Assessing Africa as an alternative apparel source
Mauritius is one African country with clusters of export-led manufacturing
Africa has undeniable advantages that make it attractive as a potential destination for large volume, low cost, commodity garments, according to Chris Wynne-Potts, CEO at African Merchandising Services.
Apparel production constantly shifts. It's often one of the first manufacturing businesses that go into a developing country, but also the first to leave as the country grows and develops. And with continued margin pressure, companies are constantly looking at new low cost, reliable sources.
Chief procurement officers and buyers also have a challenging balancing act in getting it right. Sourcing strategies differ for every retailer; each company must first define its procurement requirements and factor in the strengths and weaknesses of the various countries and/or regions. Key criteria revolve around cost, quality, CSR (corporate social responsibility), compliance, speed and risk.
In today's world of heightened security, terrorism, rebel wars, political instability coupled with increasing environmental and human compliance demands, a great deal of thought has to go into a company's sourcing strategy and spreading the risk.
Africa has many of the ingredients that can make it a global force in apparel and textile exports. However it will take some time for all these ingredients to come together and mirror what China, India, Vietnam and others have done over the last 30 years.
It has cheap, abundant labour; it has water, power, cotton and lots of land. It has receptive governments and attractive investment conditions. But Africa still needs to build much more capacity coupled with vertical operations so that it can convert its raw material into yarn and fabric.
The advantages of Africa
- Abundant labour. By 2035 sub-Saharan Africa will have the highest working age population (15-64) anywhere in the world – with more than 900m people.
- Low wages: Kenya US$100 (per month), Lesotho US$90, Tanzania US$90, Madagascar US$65, Ethiopia US$50, Mauritius US$165.
- AGOA renewed for 10 years until at least 2025. This gives 45 countries in sub-Saharan Africa duty-free access to the US, with the added advantage of being able to use third-country fabric from anywhere. According to Gail Strickler, assistant US trade representative for textiles and apparel, this is a "game changer" and could quadruple its current exports and create another 500,000 jobs.
- Large adult unemployment coupled with free education and strict labour laws make under-age/child employment unheard of. English is widely spoken in East and Southern Africa.
- Government backing and promotion of the apparel and textile industries, particularly Kenya, Ethiopia and Lesotho. The sector is seen as being a major employer and reducer of poverty.
- While the value of current apparel exports is, in global terms, very small, Africa does have a history of garment production and exports. In 2014 Sub-Sahara Africa exported almost US$1bn in apparel value.
- Lesotho, Ethiopia and Kenya have, or are establishing, training centres and tertiary institutions to promote textile and apparel technical qualifications. Governments today are more and more aware that apparel production offers large-scale employment and creates a sustainable sector – especially when ultimately being able to beneficiate using African grown cotton. Long-term integration, vertical units and textile mills are the end game.
- Government incentives and tax holidays are offered by many countries to investors.
- Many US and EU companies are already doing business here, including H&M, Tesco, Primark, VF Corp, PVH, Kohl's, Wal-Mart, Dillard's, Dollar General, IFG, Jones Apparel, Haggar, Academy, Belk, Dickies, Children's Place, Carter's and Family Dollar.
- Multiple ports offer weekly sailings to both the US east and west coasts, as well as Europe. Transit times are approximately 30 days to the US east coast, and 20 days to Europe. Various conference and non-conference lines offer regular services in and out of Africa. From the Far East, sailing times vary from 21 days to 30 days to African east coast ports.
- Export manufacturers are generally big volume producers catering for the large national and international US or EU retailers and brands. They meet the various in-house or third party compliance audits and standards.
- There is a compelling moral and ethical story that retailers and brands should at least look at some ways to develop business in the poorest continent on the globe.
The challenges facing Africa
Africa is a continent that is rapidly changing, and more so now than ever before. Its growing middle class has created demand in many areas of consumerism, banking, communication, education, transportation and power generation. Africa also has enormous untapped resources and wealth: huge swathes of fertile agricultural land, abundant minerals, and oil and gas reserves. Power generation and infrastructure is needed, and many projects to address this have already started across the length and breadth of the continent.
Sub-Saharan Africa consists of 48 countries with more than 900m people. Consequently language, cultural diversity, ethnic mix, development, economies, democracy and governance vary across the continent. Africa cannot be looked at as one bloc or country or with one set of eyes in the same way that neither can Europe, Asia or the Americas.
The main countries in Africa with a sizeable and growing apparel manufacturing base are Lesotho, Kenya, Ethiopia and Mauritius, with a second tier consisting of Uganda, Tanzania, Madagascar and Ghana. South Africa has a history of garment production although mainly producing for the domestic market. South Africa's current issue is that under AGOA its status is deemed as a non-LDC country (Least Developed Country) and therefore has to use local fabric or fabric produced in Africa, resulting in it being less competitive.
Some of the challenges facing Africa are:
- Current lack of locally produced, competitively priced, export quality fabric. This results in a reliance on imported fabrics, which in turn adds to lead-time on garment deliveries. This is fine for buyers with long lead-times, but probably not for others.
- Africa grows plenty of cotton but it is almost all exported as the raw material. Local upstream beneficiation and value adding needs to take place. Currently African spinning, knitting, weaving and dyeing represents only about 10% of total African cotton grown. With the 10-year renewal of AGOA it is hoped that textile industries will now evolve and develop as Africa becomes a bigger producer of garments.
- Improvement in infrastructure along transport routes, port efficiency, government red tape and streamlining export systems need continued work. Power is generally cheap but in some countries the grid is unreliable. Ethiopia has some of the cheapest power in the world and new generation projects will make it a net exporter of power in the next two to three years.
- The need for a clearly defined government policy on attracting investment, aggressive marketing of this policy in conjunction with potential investors, NGOs and all role players. Simplified barriers to entry for bona-fide investors such as expat visas, work permits, residency rules. Government to continuously address issues around corruption, safety and crime.
- Government commitment to building regional value chains, regional and continent-wide free trade agreements (Southern African Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA) etc). Individual country development, marketing and promotion of EPZs (export processing zones ), constructing specialised apparel clusters/zones.
- Industry authorities and government to streamline the whole value chain including cumbersome customs processes, address the dearth of technical and managerial skills, invest in programmes that increase efficiency of production. Productivity in Africa is not as good as China, Vietnam and many parts of Asia and this has much to do with the longevity of garment making on the continent – but also education and training.
What can US and EU buyers source from Africa right now?
- The main countries that already have critical mass and clusters of export-led manufacturing are Lesotho, Kenya, Ethiopia, Mauritius and, to a slightly smaller extent, Tanzania, Uganda and Madagascar.
- The vendors are generally geared up for large volumes of commodity type garments. This doesn't mean just basics, but volume is key.
- African vendors can supply FOB and generally the fabric is imported. The production is best suited to large programmes where deliveries are constant and lead-time is more generous.
- The products supplied from Africa in volume are woven shorts and pants, denim jeans, knit tops such as T shirts, polos, henleys, fleece tops, various types of sportswear, gym wear, outdoor wear using all sorts of performance fabrics from the Far East. The key is volume and ideally long-running programmes.
- In a country like Lesotho, many of the vendors have concentrated on CVS (chief value synthetic) knitted tops and bottoms where the duties are highest and this ends up being a good deal for both the supplier as well as the buyer.
- Duty-free access into the US under AGOA for ten years at least.
About the author: African Merchandising Services (AMS) is a specialist apparel buying agent based in South Africa. The two founders have previously set-up and worked for international buying and sourcing companies in Africa, and have many years' experience sourcing across the continent for large US and EU retailers and brands. With the renewal of AGOA in July 2015 for another ten years, they believe Africa will develop as a new alternative source for apparel buyers – and that AMS is ideally placed for all sourcing, merchandising and quality needs. Click here to contact Chris Wynne-Potts for more information.
An interactive databank with intelligence on the major apparel sourcing countries
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