Drapers explores why more fashion retailers are tapping into Africa’s sourcing opportunities.
The global sourcing map is constantly being redrawn as retailers criss-cross the globe in search of the perfect destination to meet their manufacturing needs. Creating strong supply chains is a complex jigsaw of speed, quality, volume and, crucially, price.
Global manufacturing heavyweights, such as China, Bangladesh, India and Turkey, continue to hold sway over the sourcing market, but their position is not as secure as it once was. Production costs rose by almost 50% in Bangladesh between 2005 and 2017 and by 33% in China in the same period, consultancy firm Accenture suggests.
As a result, retailers are increasingly turning to the sourcing potential of African countries. Nations with burgeoning textile industries, such as Ghana, Kenya and Ethiopia, are vying with the more established African markets, Madagascar, Mauritius and Morocco to become the next port of call. But those looking to Africa will find that advantages such as low cost and geographical proximity are tempered with issues such as underdeveloped vertical manufacturing and a lack of specialisation when compared with more established sourcing countries, and have to prioritise accordingly.
The message about Africa’s sourcing capabilities has been building over the past 10 years
Jacqueline Shaw, Africa Fashion Guide
Zara owner Inditex Group is one retail heavyweight sourcing from the continent – the Spanish company has suppliers based in Morocco. Supermarket Asda’s fashion brand, George, has manufaturers based in Morocco and Tunisia, as does Primark, which also sources from Tanzania. Calvin Klein and Tommy Hilfiger owner PVH began production in Ethiopia in 2017 through a joint venture with textile manufacturer Arvind.
“The message about Africa’s sourcing capabilities has been building over the past 10 years and now retailers are scrambling to get into the market,” explains Jacqueline Shaw, sourcing consultant and founder of social enterprise Africa Fashion Guide. “There are various reasons behind the surge in interest: concerns about Bangladesh after 2013 [when more than 1,000 workers were killed in the Rana Plaza disaster], as well as rising costs in China. As a result, retailers are looking to new regions for production.”
Keren Pybus is the chief executive and co-founder of sourcing consultancy Ethical Apparel Africa, and has previously held senior sourcing roles at Asda’s George. She agrees with Shaw: “There’s absolutely more interest in African sourcing opportunities from fashion retailers – the lead has come from the US because it has a duty-free trade agreement that covers textile and clothing with Africa, which is a big advantage over countries such as Cambodia or Bangladesh. As big US retailers have entered the market, they have drawn other businesses’ attention to the possibilities. Some African governments have also really understood the impact the garment industry can have on GDP and have been proactive about incentivising retailers to come.”
Ethiopia, in particular, has ambitious plans for its textile industry. The government has earmarked the sector as a key pillar in its plan to become ranked by the World Bank as a middle-income country by 2020 – it is currently low income. The country’s large workforce, competitive wages and duty-free access to the European Union give it potential to become a garment manufacturing hub, the government body Ethiopian Investment Commission believes. To achieve this goal, the government is investing in industrial parks to help boost manufacturing.
You aren’t necessarily going to achieve cheaper prices straight away
Keren Pybus, Ethical Apparel Africa
As with any new sourcing market, there are positives and negatives for retailers to consider.
“The logistic times out of west Africa to Europe are very favourable,” notes Pybus. “Because those countries are on the right side of the continent [for proximity], they can ship to Europe in 15 to 20 days, which is fast compared with Asia.
“However, one of the things that retailers will have to think about is that vertical supply chains are not yet here in their entirety – it is likely you will have to import things such as fabrics and trims.
“Efficiency is another challenge. Fashion retailers may expect to save money because of lower salaries but you aren’t necessarily going to achieve cheaper prices straight away.”
Joanna Maiden, founder of Kenya-based manufacturer Soko, which makes Asos’s Made in Kenya men’s and women’s wear line, agrees: “One of the challenges about Africa is that not everything is around the corner as it might be in other regions. In Kenya, for example, most things have to be imported, so retailers need a long-term strategy.”
Laura Morroll, senior manager at management consultancy BearingPoint, adds that emerging African sourcing markets are best suited to large volumes of core product: “Up-and-coming markets tend to be more focused on basic production and higher volumes, compared with more developed markets, such as China, which have invested in innovation and product development. Specialisms aren’t there yet. Kenya, Uganda and Tanzania are markets I expect to see grow, but at the moment, Ethiopia is at the forefront of where retailers are going. That’s in part because of the land conditions there, which are promising for cotton cultivation.”
Tessa Laws, chairman of Israeli sourcing giant Bagir Group, agrees that emerging African sourcing markets are better suited to large volume orders because of the level of skill and logistical challenges.
She sees potential for more complex products over a longer timeframe: “Alongside the markets that have already developed skills and capabilities to handle more sophisticated production, we’ll start to see more and more African countries, such as Ethiopia, produce mid-to-low price point garments.
“As the textile industry is still traditional and involves intensive labour, it’s very attractive for countries that are suffering from a very low employment rate. This development will take at least a decade and depend on offshore investments in equipment, and the nature of the duty-free agreements that these countries have with the US and the EU.”
Much of the appeal of emerging African sourcing markets arises from their lower labour costs. However, Morroll adds that, to be successful, retailers’ sourcing strategies need to account for more aspects than a simple financial race to the bottom – particularly given growing consumer awareness of sustainability.
This is a central consideration for retailers seeking to source from Ethiopia, given its history of drought and famine. PVH, for example, says it has focused on building water treatment plants, greener production facilities and employee safety at its factory in the Hawassa industrial park to ensure it is working in the most sustainable way.
Morroll says: “Retailers might see new markets and chase lower labour costs, but doing so could result in a trade-off with corporate social responsibility and brand quality. Retailers need to invest in local areas when it comes to education and infrastructure, and work closely with local governments.”
Shaw agrees: “The industry expertise on the ground in somewhere like Ethiopia may not be on the same level as Bangladesh – retailers need to invest in supporting workers to develop their skills. There is also an opportunity to work closely with government programmes promoting ‘Made in Africa’ products.”
African countries, particularly Ethiopia, are vying to become global sourcing hubs. Government investment in new textile sectors, along with their low costs and proximity to Europe, make these appealing. High-volume retailers that can make long-term investment in the local area will make the most of the continent’s sourcing opportunities.