Thursday, July 09, 2015

Search for Ever Cheaper Labour Leads to Africa

From H&M to Calvin Klein, brands look to Ethiopian factories. Ethiopia’s garment sector has no minimum wage, compared with Bangladesh, where workers earn at least $67 a month, according to the International Labor Organization. Garment workers in Ethiopia started at about $21 a month as of last year, the Ethiopian government said. On the outskirts of Addis Ababa, the government recently built the $250 million Bole Lemmi industrial park exclusively for foreign investors in the garment industry. Giant hangars occupy land where barley, peas and the local grain teff used to grow. They are drawn to the cheap labor and to the inexpensive power, which in many countries is the second-biggest factory cost after workers. The Ethiopian government is building a railway to the port in neighboring Djibouti to help exports leave the country more quickly. 

Colin Browne, managing director of product supply and Asian sourcing for VF Corp., which owns such brands as Lee, Wrangler and Timberland, pointed out the past few years, rising production costs in China and several deadly factory accidents like the collapse of Rana Plaza two years ago in Bangladesh have forced apparel companies to hunt for alternatives from Myanmar to Colombia. Ethiopia was recently identified as a top sourcing destination by apparel companies, according to McKinsey & Co., which surveyed executives responsible for procuring $70 billion of goods annually. Several clothing giants are beginning to source in Africa. VF expects to start getting some of its pants sewn in Ethiopia this year. Calvin Klein and Tommy Hilfiger parent company PVH Corp. has been making some of its clothes in Kenya for at least four years. Others with sourcing in sub-Saharan Africa include Wal-Mart Stores Inc., J.C. Penney Co. and Levi Strauss & Co.

At the MAA Garment & Textile Factory in Northern Ethiopia, 1,600 workers spin cotton, dye fabric and sew it into T-shirts, leggings and other basics for international retailers like Hennes & Maurtiz AB’s H&M chain, Tesco PLC, Asda Stores Ltd.’s George label, and German clothing company Kik Textilien und Non-Food GmbH.

“In the global economy, light manufacturing is constantly moving,” said World Bank’s Guang Z. Chen, who was the country director for Ethiopia until last month and is now a director for several countries across southern Africa. “We see the possibility of this kind of industry moving away from Asia, because the labor cost is rising in China rapidly.” Chinese garment workers earned anywhere from $155 to $297 a month. Garment workers in China tend to do more sophisticated production while basic cutting and sewing goes to countries with lower wages.

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