Chinese Firm Comes to Ethiopia to Test the Waters

Shangtex inaugurated a new garment factory located inside the Eastern Industry Zone

The Shanghai-based Shangten Holding Group inaugurated a new garment factory inside the Chinese held manufacturing hub. Located in the Eastern Industry Zone 37km away from Addis Abeba, for a total cost of 54 million Br.

The company started its operation in November with training from its human resource department, that now totals to 400 Ethiopians and 12 Chinese. Two of the latter are in the top management, and the rest make up the technical team. Lonto Garment Private Ltd, one of the 600 plus subsidiaries of the state-owned Shangten, will oversee the factory.

The arrival of the company to Ethiopia is part of China’s One Belt, One Road Initiative. The Initiative is a global development initiative that comprises Asia, Africa and Europe, according to Xue Jifeng, vice-president of Shanghai Dragon Corporation under Shangtex.

This modest investment will help Shangtex test the waters in Ethiopia, especially when it comes to the investment process and human resources, according to Xue.

“Now is China’s turn to bring all the knowledge and skills to Africa, specifically to Ethiopia,” she said. “We are planning to make larger investments in the days ahead.”

The company secured its investment license last October after applying to the Ethiopian Investment Commission (EIC) on July 15, 2017. Having started operation months ago, this is the first manufacturing plant under Shangtex.

Eighty-three percent of the raw materials for the sweaters that factory produces, such as yarn, will be imported from China. There are 400 new knit-linking machines, which cost close to 18 million Br. This is in addition to the 36 automatic and flat knitting machines. The shed, the factory is housed in, will cost Lonto over 100,000 dollars a year. In addition to the factory paying a maximum of 1,000 Br to manual labourers a month.

All of the products from the factory are intended for the export market. And the first shipment of 30,000 sweaters at the end of the next month will be travelling to Italy. This is part of the 180,000 product orders it has since received.

The main export destinations are Belgium, Brazil, Italy, Poland, Japan, Turkey, the United States and South Africa, according to Zhu Hai Hong, manager of Lonto. Half a million textile products are expected to be exported by the end of this year, generating 2.5 million dollars.

“Most of the investors are coming to Ethiopia attracted to the cheap labour, which is the wrong incentive for the government to offer,” said Million Abebe, a lecturer at the Ethiopian Institute of Textile & Fashion Technology in Bahir Dar University. “Workers turnover is inevitable in the textile and apparel industries in the country. Good management and human resource strategy are necessary.”

Ethiopia bagged 68.5 million dollars, from textile and garment export, in the first eight months of the current fiscal year, according to the Ministry of Industry (MoI). The amount was gained from the operational 200 textile and garment companies that created 90,000 jobs.

Shangtex hopes to capitalise on Ethiopia’s ability to attract foreign direct investment (FDI), which has grown substantially over the past two years. It is in the process of finalising a feasibility study for the possible construction of a Chinese owned industrial park in Ethiopia, after conducting studies for the past six years in Africa.

Shangtex engages in textile export, fashion design, and technology services, making an annual average profit of 150 billion dollars. It employs 72,000 people, half of them in China.

There are 1,345 textile, apparel, garment and leather industry projects in Ethiopia. Among them, only 16pc are operational while the remaining are in the implementation and pre-implementation state.


Published on Apr 28,2018 [ Vol 18 ,No 939]



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