Holistic View of Textile Value Chain of Africa Rajeev Arora Executive Director African Cotton & Textile Industries Federation / .
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Holistic View of Textile Value Chain of Africa
Rajeev AroraExecutive Director
African Cotton & Textile Industries Federation
www.actifafrica.com / www.cottonafrica.com
COTTON TRADEWORLD VS AFRICA
2011/12Million tons
2012/13Million tons
2013/14Million tons (projected)
World Production 28.042 26.684 25.63
Africa’s Share 5.6% 5.4% 6.0%
World Consumption 22.789 23.291 23.48
Africa’s Share 1.3% 1.5% 1.6%
World Imports 9.759 9.867 8.81
Africa’s Share 1.4% 1.7% 2.4%
World Exports 9.870 10.078 8.81
Africa’s Share 11.0% 12.6% 15.4%
Source ICAC June 2014
Supply & Use of CottonStatus in africa
Region 2013/14
Prod Imports Cons Exports
North Africa 119 154 184 87
Francophone Africa
902 n/a 17 892
Southern Africa 506 59 164 404
World 25,628 8,811 23,461 8,811
Source: ICAC June 2014, 000 Metric Tons
Supply & Use of CottonStatus in africa
Region 2018/19
Prod Imports Cons Exports
North Africa 120 200 280 40
Francophone Africa
1,200 n/a 25 1,175
Southern Africa 680 70 260 500
World 28,000 9,000 28,000 9,000
Source: Forecasts by Terry Townsend, ACTIF Consultant
000 Metric Tons
AGOA OPPORTUNITY
Total imports of textile & apparel products by USA stood at US$ 101Bn (Source: OTEXA, 2012)
SSA enjoys Duty free Quota free access into US for Garment exports under AGOA
Total U.S. Apparel imports from Africa under AGOA US$ 864
Million (0.8%) (Source: ACT, 2012)
U.S. Textile & Apparel Imports from Sub Sahara
Africa (SSA)
SSA
World
EPA OPPORTUNITY
Africa enjoys duty free Quota free access into EU for Textile products through the Economic Partnership Agreement (EPA)
Total imports of textile & apparel products by EU stood at US$ 234Bn. (2012)
Total EU textile and apparel imports from Africa stood at US$ 9.3 Bn (4%)
EU Textile & Apparel Imports from Africa
Africa
World
Source: ITC calculations based on UN Comtrade
KEY CONSTRAINTS AFFECTING VALUE ADDITION
1) Lack of conducive policy environment for Textile Investments
2) High operating costs due to obsolete technology & equipment among others
3) High competition from dumping pricing from Asia
4) Poor infrastructure and poor connectivity / logistics
5) Reliance on expatriate workforce for technical support
7) High costs of doing business
KEY CONSTRAINTS AFFECTING VALUE ADDITION
8) Lack of political commitment for sustainable policies to bring FDI
9) Porous borders leading to dumping and smuggling
10) Second hand clothing
11) No anti dumping policies and to check cheap import.
12) Copyright infringement
13) High cost of finance
ROLE OF ACTIF
Foreign Direct Investments(FDI): ACTIF explores investment in the cotton textile & apparel value chain in Africa, including developing due diligence and match making for JV’s
B2B Linkages: ACTIF facilitates Business to Business linkages with member countries
Access to Information: ACTIF provides information access including reports and special studies for national policies and strategies
Market access: ACTIF actively develops linkages with member countries and regional economic communities (RECs) like EAC, COMESA, SADC
ROLE OF ACTIF
Policy & Advocacy: ACTIF is very active in advocacy activities in partnership with its members and partners to improve the policy environment across the region
COMESA CtC Strategy: ACTIF has been recognized as the private sector representative for the implementation of the COMESA Cotton to Clothing strategy. With support of our funding partners, ACTIF has developed an priority implementation plan from the strategy and is currently monitoring the implementation activities;
ETHIOPIA: POLICY REFORMS LEADS TO TEXTILE INVESTMENTS
Low cost of power – 5 US$ Availability of trainable, educated cheap labour Provision of fiscal and non fiscal incentives
Tax holidays; Amortization of investment before tax; Soft loans on local investors up to 90% and foreign investors up to 70%;
Abundant arable land available for cotton production; Availability of cheap water; Easy access to land on a lease fee ranging from 0 to 3USD/m2 in regional
states for a lease period of 60-80 years depending on the specific investment location.
Availability of Industrial zones with ready to operate shells; Technical support [expatriates] at no tax; Investments are constitutionally and by law (of Multilateral Investment
Guarantee Agency of the World Bank) guaranteed of non commercial risks.
COTTON MILL USE IN ETHIOPIA INCREASING WITH GROWING TEXTILE
INVESTMENTS
0
50
100
150
200
250
300
350
400
450
90/91 93/94 96/97 99/00 02/03 05/06 08/09 11/12
Source: ICAC
Thousand metric tons lint
Other SSA Countries
EthiopiaFranc Zone
Northern Africa
KEY ADVANTAGES IN ETHIOPIA
Low cost of power – 5 US$ Availability of trainable, educated cheap labour Provision of fiscal and non fiscal incentives
Tax holidays; Amortization of investment before tax; Soft loans on local investors up to 90% and foreign investors up to 70%;
Abundant arable land available for cotton production; Availability of cheap water; Easy access to land on a lease fee ranging from 0 to 3USD/m2 in regional
states for a lease period of 60-80 years depending on the specific investment location.
Availability of Industrial zones with ready to operate shells; Technical support [expatriates] at no tax; Investments are constitutionally and by law (of Multilateral Investment
Guarantee Agency of the World Bank) guaranteed of non commercial risks.
KENYA: VALUE ADDITION ACTIVITIES
The government, under the Ministry of Industrialization & Enterprise development has placed the Textile Industry among its top 3 priority sectors. Impact so far:
Power Cost is now being subsided for Textile & Apparel Industries; Government is aggressively marketing the country for Textile
Investments;
Better Cotton Initiative Value Addition – A Niche Project for developing a full value chain project from Cotton farming under BCI to EU Market for finished garments. This project is the first of its kind in Africa and has the potential to be replicated in other countries;
OVERALL OBJECTIVE
Niche production of cotton via Better Cotton Initiative provides an opportunity to engage cotton farmers in a sustainable model of cotton production. The production activities are already under way spearheaded by the Fibre Directorate [Formerly CODA], supported by Solidaridad;
The overall objective of this project is to develop a full value chain project in Kenya, in collaborations with various institutions and support partners regionally and internationally;
The collaborations are targeting value addition of the certified BCI cotton up to finished garments and linkage to market in EU;
This project is the first of its kind in Africa;
SPECIFIC OBJECTIVES
Improve the livelihoods of cotton farmers: The project involves working with a selected group of farmers that will ensure maximum socio economic impact to them and their households.;
Sustainable production: This project will emphasize sustainable production practices across the value chain, a concept that is growing in demand and practice in the modern world today;
Value Addition: The cotton produced in this project will be processed into high valued finished garments, thereby creating jobs and increasing earnings within the region as compared to sale of raw cotton;
Access to market: This project will enable the producers to access high valued end markets in response to the growing demand in Europe for sustainable cotton products.
VALUE ADDITION ACTIVITIES
Overall Project Lead: To develop linkages & coordinate project implementation
Consultancy: Technical Assistance on Value Addition for Textile & Garment Companies
Consultancy: Technical Assistance in Marketing and Linkages to EU Retailers & Brands
CAPTURING VALUE ADDITION
Value Addition x 10 times which can create 9 million jobs if 100% value is added to current African lint
Fibre
1 Kg
0.7 US$
0.5 person
Yarn
0.75 Kg
3.40 US$
0.75 person
Fabric
3.35Mtr
8.5 US$
2.0 persons
Garment
2 Trousers
15.50 US$
4.0 persons
Retail
2 Trousers
38.80 US$
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