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African garment makers seek supply chain synergies | Apparel Industry Analysis

70% of African clothing exports come from Morocco, Tunisia and Egypt

70% of African clothing exports come from Morocco, Tunisia and Egypt

African garment and textile manufacturers are trying to create more synergy to better integrate the supply chain within the continent – but North African producers still dominate and are expanding capacity, particularly in Egypt, say participants at a major regional industry meeting.

This month’s Destination Africa exhibition in Cairo, Egypt, brought together Egyptian, Moroccan, Tunisian, Algerian, Ethiopian, South African and Rwandan manufacturers and delegations, as well as buyers from all over the world, eyeing up new production hubs as labour costs in Asia rise. 

The exhibition has increased the number of exhibitors from 90 in 2018 to 150 this year. “This is the fourth edition of the show, and we’ve seen growth year-on-year, increasing space by 30% to include more exhibitors. It’s the only place you can meet Egyptians, Tunisians and South Africans under one roof. It is also a good opportunity to meet buyers, and for Africans and Egyptians to find synergy,” said Mohamed Kassem, the commissioner of Destination Africa.

The event is trying to push such synergy. On the sidelines of this year’s exhibition, representatives from the Agadir Agreement countries – a free trade agreement between Egypt, Morocco, Tunisia and Jordan – discussed ways to boost weak regional upstream capabilities. This is apparent in Tunisian-Egyptian trade, for instance, with only 1.3% of Tunisia’s textile and clothing imports being from Egypt (5,024 tonnes), compared to 42% from Europe, according to CONNECT (Confederation of Tunisian Citizen Enterprises).

“The vision is to build a connected supply chain and change the mindset from competition to cooperation,” said Kassem.

Continental cooperation at the institutional level is improving, according to Kassem, an Egyptian who was this year elected vice-chairman of the African Cotton & Textile Industries Federation (ACTIF), a regional trade body of 17 countries formed in June 2005 from across sub-Saharan Africa. “I have pushed for Tunisia and Morocco to join ACTIF,” he said.

North Africa dominates

North Africa dominates exports from the continent, with 70% of African clothing exports and just under half of textile exports from Morocco, Tunisia and Egypt, according to international trade data. Throughout the continent, the majority of garment sales are to the US and Europe, and raw cotton exports to Asia, while upstream imports are primarily from Asia and Europe.

“There are still a lot of gaps in the upstream supply chain, such as dying and weaving. We need to attract foreign and domestic investment for the supply chain to be more connected,” Kassem explained.

Regional and national export bodies have been trying to attract more production to the continent as labour costs rise in east Asia and buyers look to diversify sourcing due to trade tensions between China and the US.

Meanwhile, Kassem said the tension of the (US-China) trade war has created extra opportunities for African manufacturers. “A 15% decline in Chinese exports means there’s around US$45bn up for grabs.”

African countries have been trying to woo Chinese and East Asian manufacturers to invest. So far, Ethiopia in particular has benefited from such investment, but some manufacturers and buyers have run into problems in the country and have re-sourced production to Kenya, Rwanda and Madagascar.

“Ethiopia has been volatile for us. There are logistics costs, but more so instability, problems with telecom networks. Entrepreneurs don’t want to take the risk with Ethiopia. For us, Kenya is more stable,” said Nalin Thilakarathne, a sourcing and supply chain manager at Hela Clothing, a Sri Lankan manufacturer.

Maryse Mbonumutwa Gallagher, director of Belgium-based clothing company Pink Mango, said it had closed a padded jacket factory in Ethiopia and relocated to Rwanda. “We explored Ethiopia, but weren’t very satisfied. While Rwanda is also landlocked, it has a conducive business environment, which makes up for extra transport costs.”

Egypt pushing hard to expand capacity

Egypt is trying to capitalise on its long history of garment production to attract buyers and investors, with its free trade agreement with the US giving Egyptian goods duty-free access to the US through the Qualifying Industrial Zones (QIZ) programme if at least 10.5% of a product is sourced from Israel – a particular sweetener in the current economic climate. Morocco, the continent’s largest exporter, has limited free trade exemptions with the US, until 2023 when it is hoped a more encompassing agreement will go into effect.

Egypt is pushing hard to expand capacity and attract investor following a downturn in exports since the 2011 revolution, launching in 2015 its Vision 2025 strategy to quadruple textile and garment exports, employ a further 1 million people, and attract US$17.5bn in investment.

“Bangladesh is targeting US$30bn [in exports], and we should attract billions, but we’re not ready yet in terms of capacity. With US$950m in Egyptian exports to the US, that is just 0.5% of the US market, so there’s room for manoeuvre,” said Magdy Tolba, chairman of the Textiles, Apparel and Home Textiles Export Council of Egypt, and one of the organisers of Destination Africa.

Egyptian garment exports grew 10% last year and 15% in 2017, and are forecast to grow 15% this year, said Tolba. His organisation is targeting 20% to 25% growth, but to hit that, Egypt needs to modernise to meet standards increasingly demanded by buyers and retailers.

“Around 70% to 80% of our factories have to be modernised. We feel it, that we’re old fashioned, and that also applies to our management, which has been too much of a one man show. We need to be as efficient as China,” said Tolba.

Production plans

With limited Chinese investment in Egypt, the country is instead looking to Turkey for investment and managerial expertise to overhaul businesses, especially by hiring specialised middle management. “Turkey has an eye for investing in Egypt, and Egypt is enlarging capacity,” added Tolba.

Tolba’s T&C Garments, which manufactures denim for leading retailers, is aiming to double annual sales from US$70m to US$150m by doubling capacity to 12 million pieces annually. Jade Textile Egypt, a Turkish-owned company, is also expanding, from US$130m a year to US$200m in 2020, with a particular focus on active wear and added value wear for the US.

Another key Egyptian player, Lotus Garments, a major manufacturer of Levi’s jeans, making 800,000 pairs a month, equivalent to US$80m a year, is planning to expand its overall production capacity. It is establishing a fabric facility next year, in 10th Ramadan City outside of Cairo, with Italian management, to produce 20m metres of denim, and in the second stage, 40m metres by 2022. The company is also buying 20 Jeanologia laser finishing machines, and is trying to attract American Eagle, Hennes & Mauritz (H&M) and Inditex to its client portfolio, which also includes Ralph Lauren, Polo, Lee and Wrangler,

“We aim to manufacture 2m garments a month by 2021, and increase exports from US$145m a year to US$200m,” said Mamdouh Saad, merchandising manager at Lotus Garments in the Port Said Public Free Zone.

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