• African governments are waking up to the fact that the continent could be a 'new frontier' for garment sourcing, export associations and manufacturers have told just-style.
  • A key challenge is to develop upstream as well as downstream sourcing as, almost without exception, the continent cannot supply the whole manufacturing chain.
  • However, despite the opportunities, the African clothing and textile sector is still lagging behind Asia when it comes to investment.
African governments are giving serious attention to the continents apparel sourcing opportunities, according to attendees at the recent Destination Africa event

African governments are giving serious attention to the continent's apparel sourcing opportunities, according to attendees at the recent Destination Africa event

According to exhibitors at the recent Destination Africa trade event in Cairo, Egypt, Africa has significant opportunities to divert manufacturing from Asia due to rising production costs, especially in China, and take advantage of its close proximity to European markets.

"We are seeing for the first time serious attention by local governments to address the potential, be it Egypt, Ethiopia or Uganda, and the establishment of one-stop-shops for industrialisation within the African continent," says Waleed el Zorba, managing director, of Egyptian clothing exporter Nile Holding Company.

Ethiopia is a case in point, with the 350,000 square metre Hawassa Park being developed by the government for some US$250m in the southern city of Hawassa.

"The opportunities coming out of Ethiopia right now are amazing. There are a lot of international brands coming in, but we cannot rely on China for raw materials. We have to build supply chains as we don't just want garment factories," says Roy Ashurst, a consultant to the Ethiopian Investment Commission, who has worked with PVH in the past.

Upstream opportunities

A key challenge is to develop upstream as well as downstream sourcing as, almost without exception, all African countries, from the north to the south, cannot supply the whole manufacturing chain.

"We need new investment in upstream, from spinning to weaving, to finishing and technical textiles," says Samir Ben Abdallah, president of the Professional Clothes and Clothing Group, which is part of CONECT (the Confederation of Tunisian Citizen Enterprises).

Despite the opportunities, the African clothing and textile sector is still lagging behind Asia when it comes to investment. "The biggest investors in the sector in recent years have been China, India, Bangladesh and Vietnam. Africa and North Africa are only slightly represented," says Oliver Zieschank, an economist at the International Textile Manufacturers Federation (ITMF).

Should this investment be forthcoming, African garment and textile manufacturers are aiming to capitalise on the human and natural resources at hand. "By 2025, there will be 1.1 billion Africans, so it is the next frontier, with a huge population while the average age is 19 years old," according to Jaswinder 'Jas' Bedi, chairman of the Export Promotion Council of Kenya. "We will be the factory of tomorrow due to demographics."

He says there is potential to expand African cotton production to cater to local manufacturers. While 7% of the world's cotton is grown in the continent, it is currently primarily exported to Asia.

"We are trying to put up a value proposition to not compete with American or Australian cotton, as it's machine picked, but through identity cotton from Africa as it is a sustainability story if we market the passion of hand-picked rain-fed cotton," says Bedi.

Yet while there is potential for Africa to produce more cotton for local production and export, greater opportunities may lie more in developing man-made fibre production due to greater global demand.

"There are huge opportunities to grow cotton as 55% of Africa is uncultivated arable land. But demand patterns are changing. Polyester accounts for 78m tonnes of global demand, and cotton 24m tonnes, so there's a shortfall that needs to be fulfilled. Synthetics and polyester will grow. That doesn't mean cotton will die, but it will become a luxury item," says Bedi.

Sustainable industry

African manufacturers are also trying to promote the continent as a more ethical source for retail buyers.

"It used to be that sourcing was about price, quality and delivery, but now first on the list is compliance. We cannot operate without that, as social media [publicises bad practices] out there so quickly," says Ashurst. "We've taken the view that this is the last opportunity to build a sustainable industry. We can see what countries have done right and wrong, and we want to build it right the first time in Ethiopia."

Trade agreements

Ironically, possible assistance for Africa could come from President Donald Trump, a man who has not demonstrated much concern about foreign development.

With the US's withdrawal from the Trans-Pacific Partnership (TPP) agreement in January, African manufacturers are hoping this will help them take advantage of existing trade agreements with the US, Europe and within Africa to attract the needed investment.

"What is happening is that with no TPP, Africa as a whole needs to absorb what I call the 'next migration', as manufacturing went to Asia, and now it will come to Africa," Zorba tells just-style.

The plethora of free trade agreements (FTAs) that cover African countries could encourage upstream sourcing within Africa, especially as this will help clothing manufacturers and brands fulfil origin requirements in deals such as the African Growth and Opportunity Act (AGOA) with the US.

For instance, 26 African countries in 2015 established a free trade zone that consists of the Common Market for Eastern and Southern Africa (COMESA), the Southern African Development Community (SADC) and the East African Community (EAC).

Of all the 54 African countries, Egypt is considered the best positioned to take advantage of continental FTAs, as it is also part of the Agadir FTA between Egypt, Morocco, Tunisia and Jordan.

Clothing export competitors Morocco and Tunisia are not members of the other African FTAs or part of AGOA, while Egypt is able to export to the US tax-free through its Qualifying Industrial Zones (QIZ), which must source at least 10.5% of their manufactured goods from Israel to qualify. Egypt's exports of ready-made garments to the US were US$334.4m in 2016, while clothing and textile exports to the European Union were EUR800m.

"Is no longer possible for Tunisia or Morocco to access AGOA. The only (African) country that can take advantage under the QIZ agreement is Egypt," says Gail Strickler, president of global trade at consultancy firm Brookfield Associates, and a former assistant US trade representative for textiles.

But while Egypt's manufacturing sector is more developed than much of that in sub-Saharan Africa, it is facing challenges on labour costs. "At US$100 a month you are still not competing with the far east, Bangladesh or Ethiopia, as all are one-third less than Egypt's," Simon Fares, sales manager for Japanese zip maker YKK in Egypt, told just-style.

Exhibitors at the Destination Africa event also talked about how buyers are being attracted to the continent to take advantage of lower production costs:

African clothing sector eyes growth on rising China costs