Building “Factory Africa”

Few people think of Africa when they imagine the world's top retail fashion production, but this may soon change. On a recent trip to Ethiopia, I visited Bole Lemi, a pilot industrial park for a bourgeoning garment industry. There, I witnessed a buzz of activity and rainbow of color, as thousands of people worked to hem, cut, and construct everything from neon sweaters to ski pants.

Bole Lemi is a small part of a grand vision to rapidly industrialize Ethiopia, capitalizing upon favorable foreign and domestic conditions. If the country succeeds, it may become the center of “Factory Africa,” lifting millions out of poverty, and putting African-made products on the map.

Why Africa? Asia’s loss could be Africa’s gain

Over the past three decades, China surged to become the world’s largest producer of consumer goods. The country established itself firmly at the nexus of “Factory Asia,” a complex web of supply chains in South and Southeast Asia, manufacturing goods sold around the world.

Now, rising labor costs are threatening China’s global lead. Over the past ten years, Chinese wages have more than tripled, and nearby countries are beginning to experience wage creep as well.

Leading retailers have also faced reputational concerns related to Asian manufacturing. Headlines about factory collapses in Bangladesh and child labor in China have caused producers to seek safer locations in which they can protect workers and their brands.

Africa presents an enticing opportunity. Labor is cheap and abundant in many markets, and manufacturing reputations remain largely untarnished. A growing consumer class also means the potential to help shape and access new markets for the sale of manufactured goods.

However, establishing a manufacturing industry doesn’t happen overnight. Only 1.5% of the world’s manufactured products currently come from Africa. Manufacturing demands power, roads, ports, capital investors and a trained labor force. If Sub-Saharan Africa is to establish a Factory Africa, it will need to overcome these barriers.

Why Ethiopia?

Historically closed to international investment, Ethiopia has recently begun opening with an almost singular focus on industries that will drive development in the country. For manufacturers scoping out new factory locations, Ethiopia offers an attractive cost of operations as well as a government committed to developing infrastructure and a conducive investment environment.

Ethiopia’s competitive advantage spans both regionally and globally. The country has the least expensive power in Africa. Like Asia in the 1980s and 1990s, labor is cheap and abundant. Average manufacturing wages in Ethiopia are one-fifth what they are in China, and less than half of those in Kenya. As the second most populous country in Africa, companies looking for their next long-term move will find an abundant skilled and unskilled labor force.

The Government of Ethiopia is also heavily investing to ensure the country seizes the moment of opportunity as factories move from Asia. Substantial financial incentives, like lengthy tax breaks in target industries, and rapid infrastructure development, including the development of the Addis-Djbouti railway, have provided investors assurance of Ethiopia's commitment to industry. 

Why it matters: Manufacturing improves lives

Very few countries have grown without manufacturing. If Ethiopia succeeds, it will not only improve the lives of millions of Ethiopians, but will have a positive regional effect as well.  

The Government of Ethiopia plans to create two million jobs through the manufacturing, generating household incomes to support ten million people. These jobs come at a critical time for Ethiopia, as joblessness has decreased in recent years, but still remains at 17%.

While manufacturing wages will begin low, livelihoods are likely to improve quickly. Over the past thirty years of Chinese industrialization, GDP per capita increased seventeen-fold, creating a new middle and upper middle class. Already, factories in Ethiopia are experiencing a high demand for jobs. Factory managers at Bole Lemi shared they have a constant flood of applicants, with workers valuing the steady, reliable income of clothes making.

Nearby countries are also likely to benefit from Ethiopia’s development. Ethiopia recently entered an agreement with Djbouti to boost trade, industry, and transport—a treaty as important to land-locked Ethiopia which depends upon Djbouti’s port, as it is to Djbouti’s economic growth. Ethiopia also sells its excess power to Kenya, Sudan and Djibouti, and has signed deals to send power to Tanzania, Rwanda, and South Sudan. As these countries begin to access energy and build the infrastructure necessary for development, they take steps toward creating an enabling environment for the creation of cross-border supply chains.

Fifteen years for now, the Horn of Africa is likely to have many Bole Lemis constructing the latest fashion. As the employees of these factories work to create the world’s merchandise they will be making something for their own future as well, a future in which Africa will be placed firmly on the map of global manufacturing.   

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