Ciel Textiles Tropic Knits produces 12m T-shirts and polo shirts per year in Mauritius and Madagascar

Ciel Textile's Tropic Knits produces 12m T-shirts and polo shirts per year in Mauritius and Madagascar

The devastating impact that political instability and the loss of trade benefits can have on an apparel manufacturing country is exemplified by Madagascar, the island off the southeast coast of Africa that all but fell off the sourcing radar when it lost its duty-free privileges to the United States at the beginning of 2010. But a change of fortunes in the last two years is now seeing its apparel exports bounce back with a vengeance.

Few apparel manufacturing countries have experienced the roller-coaster ride that has characterised the rise and fall and rise again of Madagascar's exports over the past decade or so.

At the beginning of the millennium, the country seemed well on its way to becoming the leading sub-Saharan African clothing exporter to both US and EU markets.

Under the African Growth and Opportunity Act (AGOA) passed in June 2000, Madagascar's clothing exports to the US exploded, jumping from US$109.5m in 2000 to US$323.3m in 2004.

This growth was all the more remarkable given the country shrugged off six months of political turmoil in 2002 that effectively brought the sector to a standstill. Indeed, some leading manufacturers left the country and the buying offices for Mast, Li & Fung, Eddie Bauer, Gap, Dockers and Levi's closed and were not reopened.

In 2004, Madagascar was also the second largest sub-Saharan African exporter of clothing to the European Union (US$196m), surpassed only by Mauritius (US$635.7m).

But Madagascar's nascent clothing industry was dealt another blow after a coup in 2009 and the overthrow of the country's democratically elected president led the US to remove its AGOA beneficiary status the following year.

The move again saw many overseas investors close their factories – and garment exports plummeted. From being the second-largest clothing exporter under the African Growth and Opportunity Act (AGOA) in 2009, Malagasy apparel exports to the US plunged from almost $280m to just $40m in 2011 – falling further to US$17m in 2014.

Professor Mike Morris, director of the Policy Research in International Services and Manufacturing (PRISM) at the University of Cape Town in South Africa, who researched the consequences of Madagascar's exclusion from AGOA benefits, remarked that in crisis times, "ownership matters."

Indeed, Asian-owned firms with operations in Madagascar largely exited the industry. However, many regionally embedded Mauritian-owned firms and French/European diaspora-owned firms reacted to AGOA suspension by shifting market channels and upgrading.

The reinstatement of AGOA eligibility in June 2014 had an immediate effect on Malagasy garment exports to the US. The value of its apparel exports to the US surged 162% year-on-year to $48.98m in 2015, and so far in the first nine months of 2016 has reached almost double this amount at $90.16m – putting the country on track to more than double last year's figures.

Privileged access

The US is not the only market where Madagascar enjoys privileged market access. In 2015, thanks to the Everything But Arms (EBA) arrangement of the EU's Generalised Scheme of Preferences (GSP), the EU was the main destination for Malagasy apparel – with shipments of US$350m.

Through membership of the Southern African Development Community (SADC), Madagascar also has free access to the nearby market of South Africa, which imported US$100m of Malagasy-made apparel in 2015. Australia also grants free access to garments made in Madagascar.

Combined, Madagascar's total clothing exports reached US$500m in 2015.

Jaswinder Bedi, chairman of ACTIF (the African Cotton & Textile Industries Federation), believes there's also a great market opportunity with the COMESA-EAC-SADC Tripartite Free Trade Area signed in June 2015 between 26 eastern and southern African countries with a combined population of over 600m.

However, inter-African free trade agreements have traditionally been characterised by much talk and little achievement. Newly explored markets like Australia and China could be more promising in the short term.

In Madagascar, the fourth largest island in the world with 24m mostly very poor inhabitants, the garment industry is by far the main supplier of industrial jobs. There are currently 90 exporting factories with over 100,000 workers producing a wide range of products for large retailers like M&S, Zara, American Eagle, Woolworths, brands such as Levi's and Wrangler, and luxury labels including Hermes, Kenzo and Baby Dior.

Previous governments have seemed to be unaware of the industry's huge potential for job creation, although Madagascar's President Hery Rajaonarimampianina told the audience at this month's Origin Africa 2016 event that 200,000 new textile and apparel jobs could be created in the next five years.

John Hargreaves, vice-president of GEFP, the Madagascar Export Processing Zone Association, has even bigger aspirations, believing an industry-friendly policy could lift total employment to 500,000.

One of the government's key contributions appears to be the facilitation of a large Malagasy Textile City.

However plans are still on the drawing board, and according to Eric Robson, CEO of the Economic Development Board of Madagascar, it's not yet clear if the Textile City will be developed in one of the country's textile hubs (Antananarivo or Antsirabe) or near the port of Toamasina (Tamatave).

Madagascar mulls Textile City production hub

Sustainable production

Despite the country's many advantages including very competitive labour costs – wages in Madagascar are US$65 per month, compared with Kenya (US$100), Ethiopia (US$50) and Mauritius (US$165) – workers with better than average dexterity, privileged market access, and substantial transfer of capital, technology and market knowhow from nearby Mauritius, Madagascar is not an easy option for garment manufacturers.

Most fabrics have to be imported, electricity supply is problematic and the road infrastructure is poor. Exporters also complain about delays at the port of Toamasina, too many administrative procedures, corruption and a weak judicial system.

Though the overall cost of doing business in Madagascar is high, manufacturers seem to readily accept social compliance, including connected costs, as a sourcing imperative.

Many of them also express a commitment to ecological sustainability – perhaps a reflection of the country's rich biodiversity, which includes many unique plant and animal species. When Cotona, the biggest textile company in Madagascar, recently replaced its wood-burning furnace for steam production, the sustainability of the country's forests was a key investment criterion.

Interesting projects are underway in the field of natural silk production, where the aim is to preserve the domestic silkworms of Madagascar and the tapia woods in which they live, while creating textile jobs (spinning, weaving, dyeing) for the rural female population. The Ny Tanintsika organisation, which supplies wild silk to luxury brand Edun for the production of jackets, is also trying hard to expand exports of raw silk shawls to the US, France and the UK.

Sector leaders believe in Madagascar

With the crises of 2002 and 2009 still in mind, and the political situation in the country still fragile, some would be-investors are taking a 'wait and see' stance ahead of the presidential elections in 2018.

Other executives are bullish. "I believe in Madagascar," says Eugene Havemann, CEO of the company Madagascar Clothing Manufacturers. He is starting up a knitwear factory in the capital Antananarivo and points out that for certain synthetic articles, AGOA's duty-free benefits give him a 32% edge on exports to the US and SADC a 45% edge for exports to South Africa.

The sector leaders also act as if future political stability is guaranteed.

CMT (Compagnie Mauricienne de Textile), which boasts being the number one jerseywear supplier for leading brands in Europe, left Madagascar in 2002 but in September 2016 started a fully-fledged sewing factory in Antananarivo, which will employ 2,000 workers by early 2017.

The Cotona fabric mill in Antsirabe, which produces 12m metres/year, is a key part of the Socota Textiles and Apparel group, the largest local supplier to the Malagasy Export Processing Zone (EPZ) factories. It recently invested in new weaving and washing machinery and is planning to increase its capacity.

Also Aquarelle Group, part of Mauritius-listed clothing manufacturer Ciel Textile (which has 17,000 employees), has four factories in Madagascar is increasing its capacity and efficiency.

Origin Africa highlights apparel sourcing ambitions