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Supply Chain
Sourcing in Africa, Part 4: Region in Transition — Symbiotic Partnerships Required
By Yvonne Heinen-Foudeh, Senior International Correspondent
Global economic relations are changing. Supply shortages as a result of the Russian war of aggression in Ukraine as well as the Corona pandemic are encouraging a rethink in politics and business. As a result, Africa is coming under a new perspective as well for apparel sourcing. Companies are reorganizing their supply chains and economies are striving for greater resilience
Often cited as a risk is the unstable power supply. Yet Africa has a gigantic reservoir for generating renewable energy. With an annual growth rate of 54 percent, solar energy is the fastest-growing renewable energy source on the African continent in the last ten years.
"East Africa: The next hub for apparel sourcing?" was the title of a dedicated study published by McKinsey as early as 2016. At that time, East African countries in particular, especially Ethiopia, Kenya, and to a lesser extent Uganda and Tanzania, were identified as suitable production locations for apparel. Vertical suppliers such as Primark or Tesco undertook procurement or even their own investments, as did H&M in Ethiopia.
Concerning Ethiopia, renewed unrest in the aftermath has unquestionably slowed further development.
U.S. to Boost Trade with Africa"The future is Africa - for the United States and the global economy," said Katherine Tai, United States Trade Representative at the U.S.-Africa Business Forum in December 2022. The U.S. Trade Organization and the AfCFTA (Secretary General of the African Continental Free Trade Area Secretariat) also signed a Memorandum of Understanding with a comprehensive set of measures to promote the development of industrial and regional value chains, as well as an intensified partnership between African and U.S. companies in areas such as infrastructure, digital trade, but in agriculture and pharmaceutical products.
U.S. to Boost Trade with Africa"The future is Africa - for the United States and the global economy," said Katherine Tai, United States Trade Representative at the U.S.-Africa Business Forum in December 2022. The U.S. Trade Organization and the AfCFTA (Secretary General of the African Continental Free Trade Area Secretariat) also signed a Memorandum of Understanding with a comprehensive set of measures to promote the development of industrial and regional value chains, as well as an intensified partnership between African and U.S. companies in areas such as infrastructure, digital trade, but in agriculture and pharmaceutical products.
Yvonne Heinen-Foudeh, Senior International Correspondent
"Mami Wata" mission: create jobs and skills in the motherland. South African surf lifestyle brand supports the surf therapy organization "Not Street Children". Clothing & surfboards are dedicated to "Mother Ocean". Photo: Mami Wata, West African Pidgin English, literally translated: "Mama Water".
McKinsey reveals three conceivable scenarios within its 2016 study on apparel sourcing from the African continent.
Source: McKinsey 2018
The textile/clothing sector is a high priority in government programs for industrialization – also in countries such as Côte d'Ivoire, Togo, and Ghana. The task is clearly defined: to develop a vertically integrated, sustainable industry with capabilities in recycling, renewable energy, and traceability of materials. This was the vision developed for the region by a delegation of representatives from global brands and retailers, including H&M, Li & Fung; PVH, The Children's Place, Under Armour, on the sidelines of a road show organized by the UK's Tony Blair Institute (TBI) in late 2022.
Whether "East Africa will indeed become a crucial hub for apparel sourcing" currently seems to be largely decided by Beijing as well. The People's Republic of China has invested massively not only in Africa's infrastructure; in the last ten years, it has built around 75,000 kilometers of new roads on the continent, according to the British weekly newspaper The Economist.
China & Ethiopia Memorandum: Strengthening Economic Relations Recently Ethiopia and China signed a memorandum of understanding in Addis Ababa to strengthen economic and trade relations in key sectors. The memorandum of understanding is intended to further strengthen the already existing close ties between China, also as a supplier of raw materials (2022: 75% of all textiles processed in the country; cf. 2010: 49%), and Ethiopia in the textile and apparel sector.
The planned deepening of bilateral relations between the People's Republic and the East African country should also be seen as a reaction to the efforts of Western fashion companies to diversify their procurement sources. Chinese companies are undoubtedly also aiming to gain duty-free access to many Western fashion markets through investments. The MOU is all the more interesting because the U.S. has suspended privileges under the AGOA agreement not only for Madagascar but also Ethiopia - due to concerns about human rights abuses. As of March 1, 2023, China treats 98% of the tariff line, which includes 8,804 Ethiopian-made goods, duty-free.
Outlook: Clear AgendaCollaboration among the various stakeholders - buyers, governments, and investors - is needed to collectively maximize and accelerate the opportunities Africa offers. There is a need to drive industrialization and create greater value. Instead of exporting raw cotton, Africa needs to produce finished garments from it - both for the global customer and for African consumers. To date, Africa produces just over 5.6% of the world's total cotton fiber output but processes only 30% into yarn, fabric, and apparel for domestic and regional consumption (source: Better Cotton). Thus, Africa now ranks first as a destination for cotton yarn from processing in Mauritian spinning mills for instance (see the feature in The Needle's Eye, Issue #22, April 2023).
"Technology and know-how transfer are needed here," says Bielle Bellingham in conversation. The journalist, former editor-in-chief of Elle Decoration, now teaches at the University of Cape Town, emphasizes in conversation the need for symbiotic partnerships - not least to mitigate the effects of climate change on the continent, which has already been badly affected. This, too, should be in the interest of the global West - its entrepreneurs and consumers.
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