Is East Africa The Next Hub For Fashion?!

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European-centric companies such as H&M, Primark, and Tesco are all uprooting themselves from Queen Elizabeth and attempting to source their garments to East Africa.

Since 2013, the fashion apparel industry has looked to East African countries as Ethiopia and Kenya as potential sourcing destinations. Add to the mix the renewal of the African Growth and Opportunity Act (AGOA) and you have certain countries in sub-Saharan Africa that are opening up duty-free access to the U.S. market.

Do these factors contribute to East Africa being the next major garment-sourcing hub? McKinsey created a study that took place across the continent, where factories in Kenya and Ethiopia were visited, stakeholders, manufacturers and buyers were interviewed — and market data was analyzed. To drill down the point a bit, 40 apparel CPOs representing a combined $70 billion in purchasing volume in 2014, responded to the survey.

Nearly three-quarters of the respondents to said survey mentioned that they expect to reduce their purchases from Chinese firms. This means that China will continue to take a major hit in the industry, yet it doesn’t seem it’ll stop the billion dollar export apparel industry for a few years. While Bangladesh remains at the top of the list of future sourcing destinations, sub-Saharan Africa will have the highest growth in working-age population anywhere over the next 20 years.

According to United Nations projections, by 2035, the working-age population is expected to be as large as China’s today with more than 900 million people filling the labor pool. This statistic alone captures the essence of those intrigued by where the apparel industry is headed. When it comes to countries specifically like Ethiopia and Kenya, and to a lesser extent Uganda and Tanzania, the governments have already begun to develop its domestic textile and garment industries.

For example, barely 7 percent of that land is being used today in Ethiopia. Organic-cotton cultivation suffered a setback after garment manufacturers became entangled in land-grabbing accusations in Ethiopia’s Omo Vally. Eighty percent of the CPOs in the McKinsey survey believes that production efficiency and long-lead times are major issues. 80 percent also cited production inefficiency as a challenge to the growth of apparel sourcing in Ethiopia. The government is already attempting to tackle these issues.

In terms of what’s going on in Kenya’s garment factories, it is quite the opposite as to what’s happening in Ethiopia. The market has grown impressively in recent years thanks to foreign direct investments from Asia, the Middle East, and the Export Processing Zones developed by the Kenyan government. According to McKinsey, factories have grown larger and more efficient, employing more than 1,000 employees on average when compared with around 560 in the year 2000.

However, within Kenya’s borders, there is a lack of local upstream industry. Manufacturers must import fabrics which means longer lead times and delays. It could take up to 40 days just for fabrics to make its way through customs into a garment factory. High labor costs and paltry monthly wages for garment works make honing the apparel industry an uphill battle. Include energy costs, because the power supply is spotty, and factories are spending four times as much just to keep the lights on.

How will East Africa’s government overcome these startling issues to become a new fashion superpower? Share your thoughts in the comments section below!

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