The progressive policies and investment incentives offered by the Ethiopian government are going some way to encourage global textile giants to relocate their businesses to the country. Some of the projects that have materialised involve Ayka, Saygin and Nepsa from Turkey, Spintex from India and a business agreement with two US firms, writes Professor Raosaheb Chavan.

Ayka relocates to Ethiopia
One of the largest Turkish textile and garment firms, Ayka Textile Industry, which was founded in 1988 in Istanbul, has set up a subsidiary company Ayka Addis Plc in Ethiopia with a capital of $100m. The firm has a 15,000 square metre plot in Alem Gena, 18km west of Addis Ababa and currently employs around 5,000 workers. At its peak it will provide over 10,000 jobs.

The company became fully operational in April 2010 and plans to manufacture its products in two phases. The first phase will involve spinning (20 tons/day) and knitting (40 tons/day) while the second phase will incorporate finishing and garment production to meet its target of exporting $70m worth of products in first year and $100m from the second year onwards.

The project was personally overseen by the Prime Minister, who took interest in the setting up of the plant. The Development Bank of Ethiopia has extended term loans for the project.

The factory is thought to be the biggest integrated textile facility in sub-Saharan Africa, and as such is seen as serving as a role model for attracting other prospective investors to Ethiopia and as a pacesetter for the country's textile industry.

Saygin Dima Textile Factory
A joint venture between the government of Ethiopia and investors from Turkey has established a new $78.5m textile unit. Named Saygin Dima Textile Factory after the Turkish company Saygin and Dima, the region where the unit is located near Addis Ababa, production began in January 2011 and includes facilities for spinning, weaving, and dyeing.

The Privatization and Public Enterprises Supervising Agency (PPESA) owns a 60% stake, while and 40% is owned by the Turkish company. It is mandatory to export at least 50% of its output. The Ministry of Trade and Industry is expecting to generate $50m in export earnings once the unit is fully operational.

Nepsa Textile Plc
Nepsa Textile Plc, which is a subsidiary of one of the major textile producers in Turkey, is opening a factory in Ethiopia with an initial investment of ETB25m. The Oromia regional government has provided 7.5 hectares of land in Sebeta, near Addis Ababa. It is envisaged that Nepsa Textile will export 50% of its production.

Indian Investment
The Export Credit Guarantee Corporation (ECGC) of India rates Ethiopia second to South Africa for investment. An agreement has been reached between the two countries to collaborate in the financial sector, hydroelectric power generation as well as the leather and textile industries.

Spintex India
Spintex, which was established in India in 1972, produces machinery for spinning, weaving and knitting and will fully own the factory it is setting up in Ethiopia. The Ministry of Trade and Industry has awarded a loan for the project and Spintex has received 50 hectares of land at the Kombolcha Industrial zone to construct what could become one of the largest textile factories in Ethiopia.

The company will produce 100 ton/day of yarn, which is five times the capacity of Ayka Addis. Spintex expects to export $1bn worth of products a year in seven years' time. It has also received support in the form of 50,000 hectares of land in the Awi zone of Amhara State for cotton farming. The arrival of Spintex will be a major boon for the sector.

US firms strike apparel deal with Almeda Textiles
Almeda textiles, a member of the Effort Group, is one the largest vertically integrated textile companies in Ethiopia having spinning, weaving, finishing and apparel manufacturing facilities.

It has signed agreements with two US companies - uniform, corporate wear and medical garment Atlas Manufacturing Group and kitchen wear and hospitality clothing supplier Pinnacle - to establish long-term relationships in the apparel sector.

Atlas last year placed orders worth $3m with Almeda for T-shirts and other garments, while Pinnacle was expecting orders of kitchen wear valued at $7m for the same period. The partnerships will lead to initial production volumes of more than one million units of T-shirts, kitchen wear and uniforms per year, providing jobs for over 1000 Ethiopians.

The Italian intervention
The original Ethiopian textile and garment sector suffers from inefficiency and low capacity utilisation. The focus is on restructuring, rehabilitation, modernisation, and finally privatisation.

In line with these needs, Program Aid of Italy has assisted the Ethiopian Ministry of Trade and Industry with the rehabilitation of seven publicly-held textile and garment companies already identified for privatisation with a budget of EUR9m.

Gulele Garment was bought by a local investor while Adey Ababa and Ediget Yarn are under negotiations to be leased by Italian and local entrepreneurs with an option to buy. Akaki Garment has garnered the interest of a Turkish investor. The Privatizing Agency is evaluating offers for Addis Garment. Kombolcha Textile and the Ethio-Japanese Synthetic Textiles are also beginning the privatisation process.

All of which are helping the Ethiopian government to forge ahead with its ambitious export plans.

The author of this article, Professor Raosaheb Chavan, works at the Institute of Technology for Textile, Garment and Fashion Design (IoTex) at Bahir Dar University, Ethiopia. He has also written a report on the 'Ethiopian Textile Industry - Present Status and Future Growth Prospects' which is available from the just-style research store. Click here for more details.