Africa Poised to Be Even More Competitive in Sourcing in Coming Years | Sourcing Journal

Africa Poised to Be Even More Competitive in Sourcing in Coming Years | Sourcing Journal

Friday, December 16 2016

By Tara Donaldson, Sourcing Journal

Africa isn’t just enjoying a moment of attention from the sourcing world—countries in the region have continued to position themselves for a competitive role in the manufacturing sector and more retailers are taking note.

From its duty free access to the U.S. market under the African Growth and Opportunity Act (AGOA) and to the EU as part of its Everything But Arms (EBA) program, to its ample available and affordable labor, Africa is becoming increasingly competitive as a sourcing destination.

What’s more, as eyes move away from the Trans-Pacific Partnership (TPP) that could soon meet its dissolution, Africa looks set and ready to pick up on production that might otherwise have gone to Vietnam or other members of the wilting trade deal.

The key for many interested in manufacturing in Africa, is the idea that the fledgling sector can be built ethically and sustainably from the ground up as it has’t already spent years growing accustomed to manufacturing models and practices that aren’t what the industry demands today.

Some major retailers like H&M and PVH are well aware of the opportunities in Africa and are investing in making a long-term go of sourcing there. PVH said in September that it would increase its production from Africa to as much as 25 percent of its production.

Naturally, certain countries have come further than others in their readiness to manufacture on a grand scale, but three in particular are getting the most attention.

Kenya

Kenya benefits from duty free access to the U.S. under AGOA, and one thing the nation has so far been known for is its stability—key at a time compliance concerns are higher than they’ve been in the past.

Labor is stable in Kenya, workers have been touted as being easy to train and the country’s ease of doing business ranking has improved steadily in the last few years.

Spokespeople from Kenya’s Export Processing Zones Authority say the country is keen on improving the quality of life for its citizens, and as such, the government has invested in the textile sector to help factories expand and ultimately, for the sector to flourish.

H&M, which has manufacturing operations in Kenya, has said it wants to contribute to sustainable growth in the region, and that as more buyers come to Africa, sourcing there will become a collective success.

Ethiopia

Ethiopia has been putting its best foot forward when it comes to improving its offering as a textile manufacturer.

In the last year alone, Ethiopia opened a 1.3 million-square-foot eco-friendly industrial park for textile production in the southern city of Hawassa, worked on a new hydropower plant expected to be operational this year that will nearly double Ethiopia’s power capacity, and opened a new railway.

As infrastructure has been an ongoing challenge for Africa, the landlocked country recently completed work on a new 407-mile long railway to connect itself to a port in neighboring Djibouti.

China funded the $3.4 billion project, which is expected to reduce the time it takes to move goods across the country from two days to just eight hours. The move is part of Ethiopia’s plan to eventually build more than 3,000 miles of new railway in the nation by 2020.

In August, PVH said it is working toward creating a “best-in-class” apparel manufacturing industry in Ethiopia, noting its aid in establishing an industrial park in Hawassa.

“We are taking a thoughtful and measured approach to sourcing in East Africa, partnering with suppliers to thoroughly investigate trade prospects across the region and engaging with the national and local governments,” PVH said in its 2015 Corporate Responsibility Report.

Egypt

Egypt is being considered the hub of sourcing in Africa. Though it doesn’t fall under AGOA, goods produced in Egypt still have duty free access to the U.S. market as part of the Qualifying Industrial Zone (QIZ) program. Under the QIZ, goods made in Egypt can enter the U.S. tariff free provided the products contain 10.5% inputs from Israel.

Factories there are well established, innovative and not facing the same labor turmoil other nations have seen. Woven bottoms are a big part of production there, and shirts and suiting are also part of the country’s capabilities.

Brands like Levi’s, Walmart, Under Armour and Kenneth Cole are producing goods out of factories in Egypt and the quality of the products is high.

Egypt took a hit to its reputation in recent years after back to back revolutions had brands and retailers questioning its stability, but the country’s ability to still deliver on orders during that time, and its stability since, has shifted impressions back to the positive.


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