Holistic View of Textile Value Chain of Africa Rajeev Arora Executive Director African Cotton & Textile Industries Federation www.actifafrica.com / www.cottonafrica.com

COTTON TRADE WORLD VS AFRICA 2011/12 Million tons 2012/13 2013/14 Million 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 1.3% 1.5% 1.6% World Imports 9.759 9.867 8.81 1.4% 1.7% 2.4% World Exports 9.870 10.078 11.0% 12.6% 15.4% Source ICAC June 2014

Supply & Use of Cotton Status in africa Region Imports 2013/14 Prod 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 23,461 000 Metric Tons Source: ICAC June 2014,

World Cotton Million tons Lower cotton prices ahead Production Mill Use Lower cotton prices ahead January 30 2013

Supply & Use of Cotton Status in africa Region Imports 2018/19 Prod 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 9,000 000 Metric Tons Source: Forecasts by Terry Townsend, ACTIF Consultant

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)

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%) Source: ITC calculations based on UN Comtrade

KEY CONSTRAINTS AFFECTING VALUE ADDITION Lack of conducive policy environment for Textile Investments High operating costs due to obsolete technology & equipment among others High competition from dumping pricing from Asia Poor infrastructure and poor connectivity / logistics Reliance on expatriate workforce for technical support High costs of doing business

KEY CONSTRAINTS AFFECTING VALUE ADDITION Lack of political commitment for sustainable policies to bring FDI Porous borders leading to dumping and smuggling Second hand clothing No anti dumping policies and to check cheap import. Copyright infringement 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;

TEXTILE VALUE CHAIN : VIEW OF ETHIOPIA & KENYA BCI VALUE ADDITION PROJECT TEXTILE VALUE CHAIN : VIEW OF ETHIOPIA & KENYA

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 Thousand metric tons lint Northern Africa Other SSA Countries Franc Zone Ethiopia Source: ICAC

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: the leading apparel exporter from africa under agoa

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.

Phase 3: Phase 1: Phase 2: Production & Ginning Spinning, Knitting, Weaving Phase 3: Apparel Production & Marketing

PHASE 1 Salawa Ginnery PPP Model Cotton Farming Ginning Marketing Targeting 5000 farmers Training activities Ginning Certification & Training Upgrade for efficiency Marketing Link to Certified Spinners Local & International markets PPP Model Salawa Ginnery

PHASE 2 & 3: VALUE ADDITION Spinning Certification Technology Upgrade Optimization Knitting & Weaving Dyeing & Finishing BCI Membership Design Link to local and international sourcing Apparel Production Certification Optimization Promotion & Marketing Local & International markets

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

VALUE ADDITION SUPPORT PARTNER

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 38.80 US$

Changing Perceptions, Building Synergy & Doing Business Origin Africa Hosting ‘Africa Sourcing and Fashion Week’ 21st – 23rd October 2015, Addis Ababa / Ethiopia Changing Perceptions, Building Synergy & Doing Business   www.originafrica.org