East African countries, particularly Ethiopia and Kenya, could become leading clothing manufacturers if governments, employers and buyers pull together to improve business conditions, global consultancy McKinsey & Company said in a report.
Since 2013, buyers – among them H&M, Primark and Tesco — have been increasingly sourcing their clothing from East Africa, helped by the renewal of the African Growth and Opportunity Act (AGOA), which gives certain countries in sub-Saharan Africa duty-free access to the US market.
Apparel exports from Ethiopia, Kenya, Tanzania and Uganda amounted to a combined $337 million in 2013.
McKinsey said that its researchers visited apparel factories in the region; interviewed stakeholders; analysed market data; and surveyed 40 chief purchasing officers (CPOs), representing a combined $70 billion in 2014 purchasing volume.
“We found that East Africa could indeed become a more important centre for apparel sourcing, but only if stakeholders—buyers, governments, and manufacturers—work together to improve business conditions in the region,” the consultancy said.
Although China will remain the leader in garment manufacturing, with about $177 billion in exports in 2013, almost three-quarters of survey respondents said they expect to reduce their purchases from Chinese firms.
Bangladesh remains at the top of the list of future sourcing destinations, followed by Vietnam and India, but East Africa is clearly on the rise. Apparel exports in 2013: Bangladesh ($24 billion), Vietnam ($17 billion), and India ($17 billion).
“Within sub-Saharan Africa, East African countries—especially Ethiopia and Kenya, and to a lesser extent Uganda and Tanzania—are of interest to apparel buyers. The governments of both Ethiopia and Kenya are taking steps to develop their domestic textile and garment industries,” McKinsey said.
According to United Nations projections, sub-Saharan Africa will have the highest growth in working-age population anywhere over the next 20 years. By 2035, the working-age population in the region is expected to be as large as China’s today—more than 900 million people. This massive labour pool is capturing the attention of several industries, including clothing.
However, if East Africa is to enjoy sustainable growth in garment manufacturing governments should consider investing in infrastructure, supporting local entrepreneurs, diversifying free-trade agreements and building market-oriented educational institutions, McKinsey said.
Suppliers will also need to upgrade their facilities and enter into long-term partnerships with buyers, while buyers will need to evaluate the region as a true strategic option rather than just a testing ground.