Ethiopia attracted foreign investments of US$1.2 billion in the first six months of the 2016-2017 fiscal year, dominated by Chinese companies.
The investment is helping Ethiopia develop as a manufacturing hub for the global textile market.
Out of the 124 foreign investors that expressed an interest in Ethiopia’s textile and clothing sector over the past three months, 71 were from China. Indian clothing and textile industry could also be a significant future player, with more than 30 investor inquiries.
“The bulk of recent investment is being made by Chinese companies in the textile and apparel sector,” said Mekonnen Hailu, EIC public relations director.
Investors include Chinese conglomerate Jiangsu Sunshine Group, which deals in wool textiles and garments. The company has decided to invest close to US$1 billion in Ethiopia.
It is building a major textile manufacturing hub in Ethiopia for the same reasons that many other Chinese textile investors are choosing to relocate their textile operations to the East African country, says Helen Hai, vice-president of Chinese footwear manufacturer the Huajian Group and advisor to the Ethiopian government on industrial strategy.
“Chinese textile companies are moving closer to their raw material base, the cotton-producing countries such as Ethiopia. This is part of its value chain repositioning, a strategy most Chinese companies are adopting. Companies are also using Africa as a gateway to emerging markets on the continent and to the European market,” said Hai, who helped broker the Jiangsu investment deal.
Ethiopia’s economy has registered double-digit growth in recent years, making it one of the fastest growing in sub-Saharan Africa. The World Bank projects 8.9 percent growth this year. Foreign investment has played a critical role in the country’s economic success, with the government offering favorable benefit packages to attract clothing and textile companies looking to relocate their manufacturing bases to Africa.