Sourcing Opportunity in Africa

1

Although Africa only accounted for 0.55% of world textile and apparel (T&A) exports in 2013(WTO, 2014), numerous studies have suggested that this is a region of strategic importance as a sourcing base in the long term. For example, according to one recent study released by McKinsey & Company, among 40 surveyed apparel chief purchasing officers from January to February 2015, around 40 percent expect to be sourcing a greater share of their portfolio from sub-Saharan Africa in the next 5 years.

26

Africa is gaining attention as a sourcing base largely because of its growing working-age population, which is expected to surpass China today by 2035 (Note: In comparison, affected by its one-child policy, China’s labor pool could shrink by one-fifth over the next 50 years). The current wage level in Africa is around USD 120 to 150 monthly for garment workers, higher than Bangladesh (USD 91/month), but lower than Vietnam (USD 254/month) and China (USD 324/month).

3

However, sourcing from Africa is not without challenges. One big disadvantage of African countries when competing with “factory Asia” is its nascent local textile industry, meaning most fabrics and raw material needed for apparel assembling in Africa has to be imported. As reported by the McKinsey & Company study, among those surveyed companies which involved in sourcing from Sub-Saharan Africa, only around 50% directly source from the region, 15% source via Asian suppliers’ headquarters and 32% source via agents.

Poor infrastructure in Africa further amplifies the problem of heavy reliance on imported fabrics, trims and other supplies. For example, It can add up to 40 days in transit, for fabrics manufactured overseas to come from abroad and make their way through customs and to the factory in Africa.

5

Look into the future, the collaboration between local governments, suppliers and buyers is suggested as the key to fully tap the potential of Africa as a sourcing base. Particularly, the McKinsey & Company report suggests US and EU-based apparel companies to evaluate Africa as a strategic option and think about the region beyond the next 2-3 years. Improving workers’ productivity, upgrading the industry to go beyond cut-make-and-trim (CMT) and establishing long-term partnership with buyers are suggested to be prioritized.

Advertisements

Author: Sheng Lu

Professor @ University of Delaware

15 thoughts on “Sourcing Opportunity in Africa”

  1. i believe that introducing Africa into the global trade and manufacturing sector is a great idea. This will take some time in working out the kinks and establishing relationships between other sourcing countries, but however will continue in making globalization happen. Although, the textile and apparel industry is Africa is subpar and still needs imports to make it happen, this is just the beginning of the industry potential in Africa. Within this industry to become successful in new emerging countries, there has to be a broad starting point which leaves openings for a successful and ultimate improvement.

  2. I personally think that the US needs to look into as many outside sources as possible. History should be the best teacher. The US has transitioned from countries, which they outsource most throughout the years. I think even though Africa does not have the best infrastructure and outsource a lot of their raw material. It is important for the US to have other options. Similar to how China uses to be our number one sourcing agent. We need to keep our options open. In the long run I think it is important to begin to build a relationship sourcing wise with Africa. Maybe not dive right into sourcing and importing from them but make sure the relationship is there for when we need them. Similar to how we went from China to Bangladesh. There is no way to predict what will happen so having a multitude of options can only benefit the US. It does not mean we need to take direct action but to know what they have to offer and how we can benefit from the relationship.

  3. I really agree with you Morgan in that the US definitely needs to keep their options open. I would not rely too much on this Africa idea. In my opinion, it is just too much work and too many obstacles to source in Africa, at least on a big scale. I feel as if they decided to start small and see how it works, this could be an option. As for sourcing on a larger scale, importing raw materials and their poor infrastructure becomes a huge problem. Also adding 40 days to transit would really hurt big companies as they are always looking for shorter and shorter lead times. Why would we want to source where we have to import the supplies, it could be potentially dangerous and it would take way longer? Is it only because of the cheaper wages? This seems inhumane to me and I feel as if, if we are going to try so hard to source in Africa, lets just try as hard to make more jobs in the US in the T&A industry.

  4. I think that it is a great idea that the U.S. is thinking about sourcing from Africa. However it is going to take a lot of time because of the poor infrastructure as well as challenging political issues; but it could tap into hidden potential and end up being very beneficial in the long run for both parties involved.

  5. I think that its an interesting idea for the US to outsource in a developing country such as Africa. This could be a potentially great opportunity for these countries to get a large foot in the door in the developed market place. I have two main concerns though. Considering the increasing large number of workers in these African countries and not so impressive infrastructure due to lack of capital- it worries me that it will just become another china with poor working conditions and low wages. Another worry of mine is the amount of traveling these fibers have to do until they get to Africa to become assembled apparel and then shipped to the US. This will create even more environmental pollution from the amount of traveling. I think the US needs to outsource in more countries that can grow specific fibers in their country and also can assemble the textiles and apparel in the same country to try to limit carbon emissions in the air.

  6. America sourcing from Africa can be a great opportunity for both Africa and America. Due to the weak infrastructure it may take a long time to develop however it has the potential to be extremely beneficial. Once all the issues are sorted out and relationships are made, I believe it will be a great addition. Anything worth while takes time, and this is one example of that.

  7. The U.S. and EU should take the advice from the McKinsey & Company report and strategically evaluate Africa and think about the region beyond the next 2 to 3 years. The growing working age population in Africa is a huge opportunity to take advantage of in the apparel industry. Especially with the China population (work force) shrinking due to its one-child policy. What will these companies due in the future when the work force is diminishing in China? Will it then be too late to take advantage of Africa? Another positive is that the the wage level for factory workers in Africa is much lower than China. However, the 40 day transit for Africa to receive imports of raw materials and fabrics to go into production is a very long time. Today, with “fast- fashion” it is all about speed and how fast one can produce a garment. Africa would not be able to competitively keep up with the competition in this area. There are negatives and positives to this issue and the U.S. and EU should strategically evaluate Africa’s ability to enter the apparel manufacturing market.

  8. After reading some of the other comments above, I have a hard time deciding whether or not sourcing from Africa is a good or bad idea. There are definitely pros and cons to both sides. I feel like it can be good for the economy in Africa. This could be an opportunity for the continent to grow economically and learn new skills/educate the people in a “new” field. So that could be the pro for this opportunity for Africa.

    I want to support this idea because it could lead to great opportunities for Africa and allow them to get a place in the textile and apparel industry competition but I would hate for Africa to become the next location where sweat shops start or have factories that we read about in some of the case studies.

  9. Just as the comment above, I am finding it hard to choose whether or not sourcing from Africa should take place at this time. How can Africa, with the majority having low wages, nascent local textile industries, and poor infrastructure amidst politically and war ravaged nations be expected to compete in a such a modernized, global T&A industry? I feel that Africa may not be ready for this challenge and many African countries should internalize many of their industries so that they can be more competitive and capital efficient as well. The US has far better prospects for outsourcing than getting involved with nations that truly need to focus on their own industries.

  10. I think it’s great that developed countries are now seeing the potential in African countries who need a way to enter the T&A industry. I think people in Africa are eager to develop there economies and with the right relationships with political figures and trade rules I think this could work for country’s like the U.S were we are trying to look for other places to source from in a cheaper form even though the rate of pay is higher than Bangladesh it’s still lower than Vietnam giving Africa an advantage. I do however feel that if manufacturing is brought to Africa the right precautions should be taken by the U.S, E.U etc. in the working conditions in these countries if manufacturing evolves in Africa. I don’t think people should interpret the article as something that will happen in the next year or two I think the growth of the African T&A industry will take a long time and negotiation.

  11. Being a citizen of the US I want my country to be as successful as possible, benefiting economically. This may include looking into sourcing outside of the US. Much of US T&A industry is produced overseas, particularly China. I think it would be smart to start looking into other sources as well, I don’t think we should rely on just one country so heavily. Like China, Africa will be a challenge to build up into something that will rise to the standards of the industry but the pros outweigh the cons. Building up Africa’s T&A industry would benefit both Africa and the US, creating a market in Africa and having a hand in the US T&A growth. Doing this will help the global economy and trade relationships, benefiting the US T&A. It would be wise for the US to look into all their outside sourcing options.

  12. It would only make sense that Africa enters the industry as a major player. If not in both textile and apparel, then atlas textiles. They are at the perfect point economically and socially to strive for a boost in the industry. Having many people looking for a safe way to make money and willing to work for cheaper than people in many other countries, it is only a matter of time before existing players in the T&A industry decide to take their business to Africa.

  13. I believe the United States should be looking into as many outside sources as they can to keep their options open. For the future, I feel like it would be a good idea to think about keeping Africa in our sourcing circle. From what we have seen through the years, countries like Africa are not completely reliable due to natural disasters, etc. But they do outsource a lot of their raw materials, which is beneficial for us in the long run. As for sourcing on a larger scale, importing these raw materials could become a problem since their infrastructure is so poor. Is it worth keeping Africa as a sourcing opportunity? In my opinion, it is still crucial for the US to keep other options open for outsourcing. If we keep focusing on trying to improve our relationship with Africa, we might as well open up more jobs in the textile and apparel industry in the United States to benefit ourselves first.

    1. this is why the long-term renewal of AGOA as well as the “third-country” fabric provision is regarded as critical for developing Africa as a growing sourcing destination.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s