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The performance of the Manufacturing Sector over the past decade

The performance of the Manufacturing Sector over the past decade

Bereket Gebru 09-22-17

The manufacturing sector in Ethiopia has expanded very noticeably during the past decade. The World Bank reported a growth rate of 12.3% in the sector as far back as the year 2009 G.C. Aggressive efforts to draw investment from both outside and inside have these days pushed investment activities in the sector to an unchartered territory in the history of the country. Recent international studies have further put Ethiopia among the countries poised to become heavy weights of international manufacturing.

Accordingly, letís take a look at the performance of the manufacturing sector in the past decade.

Textile and Garment Manufacturing        

Letís start our analysis of the trends in the manufacturing sector of Ethiopia with the first of the groupís markers Ė textile and garment manufacturing. Textile products do not yet make the top list of Ethiopian export items. The 2002 data from the Central Statistical Authority shows that the country earned 28.8 million birr from the export of textile, clothing and apparel in 2000/01. The country has come a long way from that as it made 98 million USD (about 1.8 billion birr) in the fiscal year that just ended. This figure, however, still runs short of the one billion USD export earnings planned at the end of the Growth and Transformation Plan (GTP).   

Ethiopia has enjoyed increased attention from various textile and garment factories located all around the world. The biggest milestone in this context was the inauguration of Ayka Addis in April 2010. Built by Turkish investors, Ayka Addis is the biggest textile factory in Ethiopia. The factory has a daily spinning capacity of 20tn and knitting and dyeing capacity of 40tn. It is expected to make up to 100 million USD per year at its optimal operational capacity. Ayka was first established in Istanbul, Turkey, in 1998. It dismantled its plant in Turkey completely in order to move to Ethiopia. Part of the 140 million USD needed to build the factory was provided by the Development Bank of Ethiopia. The factory has provided employment opportunity for 10,000 people.  

After three years of operation in Ethiopia, Ayka Addis is currently facilitating the relocation of another 50 Turkish textile and garment companies. Accordingly, Capital newspaper reported, Ayka Addis is expected to build an industrial zone of several five-story buildings that  it plans to rent out to the relocating factories. The report further indicates that Ayka Addis is carrying out project preparation and feasibility study. The government, the report further states, is allocating land around Addis Ababa for the construction of the industry zone.   

The project aims to export value added textile products which are considered to be sources of strong export revenue. The relocation of these companies is projected to generate two billion USD in export revenue for the country per annum, surpassing the one billion USD goal set at the end of the last year of the GTP by an astounding 100%. In so doing, the whole package is expected to create more than 60,000 job opportunities.

Capital newspaper also reported that the Ethiopian Textile Industry Development Institute (ETIDI) also revealed that other textile companies are preparing to go into production, such as MNS Textile Company, which has built its factory in Legetafo, 15km northeast of Addis with one billion birr investment. S.V.P is another textile company engaged in building its factory in Ethiopia. The new Indian company has invested around one billion birr for the construction. Nas Foods, one of the leading biscuit manufacturers, is also involved in a new textile factory project located at Yirgalem, with an investment of 890 million birr. ETIDI said that several South Korean textile companies will also be starting operations at Bole Lemi industry zone, which is under construction at a cost of 900 million birr by the Ministry of Industry. The construction for this specific project will be concluded this year and the industry zone will go operational. In June 2012, the Ministry of Industry and Oromia Regional State signed an agreement with Turkish Investors for the development of 640 hectares of land at Legetafo. The contract established that the investment on the land would include pharmaceutical, garment, leather processing and paper and packaging factories, amongst others. The zone is set to include social service institutions such as health care, schools, technical and vocational training and hotels. It will be amongst the series of new industrial parks to be developed around the country.

Clothing retailer H&M (Hennes & Mauritz) is also another one of the foreign companies with textile related activities in Ethiopia. The retail company has established an office in Addis Ababa over a year ago now. It, at first placed test orders with Ethiopian suppliers and large-scale production has begun. H&M is trying to form a cluster of suppliers that could, in aggregate, satisfy its one million pieces per month demand. This move is new for H&M as it does not source any of its range from Africa. The fact that Ethiopia stands as its first source from Africa is indicative of the increasing suitability of the country to invest in the sector.

Three other leading Swedish textile retail companies have also paid a visit to Ethiopian textile factories. Tesco and the British arm of Wal-Mart called George are also buying clothing from Ethiopian manufacturing plants.

Shoe Manufacturing

Ethiopiaís footwear industry and leather sector in general enjoy significant international comparative advantages owing to the countryís abundant and available raw materials, highly disciplined workforce and cheap prices. Ethiopia boasts the largest livestock production in Africa, and the 10th largest in the world. Ethiopia annually produces 2.7 million hides, 8.1 million sheepskins and 7.5 million goat skins. This comparative advantage is further underlined by the fact that the costs of raw hides and skins constitute on average 55-60% of the production of semi-processed leather. 

Ethiopiaís leather and leather product sector produce a range of products from semi-processed leather in various forms to processed leathers including shoe uppers, leather garments, stitched upholstery, backpacks, purses, industrial gloves and finished leather.

Ethiopian leather products have been exported to markets in Europe (especially Italy and the UK), America, Canada, China, Japan and other far eastern countries and the Middle East. Leather is also exported to African countries including Nigeria and Uganda.

Ethiopian footwear factories produce menís casual shoes and childrenís shoe-uppers made from pure leather. In addition, the factories sell directly to overseas importers/wholesalers or to direct buying offices, facilitate the production and export of footwear under the private labels of department stores, boutiques, shoe retail chains and mail-order houses, source out from Ethiopia and other nations in East Africa and re-export, and facilitate the production and export of internationally well-known brands under contract. The footwear industry produces shoes that are globally competitive in terms of both quality and price. Due focus is given to maintaining the quality of hides and skins, leather and leather products.

When it comes to foreign direct investment in Ethiopiaís footwear industry, Chinese companies take pole position. Huajian, one of the three biggest shoe producers in the world, is the major foreign shoe manufacturing factory in the country. The others include Top Glory and Luxj.

Huajian has a factory in Dukem, 35 kms from Addis Ababa, employing 600 people, which opened in January 2012, and is committed to jointly invest $2bn over the next decade to create a light manufacturing special economic zone in Ethiopia, creating employment for around 100,000 Ethiopians. The company, which employs 25,000 workers in China, expects to be able to provide around 30,000 jobs in Addis Ababa by 2022. The company aims to make Ethiopia a global hub for the shoe industry supplying the African, European and American markets. It hopes to achieve that through the creation of shoe manufacturing clusters in a well built supply chain. The creation of a whole supply chain entails the production of everything used in the production process locally.

The companyís vision is one step closer to fruition with the lease of 300 hectares (741 acres) of land in Lebu, on the outskirts of Addis Ababa, where Huajian plans to build a "shoe city", providing accommodation for up to 200,000 workers and factory space for other producers of footwear, handbags and accessories. The complex will offer help and advice to entrepreneurs setting up companies.

The company cites employee welfare as a priority. In China, Huajian has a modest outfit 40km south of the capital, Beijing, employing 1,700 workers and exporting more than $1m worth of shoes each month to the US and the UK. In Dongguan, in the southern province of Guangdong, the majority of the staff come from poor rural areas. The company provides accommodation, hot meals, clothing and laundry services, as well as free childcare. A similar package is offered to its Ethiopian workers who, in addition, earn 10% above the average local wage.

The Huajian factory near Addis Ababa employs 130 Chinese workers, all in supervisory roles. The number of expatriates on the payroll has come down from 200 when production began in January 2012, and Huajian plans to reduce it further. The company has selected 130 university graduates from southern Ethiopia to spend a year in China at its training facility. About 270 more will be recruited later. The company plans to make them future managers.

Mobile Phone Assembly

There are more than 18 million mobile phone subscribers in Ethiopia currently.  This number is expected to jump to 40 million in the next three years. There are three mobile phone assemblers in Ethiopia. These are:- Tecno, Tana Mobile (Chinese brand assemblers) and Sami Mobile which assembles Samsung handsets.

Tana Communication Plc is a local mobile assembly that began operation in 2010. It assembles Chinese mobile brands in collaboration with Zhong-Xing Telecommunication Equipment (ZTE). The company has three assembly lines, with a total capacity to assemble 4,500 to 5,000 devices a day. The company produces two mobile phone models and a fixed wireless apparatus.

The Hong Kong based company Tecno Telecom was established in 2006. The company launched its operations in Ethiopia with the establishment of Tecno Mobile Ethiopia in September 2011 with a capital investment of more than $1 million from its parent company Tecno Telecom Ltd. Tecno Mobile Ethiopia inaugurated its second assembly plant in less than a year. The first plant has the capacity to assemble 60 thousand units while the second plant has a capacity to assemble 200 thousand units of handsets per month. The telecom company has already introduced 13 different brands including a smart phone.

The company disclosed that the growth recorded in the Ethiopian branch was beyond the projected figures as the demand is far more than the supply, rending the second phase of the project a necessity. The company sold 18 million Tecno Mobile handsets in Africa in 2011, making it one of the top ten mobile phone marketers in Africa. The company plans to manufacture mobiles phones in Ethiopia in the near future and when it does it expects to be able to make 400 thousand units every month.

The fact that Chinese and other Asian companies are investing in Ethiopia in this sector shows that the countryís competitiveness has increased over the years. The transfer to the assembly of smart phones also indicates that the level of local expertise in the assembly process has increased. Further activities to manufacture the products locally would obviously take the sector to another level in Ethiopia.  


As we have tried to look into, Ethiopiaís involvement in international textile, shoe and mobile assembly trade has enjoyed pronounced increment over the last decade. The large influx of Turkish and Swedish companies from Europe and others from Asia in the textile industry along with Asian investment in shoe and mobile manufacturing are substantiating evidences of the demographic, climatic and policy suitability of the country for foreign investment.

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