The State of Ethiopia’s Burgeoning Textile Industry

Several articles have recently been published across multiple African-focused newspapers, including AllAfrica and East Africa Business Week, detailing the current state of Ethiopia’s textile industry. This is of great interest to RENEW because of the Impact Angel Network’s recent investment in Desta PLC. According to recent reports, Ethiopia has failed to meet export targets of textiles for the first six months of the Ethiopian 2015 to 2016 fiscal year. The Ethiopian Textile Industry Development Institute (ETIDI) said targets were to obtain approximately $60M from textile exports, whereas actuals fell closer to $41M.(1)

Although the first textile mill in Ethiopia was established nearly 80 years ago, the textile sector has been one of the country’s least developed industries. Up until recently, contribution of textile income to the country’s GDP was insignificant. However, with Ethiopia’s growing eligible workforce and the need for the creation of jobs, the government of Ethiopia has taken steps to promote investment in this sector and has created various incentives to encourage investment in textiles.

Initiatives such as the Africa Growth and Opportunity Act (AGOA), Common Markets of East Africa (COMESA) and other bilateral trade agreements with Western countries offer free trade benefits and access to the global and regional market for Ethiopia. Yet, although AGOA took effect in 2001, Ethiopia has underutilized the program, with less than 10% of Ethiopia’s textiles exported to the U.S.(2) As a result, the government has established a National AGOA Center under the Ministry of Trade to help companies better utilize AGOA, and names the textile and garment industry as a priority sector under the country’s Growth and Transformation Plan II.(3) As stated by the Director General of ETIDI, Sileshi Lemma, "We are working to be a leading country in light manufacturing in Africa which will lay the foundation for heavy and high tech industries by 2025.(1)

Ethiopia rapidly is becoming an attractive location for textile manufacturing on account of competitive labor costs, government incentives, and low energy costs.(4) Companies such as H&M, Tesco, Gap, Belk, and Walmart, among others, are now sourcing textile products from the country.(5) In fact, Swedish clothing major H&M, International Labour Organization (ILO) and Swedish International Development Cooperation Agency (SIDA) have launched an industrial relations project aiming to improve the development of a socially sustainable textile and garment industry in Ethiopia.(6)

At RENEW, we are excited to be a part of the story of textiles in Ethiopia through our investment in Desta PLC (Desta), a textile and apparel manufacturing company located in Addis Ababa, Ethiopia. Desta, a family-owned business established in 1992, produces and exports fabric and garments and provides cut-and-sew, knitting and embroidery services to domestic and international clients. The IAN anticipates that the investment in Desta will create significant social impact in Ethiopia by adding more than 100 jobs to the local economy and supporting several hundred existing jobs, many for women, and will positively impact the burgeoning textile sector in Ethiopia.

Desta is also committed to fair treatment of its employees and adherence to guiding principles of sustainability, setting it apart from the trajectory this industry has taken in many other low and middle-income countries. Desta is accredited by international standard and compliance organizations. It has passed an audit by BSCI (Business Social Compliance Initiative), as a witness for creating suitable working conditions and protection of labor. In addition, Desta undergoes a social audit twice a year by SGS, a leading inspection and certification company headquartered in Switzerland. Worldwide Response Accredited Production has also certified the company.

RENEW and members of the IAN are proud to assist Ethiopia in achieving its ambitious development goals in the textile-manufacturing sector, in partnership with Desta.

(1) AllAfrica: Ethiopia Fails to Meet Textile Export Targets
(2) McKinsey & Company: Sourcing in a Volatile World The East Africa Opportunity
(3) Development Assistance Group: Ethiopia
(4) African Capital Markets News: Ethiopia Lures Manufacturing
(5) Sourcing Journal: Will Ethiopia Flourish or Suffer Fast Fashion Decline?
(6) H&M Press Release: Collaboration in Ethiopia