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2.7 Textile Industry in Ethiopia
Ethiopia is among the least developed countries in the Sub Saharan Africa
whose economy is based on agriculture. Hence the major exportable items
for the country are mainly agricultural products. The country has favorable
climate to produce such agricultural products as flower and cotton. Using
mainly cotton as a raw material, Ethiopia has produced textile and garment
for both domestic and international markets.
According to Berihu (2008), the modern textile sector started in 1939,
established by foreign capital under the name of Dire Dawa Textile Mills. It
is assumed that there is some 2.6 million hectares of land suitable for
cotton production, which is equivalent to that of Pakistan, the fourth largest
producer of cotton in the world. And, the major export destinations are
Asian countries, African countries, and European countries, of 67%, 23%,
and 10% respectively (Berihu, 2008).
As a result of the government‘s export incentives and opportunity of
international trading environment, in the past few years, the export of textile
product has shown significant increase. According to the Ethiopia Embassy
in Beijing (2010) report, Ethiopia's textile manufacturing industry embraces
both medium and large public and private enterprises. Their main activities
include spinning, fabric formulation, dyeing, finishing and sewing. In
Ethiopia, the textile sector is the third largest manufacturing industry, only
second to the food processing, beverage and leather industry. In the fiscal
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year 2008/09, with a total output value of 699.91 million birr (the then
1USD=8.6 birr), the contribution of textile industry to GDP was 1.35% and
8.31% to the output value of the manufacturing industry (EBDSN, 2009).
Such contribution is so small that the country needs to do more on value
adding strategies to exploit the opportunities it has with the textile sector.
According to the ETIDI (2012) report, the country‘s textile sector mainly
produces 100% cotton textiles. Each enterprise produces one product range,
such as cotton yarn, cotton fabrics, bed sheets, blanket, knitwear etc. All
the cotton yarn in the Ethiopian market is supplied to the local handlooms.
It is estimated that the annual hand-loomed fabric is around 95 million
square meters.
Marketing of textile products such as yarn, fabric and blanket made by
Ethiopian textile enterprises are usually distributed by private trading
companies to the local market. Such a system may create distribution delay
and feedbacks may not reach to those companies which should receive it on
time. But, imported textiles hold a large market share in Ethiopian market
and nearly one thousand small-scale family-owned trading firms and a
small number of large trading companies are engaged in the import
business of textile (Ethiopia Embassy in Beijing, 2010).
Ethiopia has also many opportunities to benefit from the textile sector. Such
opportunities include increased domestic market (population growth rate is
2.7% per annum) and easy access to international markets through AGOA,
EU, COMESA, and other bilateral agreements. Above all, the country has
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huge potential to produce cotton, which is the major raw material for the
sector, and cheap labor force which the sector demands. Despite these
opportunities, the country has used only a fraction of the potential
especially the AGOA and EU markets. Concerning AGOA, only two textile
factories actually benefited from it (Theo van der Loop, 2003).
This clearly indicates that the textile sector is still creeping to support the
nation‘s economy far below than expected and far from exhaustively using
the favourable business atmosphere. And this indicates the existence of
problems in the sector. Some of the problems faced by the textile enterprises
some five years ago are still persisting, such as overly bureaucratic rules
and regulations, lack of modern technology, inconvenient bank rules and
procedures, and poor infrastructure (Taye, 1997).
The consultative forum held by Ministry of Trade and the textile firms‘
managers and other stake holders in September (2013) concluded that the
textile firms‘ lack of competitiveness due to mismanagement, financial
constraints, impediments posed by the contraband trade and scarcity of
spare parts are the major problems responsible for the under performance of
the sector even in the domestic market. The participants also hoped that the
textile sector‘s contribution to the national economy would mount up to one
billion USD in the following five years (till 2015/16). However, they fail to
spell out marketing strategy problems as a major issue to be addressed.
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Getting rid of mismanagement may address some marketing issues but not
the problem in its entirety. And the participants in the forum still view the
global competition through the old analytical framework which is no longer
applicable and they fail to assist their opinion with scientific study.
But these days, there are hopes of getting foreign investors, mainly from
China and India, and Saudi Arabia, to come and invest in textile industry.
Investment has already started with cotton production and is supposed to
continue in the future. The marketing strategy, therefore, remains critically
important as the textile production should be expanded in both quality and
quantity for the country to benefit from the sector as it is hoped.
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