“I think we’re certainly entering into an era where Africa, certainly North Africa, starts to become more of a manufacturing hub. This is a very interesting development. Tesco [on Thursday] announced they’re going to expand their sourcing operations in Ethiopia, so they’re going to start making more clothes in the country, and this follows H&M, one of the biggest clothing companies in the world to also expanding their base in Ethiopia,” Dan McDougall, Sunday Times of London Africa correspondent, told CNBC Africa.
“This is generally perceived as a positive move – Africa starts manufacturing goods as opposed to importing goods particularly in the garment sector – but also comes with a lot of warning because we’ve obviously seen a lot of ethical issues in countries like Bangladesh and China, India and Pakistan in terms of textile manufacturing.”
Sub-Saharan Africa was once seen by a number of investors as a pure commodity play, but its rapid development has allowed the continent to become the next frontier market, with a number of untapped sectors.
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McDougall added that while there are strict global rules in terms of labour practices in the retail industry, companies nonetheless publically commit themselves to adhering to the highest international standards when expanding elsewhere.
Trade agreement legislations such as the African growth Opportunity Act (AGOA), which is between sub-Saharan Africa to the US, however facilitate frair trading relations and pricing of goods between markets.
“They’re [multinational companies] always covering their backs in some ways by saying we want to expand [our] operations, but everyone has to behave in terms of supply chains. There’s a strategic reason that major fashion firms are moving into the North of Africa. We already see this in Tunisia, we see it in Morocco, and we’ve also seen it in Turkey,” McDougall explained.
McDougall explained that Ethiopia was also much closer to London or Paris than a country such as Bangladesh was, indicating an additional strategic aspect to the exodus into Africa. Bangladesh and other South East Asian countries have traditionally been major textile manufacturing regions for a number of multinational companies.
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“The reason that they’re actually making clothes in Africa is because it’s closer to Europe, closer to their supply base, so they can get the clothes quicker. There is a term called ‘fast fashion’ and that means that you’ve got to manufacture the clothes as quickly as possible to get into the stores as quickly as possible in real time. [This is] so that companies can respond to a bestselling item for example in a turnaround time of two or three weeks,” said McDougall.