By Christina Passariello And Suzanne Kapner
Addis Ababa, ETHIOPIA--At the Radisson Blu hotel here last year,
a senior fashion executive met with several of his top Asian
apparel suppliers. His plea: Open for business in Africa.
"Africa is a huge opportunity to demonstrate how the industry
can work together," said Colin Browne, managing director of product
supply and Asian sourcing for VF Corp., which owns such brands as
Lee, Wrangler and Timberland. He pointed out to the factory owners
a key advantage in Africa: it's one of the few places where it's
possible to go from fiber to factory in one place.
Africa is the final frontier in the global rag trade--the last
untapped continent with cheap and plentiful labor. Ethiopia's
garment sector has no minimum wage, compared with Bangladesh, where
workers earn at least $67 a month, according to the International
Labor Organization. Garment workers in Ethiopia started at about
$21 a month as of last year, the Ethiopian government said.
Most countries in Africa benefit from a free-trade agreement
with the U.S., an arrangement that saves retailers money. And,
unlike other emerging economies such as Vietnam and Cambodia, many
African countries can grow their own cotton, which shortens
production time.
Mr. Browne's thinking marks a change of mind-set. For more than
a decade, Asia has dominated clothing manufacturing, churning out
cheap clothes on inexpensive labor that are shipped to malls
world-wide.
But over the past few years, rising production costs in China
and several deadly factory accidents like the collapse of Rana
Plaza two years ago in Bangladesh have forced apparel companies to
hunt for alternatives from Myanmar to Colombia to Ethiopia.
Ethiopia was recently identified as a top sourcing destination
by apparel companies, according to McKinsey & Co., which
surveyed executives responsible for procuring $70 billion of goods
annually--the first time an African country was mentioned alongside
Bangladesh, Vietnam and Myanmar.
Several clothing giants are beginning to source in Africa. VF
expects to start getting some of its pants sewn in Ethiopia this
year. Calvin Klein and Tommy Hilfiger parent company PVH Corp. has
been making some of its clothes in Kenya for at least four years.
Others with sourcing in sub-Saharan Africa include Wal-Mart Stores
Inc., J.C. Penney Co. and Levi Strauss & Co.
Whether or not Africa's role as a supplier expands, those
efforts show the lengths to which big apparel makers are willing to
go to find new, low-cost sources of production. Consumers have been
conditioned to expect a plentiful supply of cheap clothing, which
has pressured the margins of companies like VF and PVH.
"In the global economy, light manufacturing is constantly
moving," said World Bank's Guang Z. Chen, who was the country
director for Ethiopia until last month and is now a director for
several countries across southern Africa. "We see the possibility
of this kind of industry moving away from Asia, because the labor
cost is rising in China rapidly."
Chinese garment workers earned anywhere from $155 to $297 a
month as of Jan. 1, the date when many countries adjust their wages
annually, the ILO said. Garment workers in China tend to do more
sophisticated production while basic cutting and sewing goes to
countries with lower wages.
VF is hoping to accelerate the move to Africa. It teamed up with
its biggest rival, PVH, to try to convince suppliers to come with
them. They invited their 20 best suppliers from countries such as
China, India and Sri Lanka on a 10-day trip in April 2014 with a
goal of getting them to invest in opening their own factories in
Africa--with the promise that the American brands would place
orders there in return.
Ethiopia holds the most promise for developing garment
production in Africa, factory owners and brands say.
"Ethiopia seems to be the best location from a government, labor
and power point of view," says M. Raghuraman, chief executive for
corporate marketing and branding at Brandix Lanka Ltd., Sri Lanka's
largest clothing exporter, which is interested in Africa's garment
potential.
On the outskirts of Addis Ababa, the government recently built
the $250 million Bole Lemmi industrial park exclusively for foreign
investors in the garment industry. Giant hangars occupy land where
barley, peas and the local grain teff used to grow.
The work floor of the Bole Lemmi factories are one level--a
safety improvement over the multilevel factories in Bangladesh that
have claimed hundreds of lives in fires and collapses.
At the MAA Garment & Textile Factory in Northern Ethiopia,
1,600 workers spin cotton, dye fabric and sew it into T-shirts,
leggings and other basics for international retailers like Hennes
& Maurtiz AB's H&M chain, Tesco PLC, Asda Stores Ltd.'s
George label, and German clothing company Kik Textilien und
Non-Food GmbH.
"Investors are coming here from Sri Lanka, Bangladesh, China,
India and Turkey," said Fassil Tadesse, chief executive of MAA's
parent company, Kebire Enterprises, and president of the Ethiopian
Textile and Garment Manufacturers Association.
So far, Africa barely registers in garment manufacturing. And it
will take years for any other country to seriously challenge
China.
China exported $177 billion of clothes in 2013, according to the
World Trade Organization figures available, nearly eight times more
than No. 3 Bangladesh, which took 20 years to become a powerhouse.
(Italy, ranked No. 2, exports slightly more clothing than
Bangladesh.)
Many African countries lack roads to transport finished
clothing, and landlocked Ethiopia doesn't have a port. The
workforce is untrained in sewing clothes. All of sub-Saharan Africa
accounts for less than 1% of global clothing exports.
Some apparel companies remain interested despite those hurdles.
They are drawn to the cheap labor and to the inexpensive power,
which in many countries is the second-biggest factory cost after
workers. The Ethiopian government is building a railway to the port
in neighboring Djibouti to help exports leave the country more
quickly.
VF is planning another trip to Africa this year, after receiving
queries from suppliers who weren't on the 2014 trip.
William McRaith, PVH's chief supply chain officer, spoke about
Africa's potential at an industry conference last year. "The
dynamics of that region are far more interesting than China was" at
a similar point in its development, he said.
Saabira Chaudhuri contributed to this article.
Write to Christina Passariello at christina.passariello@wsj.com
and Suzanne Kapner at Suzanne.Kapner@wsj.com
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