For decades, major fashion chains have enjoyed an era of seemingly endless expansion planting retail stores across continents, but they’ve also had to scour the globe for new and cheap places to manufacture their every-growing volume of products.
This insatiable hunt has led retailers and producers to one of the last remaining unindustrialized frontiers: Ethiopia, which is fast-becoming the go-to spot for producing low-cost consumer fashion. Among the major brands now sourcing from the North African nation: H&M, Tesco, Primark, Walmart, Gap, and Belk.
The Ethiopian industry is being built from the ground up, almost from scratch. Currently, there are just over 115 garment factories in country as a whole, many of them opened just in the last few years. The nation has seen such rapid growth that some are calling Ethiopia the “China of Africa” or even the “Bangladesh of Africa.” What those titles portend remains to be seen, but recent news from H&M could push foreign investment down a more sustainable path. The Swedish retail giant has announced it is partnering with a socially progressive venture capital group to help build a “responsible” textile industry in Ethiopia, and this could be a signal to Western consumers that they can trust that Made in Ethiopia labels for being more environmentally friendly and pro-labor than what we’ve seen in Southeast Asia.
First, we should ask, what are foreign fashion companies doing in Ethiopia anyway? And why are they there and not elsewhere in Africa? For starters, the labor costs are very low; lower in fact than any Southeast Asian garment-making hub, and can be nine to 10 times lower than in China.
Yet despite lingering perceptions that link Ethiopia with foreign aid and “save the children” TV spots, the nation is in rapid transition. It may be that only 1.2% of the population uses the Internet and more than 85 percent live or work on farms, but Ethiopia’s leaders are intent to leave the old ways behind and use export-oriented manufacturing to wrench the country into the modern world. Their goal is to fast-track apparel and textile exports, increasing them from $99 million in 2013 to $1 billion over the next two years.
To sweeten the pot for foreign investors, the government has financed new industrial mega-zones, mostly near the capital of Addis Ababa, which are successfully attracting a flurry of business from India, Taiwan, Pakistan, Korea, and of course China, whose manufacturers are fleeing from rising costs. The most publicized Ethiopian newcomer aside from H&M is Huajian, a Chinese company and one of the world’s largest shoemakers, which produces for major fashion brands, including Guess, Clarks, Nine West, Naturalizer and Tommy Hilfiger.
Quickly scaling up the textile and garment industry, using China as a template, raises immediate issues of environmental sustainability. Huajian has plans to build a Chinese-style “shoe city” in the coming years, a 341-acre industrial zone that will employee as many as 50,000 workers (more than the current total of the entire Ethiopian garment industry) and host some 45 different manufacturers, from textiles, garments and leather makers to chemicals and metal factories—it is also projected to suck up 53 megawatts of power and 15,555 metric cubes of water per day, according to one source, which equals more than four million gallons. A Taiwanese shoe company, George Shoes, has similar plans for an industrial park with 65,000 workers and an on-site tannery.
The leather and leather footwear industries, known for being notorious polluters, stand to be two of the fastest-growing subsectors in Ethiopia as the country has the world’s fifth-largest cattle stock, and skins go for as low as $2 a piece.
Tanneries in developing countries have had an abysmal track record thus far: Bangladesh’s tanneries are linked to poisoned waterways affecting thousands of people, causing painful skin rashes, respiratory problems and shorter life expectancies for tannery workers. China passed water pollution regulations aimed at the leather industry for the first time this past March—but it’s unclear how many decades it will take to reverse the pollution, or whether it will be possible at all.
Not surprisingly, some critics are already warning that Ethiopia’s plans for quick industrial expansion on this scale “portends terrible [environmental] damage.” China’s growth came at an enormous cost to the environment with fashion being a major culprit: It is the Middle Kingdom’s third-largest contributor to wastewater pollution.
The best hope for sustainable development in Ethiopia might just come from brands like H&M, hoping to appease nervous shareholders and consumers about their African expansion and environmental and labor records. After two years doing “test runs of garments” in three Ethiopian factories, H&M is now scaling up its production in Ethiopia with the help of Swedfund by investing in textile factories with “high social and environmental standards.”
Swedfund has promised an impressive initial investment of roughly 30 to 40 million SEK ($5 to $6 million per factory) into two textile factories in Ethiopia, according to an email response from its press office. Though the partnership is in the very early stages, Swedfund’s rep says they plan to set standards for and monitor the factories’ water usage, wastewater treatment, environmental impact and working conditions based on International Labour Organization (ILO) standards.
How revolutionary or status quo Swedfund’s involvement with H&M will be for Ethiopia has yet to be determined. But the groups’ other investments give reason for hope: Swedfund currently has one other textile factory in its portfolio in India, which produces polyester yarn from recycled PET bottles using a patented cleaning process called ReNew. Given the huge volumes of clothing H&M produces, using closed-loop and recycled textiles is certainly the direction in which the retailer needs to be moving. H&M and Swedfund could even inspire other firms as well the Ethiopian government to adopt forward-thinking environmental protocols.
In terms of wages, most reports place wages in Ethiopian factories between $37 and $53 per month, making them the new title-holder of lowest paid garment workers in the world (Bangladesh, the former title holder, now pays factory workers roughly $68 a month).
Christopher Blattman, a Columbia University political scientist studying workers at Ethiopian’s new export factories, said that manufacturers are keeping wages so low that most Ethiopians are quiting within the first year, leading to a turnover rate as high as 70 percent. “It’s really boring, tedious work with some hazards and inconveniences,” Blattman said of factory life. “There’s all sorts of things that people have to put up with about it, the main one being these low wages.” Blattman added that “the minute workers find a better job, they take it.”
Some reports show that foreign newcomers are also paying lower than locally-owned plants. Huajian is among them.
Huajian’s vice president told BBC that the company feels justified paying lower wages as it is offering workers shoe-making training instead, as well as tennis courts, uniforms, food, and, in the future, free accommodation.
H&M meanwhile is asking that its suppliers pay the minimum wage earned by public sector workers in Ethiopia, which is 420 birr ($23). H&M’s press officer Anna Eriksson described the wage as “a very minimum,” adding that the company “expect suppliers to pay skilled workers above this level.” Eriksson also said the fast fashion giant is in “continuous dialogue” with the ILO to help the country set its own minimum legal wage.
Newcomers like Huajian and H&M could do well to take a page from one of Ethiopia’s most successful companies and one of the world’s most ethical and sustainable fashion brands: SoleRebels. The certified Fair Trade footwear company launched in Addis Ababa in 2005 and now has 18 retail stores around the world, including one in San Jose, California, opened just his month. The shoes are made from local and reused materials, the soles from recycled tires and the uppers from handcrafted cotton, jute and the koba plant. Craftsmen are paid four times the going rate in the Ethiopian industry. And the the shoes sell: The company is on track to open over 150 stores globally, bringing in more than $250 million in revenues by 2019.
It is a common adage that the textile industry is a stepping-stone toward development. Considering the wealth generated by the fashion industry and the environmental wreckage and exploitation left in its wake, the no-questions-asked growth is overdue for reconsideration. Going forward, how can the coming mass-market garment industry Ethiopia be structured to play out more fairly—with the spoils of advancement being shared with factory workers and environmental sustainability being factored into the total picture?
As H&M and other foreign companies flock to Addis Ababa and surrounding cities, they present enormous opportunity to create an export-oriented garment industry that not only mimics the miraculous economic growth of Bangladesh and China, but one that learns from its mistakes and works with local entrepreneurs and manufacturers to create a forward-thinking industry built on fair trade principals, living wages and environmentally sustainable production. These sustainable and ethical tools and ways of doing business already exist—as companies like SoleRebels prove—but the question is how to incentivize new businesses to practice them.
Negotiators need to support a modernized NAFTA that will lead to more job creation and commercial opportunities within, and among, our three countries.Read more
American & Efrid has formed a business alliance with CGS, a provider of business applications, enterprise learning and outsourcing services, to improve productivity, quality and employee motivation within A&E’s manufacturing operations.Read more
The Federal Trade Commission is taking further steps to ensure that clothing, fur and textile labels are accurate and protect consumers in the U.S.Read more
Invista, owner of the Lycra brand, has launched a marketing campaign based on global consumer insights around denim.Read more
Richemont is ramping up its digital growth strategy with a key technology hire, plus Dollar Tree announced a new CEO this week.Read more
Strong consumer confidence and employment rates are predictors of a positive holiday season but not all retailers well benefit from the uptick—only those that learned from last year and successfully implemented their transformation plans.Read more
An uptick in circular industry initiatives has prompted brands, and apparel organizations to make sustainability a priority in their supply chains.Read more