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Investment Or Exploitation?

Published 8 years ago
By Forbes Africa

A cold front is sweeping over Addis Ababa from the Eucalyptus-dotted Entoto mountain range. In the gloom of dawn, I shiver and look out from my hotel window at the derelict shell of a half-finished tower block. As usual I am awake as the early traffic noise begins. Despite the gray pallor of the horizon, I set out and take a morning run across the rutted steps of Meskel Square—my feet splashing in rust-colored potholes.

As the shadows lift on the downtown plaza, a more forgiving light gradually reveals hundreds of young athletes limbering up in the drizzle. I know my limits. I am a mere mortal compared to even the least talented of these local runners—most of whom will finish 30 kilometers in a round trip—a day. Rising at 4AM and running between 5AM and 7AM, with their eye on the Olympic dream, this is their solemn and stark ritual seven days a week. It will take the most dedicated years to let it go.

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I may be a stranger in their midst but I know something of their story. I investigated the plight of Ethiopia’s female athletes in 2008. For them, running represented not only a long shot at riches but an opportunity to escape the blight of child marriage which is still common in far-flung rural areas. The stipends paid to the most talented athletes by local associations also ensured the track was a small source of income in a landscape where jobs for young women were, like gold medals, too often beyond reach.

Today, I notice the warring crowds of female athletes, jostling for position along the concrete terraces that line the square, have thinned out.

“More and more are going to college. They all want to work for Western firms setting up shop here,” my driver scornfully tells me.

I have arrived back in Addis to investigate Ethiopia’s thriving leather export industry just as the Swedish retail giant, H&M, reportedly enters the local market with their first small manufacturing hubs in Africa on the outskirts of the city. Other Western firms, notably the British supermarket giant, Tesco, and the ubiquitous Walmart, are also now, according to local newspapers, manufacturing goods here for the first time. This is welcome news in many ways. I know from experience that jobs in the retail sector fill a vital role employing women—although, as recent history in Asia shows us, it is a sector that does not necessarily empower them.

The garment industry and I have had a combative relationship. While a foreign correspondent based in India, I uncovered children in the supply chain of Gap Inc, prompting relentless international headlines and hurtling me into a campaign to expose abundant retail wrongdoing among other Western manufacturers in unimaginable sweatshops from Karachi to Dhaka and Colombo.

It was an issue I couldn’t even stay away from when I first moved to Africa after I exposed suppliers to both Levi’s and Gap, in the tiny kingdom of Lesotho, who were dumping dangerous garment waste and leaking toxic dyes into the heart of an impoverished HIV-ravaged community. An exposé made all the more startling by the fact that the Gap supplier in question was producing clothing for Product Red—an enterprise entirely designed to help the world’s poorest people.

As a consequence, I find myself sitting in an Addis café reading local headlines heralding the creation of garment manufacturing hubs in Africa with both hope and trepidation.

H&M’s decision to look towards Ethiopia as a new low-cost country to produce clothing does not come as a surprise. After all, it is not a newcomer to the textile and garment industry. The first garment factories in the country were built in 1939, during the fascist Italian occupation.

Africa also has a history of production in the sector. Few Western shoppers realize that Madagascan textile factories continue to make clothes for Inditex, the parent company of Zara, and once did so for Gap Inc as well as other major Western retailers. Tunisia and Morocco has been furnishing high street shelves for decades.

But H&M’s decision to move into Ethiopia has captured the attention of many in the garment trade. It comes at a time when many retailers are relying too heavily on nations like Bangladesh for clothing production—a place where many supply chains are at breaking point. Like other foreign firms, H&M, widely seen as an industry leader, inevitably sees Ethiopia as an opportunity to expand its sourcing footprint in Africa, which could come to represent a major consumer market in itself, and not part of a bigger plan to replace its commitment to production in Asia.

But Asia is causing many retailers serious problems. In Bangladesh, sustainability and a series of deadly factory fires has led to international condemnation of the garment industry. The shelf life of China, at least as a source of cheaply manufactured clothing, also appears to be diminishing. According to the research firm, Sanford C. Bernstein, individual garments manufactured in Ethiopia were half the cost of those in China as of 2011.

The Ethiopian government wants to transform its textile and garment industry and has set an ambitious target of $1 billion in textile exports by 2016. In order to achieve this, it is bringing in foreign investors to modernize machines and factories. Other countries like Kenya, Ghana and Uganda are following suit. Led by commitments by firms such as H&M, the garment industry could partly help such nations achieve the goal of moving from primarily agricultural economies to industrial.

Few in the West realize that Ethiopia is the second-most populous country in sub-Saharan Africa, with an estimated population approaching 92 million. According to the United States Census Bureau, in less than 40 years, Ethiopia’s population will more than triple to 278 million. In perspective, in 1967, the population was just 23.5 million.

But it is also a youthful demographic. Half of all Ethiopians today are between the ages of 15 and 24. Yet according to a 2012 US Agency For International Development study, Ethiopia has one of the highest urban youth unemployment rates in the world at 50%. In a nutshell, Ethiopia, like all African nations, needs manufacturing hubs to deliver jobs to young people and in particular, young women.

In my opinion, for major players like H&M and Walmart, the country also offers the opportunity to learn from the mistakes made by the garment industry as a whole in Asia. Shaping sub-Saharan nations like Ethiopia into retail manufacturing hubs offers Western retailers the chance to wipe the slate clean and to work harder to help local suppliers avoid supply chain exploitation and sustainability issues. Above all it could represent a chance for retailers to offer consumers and stakeholders more transparent insight into their supply chains.

But there is already a flaw in this ideal. Today, the sub-Saharan Africa clothing industry is challenged by the fact that it is only partly African-owned. The clothing industries in Lesotho and Swaziland are in fact owned by Taiwanese consortiums. Similarly, in Kenya and Ethiopia, much of the industry is controlled by Indian and even Mauritian investment. Before it even grows to a recognizable sector, sub-contracting already shapes much of the industry in Africa—as does the inevitable out-sourcing of profits from local operations.

Shane Godfrey, a senior researcher in the Labor and Enterprise Project at the University of Cape Town, recently claimed that many of the garment factories in Africa are part of a triangular manufacturing strategy. So, despite often being very large operations, they do little more than assemble garments made in other nations. In the industry, he claims, they are known as caravan factories that can be easily packed up and moved elsewhere.

Godfrey’s argument is simple. He claims that that while foreign investment should be retained and encouraged, there also needs to be more stringent requirements for skills transfer so that locally-owned manufacturing capacity can develop. Controversial perhaps but the argument that Indian factories in the heart of Ethiopia will, inevitably, be less engaged in emancipating the local population and more engaged in taking out profit is hard to ignore.

Major Western retailers should not think about building schools or investing in clinics but framing corporate social responsibility investments around the training of young women to work in the garment sector and ultimately assisting Ethiopians themselves to create businesses that contribute and profit from the promising retail economy. Simplistically speaking, these firms should also keep a tighter hold on sustainability issues in far flung production hubs, such as the disposal of garment waste, the use of water during dry spells and the application of dyes.

In recent years, my own thought processes, as the outsider trying to encourage change in the garment industry, has evolved with reason and deeper understanding.

I strongly believe that Africa needs to become a manufacturing hub in sectors like retail to capitalize on the youth dividend of nations like Ethiopia. But there also needs to be more social responsibility from major manufacturers, who have been part of problematic supply chains in Asia and are now eyeing Africa as the next source of cheap clothing.

H&M, now the second biggest retailer in the world, was the first company to sign a Europe-led safety pact for Bangladesh garment factories after the collapse of the factory in Rana Plaza. This despite the fact the firm had no suppliers in the building. Helena Helmersson, the firm’s global head of sustainability, has also urged Bangladesh and Cambodia to raise the minimum wage and revise it annually. Such commitments at the outset of any involvement in Africa should be expected.

Underlying this entire issue, the dialogue between the stakeholders involved in these supply chains also needs to be more open, honest and robust. The NGOs, the CEOs, the grassroots communities and the regional and national governments all need to be involved from the outset as Africa begins to process and build goods for the West and we all need to discard the distrust we have of each other and learn from the terrible mistakes made in the sweatshops of Dhaka and Delhi.

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Related Topics: #Addis Ababa, #Downtown Plaza, #Ethiopia, #February 2014, #Leather Export, #Manufacturing, #Supermarket.