Monday, January 18, 2016

Ethiopia - land of low wages

Between 2010 and 2014, Ethiopia's economy grew at an impressive 10.4 percent annual rate, driven mainly by large public expenditures under the umbrella of an ambitious Growth and Transformation Plan (GTP). The plan seeks to transform Ethiopia into a middle-income country by 2025. As part of the GTP, selected industries such as textiles and leather with high-growth potential have been prioritised for foreign investment.

"Our factory is a bit like a military organisation. The labour here is not highly educated so we have to use a very simple way to communicate and organise them," said Nara Zhou at the Huajian shoe factory in Ethiopia. The company employs about 3,000 workers in Ethiopia and generates $20m worth of exports by producing shoes for international brands such as Guess, Naturalizer and Toms destined for US and European markets.

With a growing number of brands such as H&M starting to source from Ethiopia and existing companies ramping up production capacity, the three percent of Ethiopia's exports that came from textiles and leather in 2013 may well double in the next couple of years, according to government estimates.

Rising production costs in Asia are the key drivers prompting manufacturers such as Huajian to look for alternative production sites. Ethiopia seems to be ticking many of the boxes for investors: abundant cheap labour, no tariffs, and a stable political environment. Entry-level salaries in Ethiopia range from $35 to $40 per month, significantly below average Chinese manufacturing wages of $629 per month, a figure reported to have tripled between 2000 and 2010. In Bangladesh, textile workers are required to earn at least $68 per month. Ethiopia, however, has no minimum wage except for public servants.

The absence of a minimum wage means that market dynamics determine the salaries of factory workers. The government is sceptical about introducing a minimum wage, which might scare away investors. Union representatives say monthly wages should be 2,000 birr ($100), twice as high as today's entry-level wages. With urban unemployment at about 18 percent, workers must often accept whatever wage is offered, or have no income at all.

"I am happy I have a job but if I had an option, I wouldn't work for this amount of money and under these conditions," said Meseret Asrat, a 24-year-old employee at Ayka Textiles in the capital Addis Ababa. Asrat earns $41 per month after the factory's recent wage increase.

Ayka is considered a success story when it comes to workers' rights in Ethiopia. The country's biggest garment exporter and an employer of 8,000 workers, Ayka is also one of few textile and leather factories to have established a functional trade union. "In the beginning it was difficult to establish the union. The management didn't want the workers to unite and speak with a common voice," said Mesfin Teshome, who leads Ayka's trade union. The union won a 25-percent wage increase in a collective bargaining agreement negotiated last year. But winning further salary increases remains a challenge, Teshome said, partly because the company's profits are not made public.

Ethiopia's constitution guarantees workers the right to associate, most factories do not have trade unions. "If the business owners refuse, there is not much we can do," Angesom Gebre Yohannes from the Industrial Federation of Ethiopian Textile, Leather and Garment Worker Trade Unions, told Al Jazeera. "The law is there, but the struggle to implement it is left up to us and the workers."

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