Ethiopia’s Apparel Sector Beset By Land Disputes and Labor Risks, New Research Finds

apparel AK-DigiArt/Adobe Stock

As a sourcing destination for apparel companies, Ethiopia can hardly be called up-and-coming anymore. Since 2013, East Africa — and Ethiopia in particular — has been on the radar of apparel companies seeking low-cost manufacturing labor.

In 2015, after surveying 40 apparel CPOs responsible for a collective $70 billion in purchasing volume, McKinsey & Co. said Ethiopia had the potential to become a “bigger [player] in garment manufacturing.” For the first time, Ethiopia appeared on the list of countries that apparel CPOs expect to be a top three sourcing destination in the next five years.

Brands such as H&M, Calvin Klein and Tesco have already been sourcing from Ethiopia for years, and the appeal is there for a number of reasons. Ethiopia offers low-cost electricity, lower wages and an “abundance of labor” — to use the locution of Emanuel Chirico, CEO of PVH Corp, the parent company of Calvin Klein and Tommy Hilfiger.

The Ethiopian government is also on board, keen to expand the country’s apparel industry. Hawassa Industrial Park, the largest industrial park in Africa, opened in Ethiopia last year, and two more are under construction. Moreover, thanks to its cotton fields and other natural resources, Ethiopia can offer a “dirt to shirt,” one-stop-shop supply chain.

New research from global risk consulting firm Verisk Maplecroft, however, suggests that Ethiopia’s apparel sector is likely to face significant risks in the near future, from land disputes to human rights concerns to political protests and instability.

Government Instability

Beginning in August 2016, there have been major ongoing protests throughout Ethiopia, led by human rights activists seeking political and social reform. Reuters reported that more than 90 protesters were killed by police forces over the first weekend of the protests. Subsequently, Ethiopia’s score in Verisk Maplecroft’s Civil Unrest Index has plunged to 2.7 in Q2 2017 from 4.15 in Q3 2016.

Verisk estimates that there is a 67% chance that “[Ethiopia’s] government stability will deteriorate over the next two years,” chalking it up to the government’s decision to quell protests by declaring states of emergency instead of addressing the root of the problem. “It is therefore highly likely,” the report concludes, “that similar protests will erupt again over the coming five to 10 years.”

Land Disputes

Disputes over land have been a core cause of the protests. In late 2015, the Ethiopian government announced plans to expand Addis Ababa, cutting into towns and villages inhabited by the Oromo, the country’s largest ethnic group. The Oromo protested against the plan, and they were joined by the Amhara, the second largest ethnic group in Ethiopia.

Thus, the protests soon spread beyond Oromia, where the land issue is particularly “problematic… due to the importance of cattle raising,” as the Verisk report pointed out. According to the report, “several agribusiness and textile assets were attacked, and in some cases destroyed, during the unrest.”

Labor and Environmental Risks

Last but not least, Ethiopia’s apparel sector faces disruption due to environmental and labor factors. Verisk Maplecroft’s Climate Change Vulnerability Index categorizes Ethiopia under “extreme risk,” which the firm associates with “high levels of poverty, dense populations, exposure to climate-related events and [the country’s] reliance on flood- and drought-prone agricultural land.”

Ethiopia faced a serious drought in early 2016, and now it is facing yet another. With the population forecast to double in the next 30 years, Verisk expects competition over fertile land to intensify. As the report points out, Ethiopia’s government may favor the expansion of the textile sector and cash crops such as cotton, “investors are likely to become increasingly unpopular in the communities that they rely on for both their security and their workforce.”

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