Cotton Shortage Haunting Textile
The plan of various administrations to make manufacturing the leading engine of the economy has most often ended up being a disappointment. Through the failures were also few sectors that have contributed their fair share to manufacturing and the economy at large. The textile and garment sector is a case in point—where centuries of traditions were industrialized during the mid-1900s under Emperor Haile Selassie. A sector that was launched bounds of hope and support from the government has indeed performed relatively well throughout the years. As of recently, however, a series of security, political, and environmental challenges have been slowing down the supply of cotton and thus, productivity of the entire sector. Positive moves like the commercialization of genetically modified cotton have been countered by the removal of Ethiopia from the American Growth and Opportunity Act (AGOA), writes EBR’s Bamlak Fekadu.
The industrialized textile and garment industry in Ethiopia began in the late 1930s in Dire Dawa, though Ethiopia has heritage going back centuries, perhaps even millennia. After high attention during the reign of Ethiopia’s last emperor, the industry was given quite the consideration during the regime of Ethiopian People’s Revolutionary Democratic Front (EPRDF) which envisioned making Ethiopia a leading exporter of lightly manufactured goods in Africa by 2025. The country’s journey to industrialization thus gave emphasis to the development of the leather and textile industrial sectors, hoping it would play a vital role in transforming the country into an industry-led economy. The two sectors were selected by virtue of the perceived abundant and available raw material—raw animal skin and cotton—as well as their tendency to absorb large amounts of labor.
The development of the textile industry thus remained a priority of the state, as reflected in both the first and second Growth and Transformation Plans (GTP). GTP I, the national economic plan for the period of 2010 to 2015 had an ambitious export plan of earning USD1 billion from exports. Without success in attaining the goal, GTP II sustained the emphasis in the development of the sector, and aimed to improve production capacity, productivity, quality, competitiveness, and the creation of a sustainable and reliable input supply. There was a lot optimism flying around. The nation’s raw material potential even led to the opening of industrial parks. This was hoped to give the industry the boost it needed.
The textile and garment sector was especially heaped with lots of hopes. Though not to expectations, it has indeed been performing well all the while struggling with challenges, however. The Covid pandemic, a series of security challenges that has been rocking the nation, and the delisting of Ethiopia from the privileges of the American Growth and Opportunity Act (AGOA) have been down-pressing the hopeful sector.
Despite all governmental efforts to enhance the sector—which feeds the fashion industry worldwide—through fiscal and non-fiscal incentives, the estimated 200 medium and large garment and textile factories, as well as the 3,000 small and micro-enterprises, have continued to be hit hard by supply and input shortages and price hikes. Of course, cotton is the major input here.
One of the hardest blows has arrived owing to the insecurity and war as well as natural disasters in the State of Afar which accounts for 80Pct of domestic cotton supply. Flooding in September 2020 followed by war that entailed a partial invasion of the state by fighters of the Tigray People’s Liberation Front (TPLF) has not been the ideal situation for good output from cotton plantations which are mostly found around Awash River.
Further security issues in Gambella and Benishangul-Gumuz states—other lowland regions where cotton grows—also played a part in shortages. The shortfall in pesticides brought on by forex shortages has further exacerbated the situation.
Among factories affected by the shortage is Bahir Dar Textile, the largest manufacturing factory of the sector in the country with capacity of consuming more than 30,000 metric tons of cotton a year. The factory used to source cotton from commercial farms in the states of Afar and Benishangul-Gumuz. It has tried to survive the shortage by receiving supplies from farms in the north and central areas of Gondar in the State of Amhara.
Established in 1961, Bahir Dar Textile Factory can produce 82,000sqm of fabric and 10,000 pairs of bed sheets a day. The factory has been running on only 40Pct of its capacity and due to the continuing shortfall, its plant was recently shutdown for one month while still paying its 1,300 employees.
Meron Mengistu, who has been working in the textile industry for over a decade, observed that local supply has significantly fallen short of meeting the growing demand of the textile and apparel industries. She also argues the issue of quality has pushed companies to prefer imported raw materials.
“Many of the factories use imported cotton, looking for better quality,” says Meron. “This is despite abundant capacity at the local level.”
According to the Textile Industry Development Institute (TIDI), the industry requires an average of 55,000 metric tons of cotton annually. Domestic production is expected to fulfil only 60Pct of the demand this year. Yet, some studies show that only 6Pct of the three million hectares of farmland suitable for cultivating cotton in Ethiopia is utilized—less than 100,000 hectares. In its current state, Ethiopia’s domestic cotton production is clearly not sufficient to meet the growing demand from the textile and garment industry.
To curb the hurdle, the Ethiopian Industrial Inputs Development Enterprise (EIIDE) has dispatched invitations to suppliers, exhibiting its interest in January, to procure 10,000 MT of cotton. Yet, only one bidder proceeded to bid out of the 15 who bought bid documents. EIIDE was thus forced to retender, dealing a further blow to eagerly awaiting factories. The enterprise was set up by the Ethiopian government for the prime reason of easing supply and input shortages and hassles faced by manufacturers.
Though the auction was retendered with invitations sent out to 30 prospective suppliers, EIIDE was still unsuccessful.
Tofik Jemal, General Manager of Firke Factory PLC, is one of those whose business is suffering due to the shortage and price hike. He attributed the matter to a failure of professional leadership in several streams, including quality and explained how tenants in the 13 industrial parks built with USD1.5billion prefer cotton imported from Egypt over the locally sourced ones.
“In a country where the textile industry is priority, it is a mock to discuss about failure to import raw materials, while luxury vehicles keep finding their way into the country without much problem,” Tofik complains. “Officials are just political appointees with significant lack of insight into the sector they are leading.”
According to Ethiopian Investment Commission’s (EIC) Realizing New Productive Capacity in Ethiopia’s Textiles and Apparel Sector study where strategy and policy recommendations where made, the total textile and apparel exports for Ethiopia compared to benchmark countries such as Kenya and Tanzania is lower. Ethiopia is in competition with both neighborly African countries but also farther off ones like Bangladesh and Vietnam. The high price for cotton coupled with logistics issues creates an unfavorable competitive environment for Ethiopian manufacturers and exporters.
Ethiopia is a cotton producing and exporting country, ranked 13th among African cotton-producing countries in 2013/14, according to the Ethiopian Chamber of Commerce and Sectoral Association (ECCSA). Cotton has been cultivated in Ethiopia for many centuries both in irrigation and rain-fed systems churning out the raw material with a medium staple length of 25-30mm. Cotton production is concentrated in the Awash valley, although significant potential exists for expansion in the Omo-Gibe, Wabi Shebelle, Baro Akobo, Blue Nile, and Tekeze river basins.
Low lands are suitable to grow cotton where yields can be harvested within eight months. The State of Somali, for instance, encompasses 32 million hectares of land of which 19Pct or 6 million hectares is arable for cotton.
Fikadu Kassa is a Researcher with over three decades of experience advising and researching on government irrigational projects including Tana-Beles He remembers the several attempts including the British-based Amalgamated Limited to develop large-scale cotton farms in the Awash River valley around sixty years ago all the way up to Arkebe Oqubay’s (PhD), founding Chair of the Board of the Industrial Parks Development Corporation, proposal to cultivate cotton on 85,000 hectares under the Omo Kuraz sugar project.
“It is the cock and bull story to talk about shortage of cotton and imports in a country where textile industry is government’s priority sector,” Fekadu said.
Cotton production has long been underway in Ethiopia. Before the revolution that brought the Dergue to power, large-scale commercial cotton plantations were developed in the Awash River valley and the Humera areas. These would feed large scale textile and garment factories in Dire Dawa, Hawassa, Kombolcha, Bahir Dar, and Addis Ababa. However, with private investment and overall economic activity severely hampered, the nation would have to await the EPRDF to see larger irrigation dams being built that could theoretically water cotton farms.
However, these initiatives built to increase cotton yields with a surge of investors towards cotton-cultivating farms did not bear fruit. Corrupt officials and inept planning resulted in minimal growth to both farms’ size and productivity, especially in the states of Afar, Benishangul Gumuz, and Gambela, to the point of incurring heavy losses for the Development Bank of Ethiopia (DBE) which had lent out mass amounts without due diligence.
“I have witnessed investors presenting bogus field study documents to secure loans, take the money elsewhere, and portray a failure of follow-up on the side of the government.”
Moreover, cotton production is highly labor intensive. According to Global Agricultural Information Network’s (GAIN) report of 2019, several large-scale cotton farms in the states of Amhara, Benishangul Gumuz, Gambela, and Afar were hit by severe shortage of labor, and 40Pct of the cotton harvest was not picked on time as the country was in turmoil and war.
According to International Cotton Advisory Committee’s (ICAC) estimation, the country will be cultivating 83,000hct of land of yielding 745kg per hectare in 2022—some 40Pct less than the demand but on par with recent years’ output.
An executive at Akaki Garment who requested anonymity, urges authorities to focus their attention on contraband routes which are snatching supplies away from legitimate markets. He claims the sector’s survival is otherwise in jeopardy.
“Our plant has stayed between a rock and hard place for two years with dwindling production and escalating operational and input supply costs,” the executive says. “We are trying to survive through selling our stocks and private properties.”
“I remember how it was once self-sufficient bearing some 50,000 tons annually as of 2002,” Fekadu recognizes the available potential if a consolidated effort is put in place to solve the hurdles.
Fekadu, the experienced researcher, urges the current administration to appoint professionals in significant sectors rather than politicians in the to realize policies, strategies, and visions.EBR
10th Year •July 2022 • No. 109