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Section 1: Industrial Manufacturing Focus in Ethiopia

Industrial Clusters: Parks & Zones

The industrial parks programme is at the centre of the Ethiopian government’s industrialisation goal, which seeks to make the country a leading hub for light manufacturing in Africa by 2025. This is increasingly attracting global companies, especially labour-intensive firms in the garment and textile industry looking to hedge against the rising cost of labour in some regions, such as Asia.

Chart: Manufacturing Sector as a Share of Total Gross Value Added (%), 2018
Chart: Manufacturing Sector as a Share of Total Gross Value Added (%), 2018

As illustrated by the full list of industrial parks below, state industrial parks are complemented by private industrial zones developed mainly by Chinese businesses, including Huajian Group Industrial Park and George Shoe.

Table: Industrial Parks in Ethiopia
Table: Industrial Parks in Ethiopia
Table: Planned Industrial Parks in Ethiopia
Table: Planned Industrial Parks in Ethiopia

Manufacturing Prospects

The Ethiopian government is specifically targeting the light manufacturing sector for rapid development. Foreign manufacturing investment has the opportunity to service a large, albeit poor domestic population of over 100 million. Moreover, firms can competitively export to international and regional markets by taking advantage of the country's low labour costs and the improving regional transport networks.

Suitable Industries

Leather: Ethiopia mainly exports finished leather but has a fast-growing shoe export sector. In fact, exports of footwear grew from US$3.7 million in 2009 to US$46.4 million in 2018, making it the largest export sector after textiles and garments. Other leather items including gloves, bags and small leather articles have all registered strong export growth. Since 2012, the government has discouraged export of hides and skins to boost exports of value-added products. The government is pushing investment opportunities in tanning of hides and skins up to finished level; manufacturing of luggage (such as handbags), saddle and harness items, footwear, and garments; and integrated tanning and manufacturing activities.

Garments and Textiles: The garment and textile industry is central to the government’s industrial manufacturing strategy. As of March 2019, two of the five operational parks with a total of 29 sheds were fully occupied by apparel and textile manufacturing  businesses. H&M, Tommy Hilfiger, Otto Kessler, Calvin Klein, Speedo, IZOD, Van Heusen, Tesco, Arrow, Warner’s and Olga are among the many global businesses that have either set up manufacturing operations in Ethiopia or are sourcing garment and textile products from the country. The Ethiopian Investment Commission (EIC) indicates that FDI in the textile industry grew from US$166.5 million in 2013 to US$36.8 billion in 2017. Chinese companies are among the top investors, but there is a strong interest or presence among companies from other countries, such as India, Bangladesh and Turkey.

Huajian Group, one of China's largest shoe exporters, opened its first factory in Ethiopia in 2011 and the company has reportedly invested more than US$100 million since 2011. In 2010, Ayka Addis, a Turkish manufacturer of textiles, inaugurated a US$140 million factory in Alemgena, near Addis Ababa. The factory has capacity to export US$100 million worth of textile products each year.

H&M, along with DBL Group and Swedbank, has opened a new textile factory in Mekele, creating 4,000 new jobs. Ethiopian textile and apparel product exports will further be boosted by duty-free access to the US market under the African Growth and Opportunity Act, which received a 10-year extension in June 2015, and to the EU market under the Everything But Arms arrangement. While much of production is destined for export, these new developments could result in the opening of domestic and regional markets to fast-fashion brands as income levels rise in the long run.

Table: Ethiopia Exports Statistics
Table: Ethiopia Exports Statistics

Autos: Ethiopia's attractiveness as an investment destination is continuously improving and will continue to attract investment into the country's automotive sector. For instance, Kia and PSA Peugeot Citroën have opened assembly plants in Ethiopia and are looking to export to neighbouring countries in addition to selling to the domestic market. Isuzu Motors' general manager, Taro Kunifusa, indicated that the company will open a vehicle assembly plant in Ethiopia in August 2019. A plant is also under construction for the assembly of electric vehicles. The project will see US-based Global Electric Transport (GET) and Pangea joining to operate Pangea-made buses on a GET-operated public transport system. The domestic supply chain is developing further, with the news that India-based Esdee Paints has acquired a 50% stake in Ethiopia-based paint company Jelaram to form a manufacturing joint venture focusing on automotive paints. The plant will also serve local export markets.

Other Advanced Parts Manufacturing: There is also nascent interest and investment in more advanced manufacturing for domestic use and export. Exports of aerospace products grew from US$2.3 million in 2009 to US$2.9 million in 2018. Meanwhile, UN trade data suggests that exports of gas turbines (US$29.6 million), air pumps (US$15.2 million) and air conditioners (US$8.7 million) all surged in 2018 from negligible levels.


Manufacturing in East Africa: Ethiopia

Section 1: Industrial Manufacturing Focus
Section 2: Labour & Land Resources
Section 3: Infrastructure
Section 4: Regulations & Tax Incentives
Appendix: Relevant Government Bodies

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Content provided by Picture: Fitch Solutions – BMI Research
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