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Creating Wealth Through Fashionomics

Proshare

Friday, May 26, 2017 9:28 AM / FBNQuest Research

At the AfDB annual meetings in Ahmedabad this week, we attended a session on “Creating Wealth through Fashionomics”. The panelists agreed that rapid expansion of incomes requires large-scale industrialisation.

Just two countries (South Korea and Taiwan) have migrated from low to high income in the past 30 years, and a third (China) is set to join them in 2020. GDP per head in China in 1978 of US$154 was below sub-Saharan Africa’s yet reached US$7,500.

Labour costs in China have risen in tandem. Helen Hai, the prime mover behind the Huajian shoe factory outside Addis Ababa, said that 85 million Chinese jobs are being relocated. This includes 20 million in textiles and garments. The Chinese textile worker is now earning about US$700 per month.

Huajian is not the only new manufacturer in the segment in Ethiopia. An industrial park, the country’s fifth, is to be built this year. It is reserved for textile and garment companies, and due to provide 65,000 jobs.

Nick Earlam, the chief executive of the Plexus Cotton Group, noted that textiles have industrialised the world. Africa produces 1.5 million tonnes of raw cotton per year, 85% of which is exported unprocessed. Plexus has opened an integrated textile and garment operation in Uganda. Cotton valued at US$60m is transformed into finished goods sold for US$700m.

Vlisco Group, the manufacturer of Dutch wax prints, has two factories and more than 30 retail stores in Africa. David Suddens, its chief executive, said that the company signed a MoU with the Nigerian government in 2015 and is training tailors in the country. It plans to open its third factory in Nigeria.

The industry is a good example of changing trade patterns towards the celebrated south-south axis. Apparel consumption currently stands at US$500bn per year in Europe and the US, and US$300bn in China, India and South East Asia.

Within ten years, the balance is expected to shift to US$700bn and US$750bn. The trend is also discernible in investment, which we noted in our commentary on the African Economic Outlook 2017.

 

 

Panelists disagreed on incentives. Earlam stressed their value and cited subsidised electricity in Uganda. Hai suggested that the host government’s good intentions and the company’s drive counted for rather more.

On a less euphoric note, Sidahmed Alphadi, whose designs are worn by a host of African leaders, bemoaned the lack of suitable labour. The Abidjan-based designer called for government support to train cutters, tailors and distributors.  


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