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ISO 9001:2015 Certified ISO/IEC/17025 Accredited 16 February 2020
15 February 2020
Ethiopian Textile Industry:
Opportunities and Constraints
By: Teshome Zeleke
Fikadu Fentaw
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
CONTENTS
1. INTRODUCTION
1.1. Ethiopian Traditional Cotton Farm to Weaving
1.2. Ethiopian Modern Cotton Farm to Apparel
2. OPPORTUNITIES
3. CONSTRAINTS
4. RECOMMENDATIONS
5.About Ethiopian Textile Industry Development Institute (ETIDI)
2 16 February 2020
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
1.INTRODUCTION
3 16 February 2020
1.1.Ethiopian Traditional Cotton Farming to Weaving Process
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
INTRODUCTION …continued
4 16 February 2020
Cotton has been grown almost in all parts of Ethiopia for a century
It sustain the livelihood of more than 50,000 people engaged in related activities
The weaving history of Ethiopia goes back at least 3,500 Years
The practice were traditionally held by small artisans called “Shemane” or weavers
This traditional cottage weaving industry is inherited and still in practice
It is a means of living for millions of Ethiopian
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
INTRODUCTION…continued
5 16 February 2020
1.2. Ethiopian Modern Cotton Farm to Apparel
ISO 9001:2015 Certified ISO/IEC/17025 Accredited 16 February 2020
6
INTRODUCTION …continued
The first large scale commercial cotton farm established in 1948
Government established Awash Valley Authority to promote large scale commercial cotton
production in 1962
There are more than 500 medium and large scale cotton farmers
The first textile factory, Diredewa textile, established in 1939
In 1960’s 3 textile factories (i.e. Akaki, Bahirdar & Adey Abeba), Debrebrihan Blanket and
Augusta Garment established
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
INTRODUCTION …continued
16 February 2020 7
Sub-Sector Number
Ginning 21
spinning 6
Knitting 25
Weaving 40
Dyeing & Finishing 44
Garment 125
Traditional (exporters) 10
Total 271
Number of L & M Textile Factories in Ethiopia
Source: ETIDI
ISO 9001:2015 Certified ISO/IEC/17025 Accredited 16 February 2020
8
Addis Ababa
Afar
Tigray
Amhara
Benishangul Gumuz
Oromia Somali
SNNPR
Gambella
0.0
200.0
400.0
600.0
800.0
269.1
678.7 600.9
407.4 316.5 303.2
200.0 225.0
Area(in '000 Ha)
Total area suitable for cotton cultivation is 3 million hectare
Based on soil fertility, availability of water for irrigation:
1.99 million hectare (66.3%) is high production area
1.01 million hectare is medium production area
Land Suitable for Cotton Cultivation
2.OPPORTUNITIES
Source: ETIDI
ISO 9001:2015 Certified ISO/IEC/17025 Accredited 16 February 2020
9
Opportunities…Continued
Source: ETIDI
14%
3%
52%
31% Comercial Irrigated
Small Irrigated
Comercial Rainfed
Small Rainfed
21%
3%
46%
30% Comercial Irrigated
Small Irrigated
Comercial Rainfed
Small Rainfed
Area in 2016/17 Per Type of Farming
Systems % of Total Area Area in 2016/17 Per Type of Farming
System % Total Production
Irrigation system holds 17 % of the total area and 24% of the total production
Commercial farmers holds 66 % of the total area and 76 % of the total production
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
Opportunities…Continued
16 February 2020 10
29
.9
28
.3
27
.1
22
.2
19
.3
68
.6
36
.9 5
2.7
38
.4
58
.4
98
.6
65
.3 7
9.8
60
.6
77
.6
2014/15 2015/16 2016/17 2017/18 2018/19
SH Comertial farmers TotalLand cultivated by commercial farmers has
shown high fluctuation trend
It declined from 68.6 ha in 2014/15 to 36.9 ha
in the next year and increased to 58.4 ha in
2018/19
Land cultivated by SH has continuous
declining trend through out the given period
It decline from 29.9 ha in 2014/15 to 19.3 ha in
2018/19
Total utilized land is less 3.5%
Area Under cultivation in ‘000 Ha( 2014/15-2018/19)
Source: ETIDI
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
Opportunities…Continued
16 February 2020
Source: ETIDI
65.8
42.5
53.8
41.0
58.0
0
10
20
30
40
50
60
70
2014/15 2015/16 2016/17 2017/18 2018/19
Lint cotton production has fluctuating
trend similar with the amount of land
cultivated
The quantity of lint cotton produced
declined from 65.8 ton in 2014/15 to 41 tons
in 2017/18, and then increased back to 58
tons in the next year
Lint Cotton Production in ‘000 tons ( 2014/15-2018/19)
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
Opportunities…continued
16 February 2020 12 12
Textile & Apparel
Potential Cotton
Production Areas
L E G E N D
Industrial Parks Bahir Dar IP
Kombolcha IP Kilinto IP
Debre Birhan IP
Jimma IP
Hawassa IP Bole lemi I &II IP
Dire Dawa IP
Adama IP
Somali IP
Major Roads
Paved Roads
Smallholder cotton
farmers
Ma
p o
f E
thio
pia
wit
h P
ote
nti
al
Are
as
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
Opportunities…Continued
16 February 2020 13
The above map represents potential areas for the sector and their distance from
infrastructure
Potential areas for cotton production
Areas of small holder cotton farmers
Types of farming (rain fed, irrigated)
Textile & apparel industry parks
Roads, rail ways, dry port, air ports
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
Opportunities…Continued
16 February 2020 14
More than 100 million Population – large domestic market
More than half of the population is under young age- active labor force
High potential for other natural fibers like bamboo, kenaf, silk, wool,flax/linen
Fast economic growth as market potential
Expansion of infrastructure i.e. road, rail way, dry port, power stations
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
Opportunities…Continued
16 February 2020 15
Expansion of industrial parks (particular for textile 7 operational )
Supporting institutions, universities ( 7 with BA program) & TVTs in all Weredas
Supply of power at globally competitive rates
Large scope for value addition (cotton to garment to apparel marketing)
Geographic proximity for global markets i.e. Africa, Middle East, EU & USA
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
Opportunities…Continued
16 February 2020
Export of T& C grown with CAGR of 63.8%, while Import grown with 17.7 %
The trade deficit increased from 221.4 USD in 2008 to 551.7 in 2017
This implies trade gap of more than half a billion
Source: WTO data base
Ethiopian T& C Import and Export (2008-20017) in Million USD
13.1 17.7 36.0 71.8 66.0 89.7
90.7 104.0 82.0 96.7
234.5 242.5
348.3 357.4
468.2
611.0 554.4 664.3 617.0 648.4
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
EXPORT
IMPORT
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
Opportunities…Continued
16 February 2020 17
Ethiopian T&C Export in million USD Ethiopian T&C Import in million USD
Export of textile has high value than clothing up to 2011, then declining trend after 2013
While export of clothing has increasing trend through out the given period
Ethiopian Imports more textile than clothing up to 2013, more clothing after wards
Import of both categories has increasing trend
Source: WTO data base
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
TEXTILE
CLOTHING
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
400.00
TEXTILE
CLOTHING
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
Opportunities…Continued
16 February 2020 18
Ethiopian Total T&C Export and Share of Ips (%) in Million USD
Source: ETIDI
T&G export reached a pick of 153.3 million USD in 2018/19, from 98.0 million in 2014/15
Export of companies in Ips increased from 2.3 million USD in 2014/15 to 49 million in 2018/19
The export share of Ips to total export of the sector increased from 2.3% to 32.1% in 2018/19
-
50.0
100.0
150.0
200.0
98.0 78.0 86.5
101.9
153.3
66.8
0.0
10.0
20.0
30.0
40.0
50.0
60.0
2.3 9.7
21.6
45.3 49.1 55.3
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
Opportunities…Continued
16 February 2020 19
$- $20.00 $40.00 $60.00 $80.00
$100.00 $120.00 $140.00 $160.00 $180.00
$178.78
$119.74
$63.21
Major Export Destinations (2014 – 2018) in million USD
EU and USA are destination for 79.4 % of Ethiopian T&G products
EU is destination for 52.7 % of T&G products
USA is destination for 26.7 % of T&G products
The rest went to Turkey, China, and Sudan
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
Opportunities…continued
16 February 2020 20
The current increase in number of garment factories demands more fabric
High demand for fabric in turn demand s for more textile mills and raw cotton
Ethiopian long term strategy is to be self-sufficient in lint cotton supply, and export the
surplus
National Cotton Development Strategy (NCDS 2017-2032) is with the main purpose of:-
- understanding the major challenges of the sector
- implementing strategic interventions
- intensifying cotton development techniques
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
Opportunities…continued
16 February 2020 21
NCDS has the goal to develop identity, resilience, responsible, transformative and
inclusive cotton sector
The NCDS aims to achieve sustainable improvement of the cotton sector in terms of
productivity, value addition and marketing
Increasing productivity and improving quality is top priority for improving the
competitiveness and profitability of cotton and textile sector in Ethiopia
GTP II is focused on building industrial base leading to structural economic
transformation and inclusive growth
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
Opportunities…Continued
16 February 2020 22
The manufacturing sector is expected to play a key role to realize Ethiopia’s development
The cotton and textile sector has been identified among the top priorities sector that can
create Jobs and earn foreign currency
Free market access to Europe (EBA), America (AGOA), Africa COMESSA
On going process to be member of WTO
The coming global apparel buyers like PVH, H&M, Arvind, etc
Peace agreement with Eritrea access to market and ports (Asseb & Mesewa)
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
Opportunities…Continued
16 February 2020 23
100 percent exemption from the payment of import customs duty and
investment capital goods and construction materials necessary for
The establishment of a new enterprise
Expansion projects
Upgrading of an existing enterprise are exempted.
Motor vehicles exemption from customs duties
Locally originating or imported raw materials is exempted for exporter
Investment and Export trade Incentives
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
Opportunities…Continued
16 February 2020 24
In Industrial Development zone income tax exemption is
10 years in In Addis Ababa and Special Zone of Oromia Surrounding A.A and
15 years in other areas like Hawassa, Mekelle and other industrial parks
Up to 5 years personal income tax exemption for Expatriate employees
Lease rent period in Industrial parks is ranges from 60 to 80 years.
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
3.CONSTRAINTS
16 February 2020 25
High cost of production
Limited availability of inputs for cotton farm i.e. chemicals
Absence of transparency in pricing and marketing
Outdated equipment of ginneries (which affect lint quality)
Low quantity & quality of cotton due to poor harvesting and post-harvesting techniques,
transporting, ginnery status, etc
Inadequate and underfunded research
Minimal coordination between segments or across the subsectors
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
CONSTRAINTS…continued
16 February 2020 26
weak contractual arrangements between smallholder farmers, ginners and textile
industries
Shortage of inputs, accessories, spare parts, etc
Low productivity due to under capacity utilization, labour related issues, etc
Low integration among the value chain
High transportation cost, delay in Djibouti port
Obsolete machineries, poor maintenance practice,
CMT based market for garment factories
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
4.RECOMENDATIONS
16 February 2020 27
For Policy makers
Improve supply of inputs (seeds, chemicals, spare parts, accessories, etc)
Advance service and support delivery system
Strengthen coordination across the sector
Enhance research and development in the sector
Encourage the backward linkage in order to fill the gap
Strengthen the contractual agreement among farmers, ginneries and textile industries
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
RECOMMENDATIONS…continued
16 February 2020 28
For investors
There is investment opportunities in the following areas of the sector
Vertical Integration
In cotton farm
Other natural fibers i.e. bamboo, kenaf, silk, wool, flax/linen
Man made fibers i.e. polyester, nylon, etc
In the backward & forward linkage i.e. ginning, spinning, weaving,
knitting, finishing, garment
Fashion marketing
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
RECOMMENDATIONS…continued
16 February 2020 29
Horizontal Integration
Development of private or in joint-venture IP for textile industries
Manufacturing of accessories, spare parts, machineries, chemicals, dyestuffs, trimmers, etc
Supply of the above components by bonded ware house
Service delivery in maintenance , consultancy, laboratory, etc
Manufacturing of packaging, etc
Recycling of wasted plastics for production of man made fibers
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
5.About Ethiopian Textile Industry Development Institute (ETIDI)
16 February 2020 30
Vision: We aspire to be a world-class institute
that enables the Ethiopian textile industry
competitive in the global market
Mission: Enabling the Ethiopian Textile
Industry competent in the global market by
providing sustained industry expansion,
consultancy, training, research and
development, laboratory service, and
marketing support & service
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
About ETIDI…continued
16 February 2020 31
Main Supports and Services of ETIDI
Investment focused supports and services
Capacity building(production)
Market supports and services
policy initiation
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
About ETIDI…continued
16 February 2020 32
Fully equipped training facilities
Model spinning factory (under progress)
Model weaving and knitting factory (under
progress)
Finishing facilities (under progress)
Design and Garment training classes and facilities
Modern chemical and physical laboratories
Fully equipped library.
ISO 9001:2015 Certified ISO/IEC/17025 Accredited
About ETIDI…continued
16 February 2020 33
Cotton is tested in the laboratory Trainees in the knitting workshop
Thank You