing industry'.
Ethiopia – the emerging textile and clothing industry
With several government incentives in place, a priority given towards developing the textile and clothing industry across the value chain, a viable business environment and duty free market access to ...read more
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