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The Ethiopian Investment Commission (EIC), in consultation with the Ministry of Trade and Industry (MoTI) and the Ethiopian Textile Industry Development Institute (ETIDI) has launched a strategy and policy recommendation document for the Ethiopian textile and apparel sectors. Titled ‘Realizing New Productive Capacity in Ethiopia’s Textiles and Apparel Sector: Strategy and Policy Recommendations,’ the 157-page document includes overviews of the international and Ethiopian apparel market and value chain, identifies key challenges facing apparel producers and offers policy recommendations with an implementation roadmap.

Development of the textile industry is a national priority for the Government of Ethiopia, as reflected in both the first and second Growth and Transformation Plans (GTP). GTP I set an ambitious export earning target of USD 1 billion by 2014/15. GTP II continues to emphasize the development of the sector, and aims to improve production capacity, productivity, quality and competitiveness, and creation of sustainable and reliable input supply. The current aim is to achieve $30 billion in textile and apparel exports by 2025, with a vision to lead the African textile and garment sector in global competitiveness.

Through targeted relationship building and by providing generous incentives, the Government of Ethiopia has made concerted efforts to attract global brands and manufacturers into its nascent textiles and apparel industry. This has resulted in an emerging, dynamic, and export-oriented textiles and apparel industry in Ethiopia. However, the sector continues to face key challenges which hamper its progress to meet expectations.

The strategy identifies five binding constraints: banking/access to FX; workforce development; customs and logistics and IP development and local capability support, as well as three thematic constrains: incentives (do not address the challenges being faced), promotion (not sustained) and institutional arrangement. For each challenge area, policy recommendations are made and an implementation roadmap proposed including dedicated financing facilities for exporters and tailoring incentives to address the unique challenges.

The overall objective of this strategy is to build on the existing sector-specific studies, and develop policy recommendations to unleash growth.

This study was supported and managed by Enterprise Partners. The study team was led by Equiception and Dalberg, with local support and input being provided by First Consult, Enterprise Partners and the Ethiopian Garment Manufacturers Association.

To download a copy of the strategy, click here.

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Solid waste recycling ready for composting at a local factory in Ziway

By Bezawit Eshetu, Green Growth Adviser, EP

Ethiopia has been addressing the agenda of climate change since the early 1990s. Beyond ratifying numerous global and regional environmental agreements and conventions, Ethiopia has designed and embarked on its own ambitious national ‘Climate Resilient Green Economy Strategy.’ 

But I wonder, how much of what’s on paper is in practice?


Eco-Industrial Parks boosting green manufacturing in Ethiopia

Ethiopia is focused on industrialization in selected priority sectors: agro-processing, leather, garments and cotton/textiles. With six industrial parks already operational and more in the pipeline, Ethiopia is becoming an African hub for light manufacturing. 

Most importantly, Ethiopia’s industrial parks are in fact ‘eco-industrial parks;’ they were designed and built to support green manufacturing practices through their state-of-the-art infrastructure that includes a wastewater treatment plant.

But though the facilities live up to Ethiopia’s promise of a green economy, more is needed to run them as such, to make ancillary functions available and realize Ethiopia’s Green Strategy overall.

What is Needed to Practice Ethiopian’s ‘Green Strategy’?

1. Behavior change is the single most important determinant that can make the most impact. If investors commit to green manufacturing, they will opt for efficient resource utilization (raw material, energy and water, procurement and the supply chain) and for greener production processes, which minimize the production of waste. In this regard, I firmly believe in the importance of organizing exposure visits to learn from success stories. This is the phase when the seeds of inspiration are planted, the fruits and outcomes are envisioned, and ownership and accountability are embraced.

This coupled with cost sharing schemes from development partners like EP absorbing the risk of the high initial investment cost for green manufacturing, makes exemplary initiatives possible in and outside the industry parks.

Consumers can also make a difference because profit is determined by growing consumers’ demand for sustainable products and services. Consumers’ choice is a language that can easily resonate with investors’ anticipated profit margins.

2. Ethiopia’s response to climate change has to be directed from its leaders. There is a need for clear mandate, policy direction and coordination from the government regarding the development, regulation and enforcement of environment compliance systems. The lack of this has meant that high-level strategies and policies are yet to be translated into specific operational manuals and standards that guide the most basic level of an activity. For instance, Ethiopia is yet to have a comprehensive policy, proclamation and standard on hazardous waste management, creating a gap in environment compliance   

3. Research and human resource development is needed to strengthen institutions, run and sustain eco-industrial parks, incubate ideas, create feasible innovative bankable projects for recycling and remanufacturing of waste into value-added by products (e.g. bricks can be made from industrial sludge), etc.

This calls for a strong university-industry linkage so that our industries can hire professionals with industry-specific skills, and our universities train professionals who are fit for the context.

4. Lastly, financial capacity will be important to sustain our eco-industrial parks as well as to finance supplementary functions. The Business Case for Eco-Industrial Parks Development in Ethiopia report commissioned by EP, provides useful pointers that can be adopted. 

All of the above shows that building a nation of green manufacturing is a multi-disciplinary, cross cutting effort. Stakeholders need to be learners, and innovative and persistent in the face of challenges and work collaboratively to bring the national commitment to fruition. After all, it is wiser for us to learn from the experience of other countries the cost in environment that is often attendant to economic growth.


Disclaimer: These are the views of the author and do not necessarily reflect those of Enterprise Partners or UKaid.

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George Shoes becomes the first leather company based in Ethiopia to receive a GOLD audit award for a Leather Working Group (LWG) certification. LWG certification is an international leather tannery audit ensuring environmental compliance. With the increasing environmental concerns in the world and specifically in the fashion business, having this certification is becoming a necessary requirement for leather producers to stay in the global leather business and access new/better-paying markets.

Enterprise Partners (EP) has been supporting local tanneries who are pursuing LWG certification in order to secure and sustain their global market share. EP financed the technical services of an international LWG advisor to partner tanneries as well as the Federal Leather Industry Development Institute (LIDI). EP also shared the cost of facility and laboratory improvement activities in selected tanneries. This has resulted in increased awareness locally and a number of tanneries that are working towards LWG audit and certification. Learning about EP’s work on LWG in Ethiopia, George Shoes has also been corresponding with EP seeking information regarding various permits and tests required for LWG.

EP in partnership with LIDI organized a learning visit to George Shoe for stakeholders on December 3, 2019 to facilitate interaction and experience sharing on the topic.  The visit comprised representatives from Batu Tannery, Bahirdar Tannery, Elico Tannery and LIDI. The private sector participants, who said the visit was “an eye-opener,” inquired about the LWG process, including how to get permits, conduct third-party measurements, manage chemical inputs and process hazardous solid waste. The group further agreed to work together to improve the quality of leather produced and enhance competitiveness in global markets

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Enterprise Partners (EP) conducted an experience sharing and lessons learnt workshop for the conclusion of one of the Horticulture Intervention, “Quality Improvement and Diversification of Domestically Processed Fruits and Vegetables”. The event took place in Addis Ababa on 05 December 2019. Invited attendees included private processors (Petram, Theday and Sadura), consulting companies (LM Consultancy and MK Consultancy), industry experts, representatives from the Ministry of Agriculture (MoA), the Ethiopian Conformity Assessment Enterprise, the Ethiopian Food Beverages and Pharmaceuticals Industries Development Institute (EFBPIDI), Ethiopian Bottled Water and Soft Drink Manufacturing Industries Association (EBMSIA).

EP partnered with Local Fruit, a company based in the Netherlands to consult and strengthen the capacity of both local processors and technical service providers involved in the intervention. The consultants reflected on their findings and shared relevant learnings from trends in the international food market related to fruit and vegetable products. Some of the major findings included, adopting a business strategy that focused on operational excellence, enhancing coordination between processors, academic curriculum and research and systemising information flow within the industry.

The three processing companies also reflected on their experience and shared results

  • All three processors (Sadura, Petram and Theday) have upgraded their quality standards to meet export level. Based on their subsequent eligibility, they are pursuing ISO certification to be eligible to export to international markets.
  • Sadura Processing Company introduced a new mango product into the market after substituting imported pulp with local mango pulp. The processor has also developed a new juice recipe from passion fruit pulp. In 2021, they plan to scale-up their business by starting new products infused with Ethiopian spices and herbs.
  • Petram Processing Company commissioned a local consultant to carry out a countrywide business assessment on five selected fruits and vegetables. The assessment serves as an input for product diversification of its franchised brand and the potential of investing in pulp production.
  • Theday Processing Company has developed its own tomato ketchup recipe, secured bank loan for business expansion and is preparing to procure production machinery. 



As EP exits from the market, public and private actors will continue working together. Market linkages are bridged and stakeholders are incentivised to continue the work sustainably. This will result in processed products’ market competitiveness and thereby contribute to import substitution and support export market through the improvement of quality and diversification in the nation’s fruit and vegetable processing industry.

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By Tewodros Belachew, Senior Intervention Manager, EP

I often imagine what it would be like for Ethiopia to increase cotton production to the level of its “largest untapped potential in the world.” With its 3 million hectares of land suitable for cotton cultivation, it would be able to compete with leading cotton producers, Pakistan at 2.6ml hectares and China at 3.3 million. As the global demand for cotton and cotton production grows this year, the reality is that Ethiopian cotton production continues to decline, producing about 34,000 tons of lint this year, 30% less than last year.

Why can’t Ethiopian cotton production performance be better?

The reasons for the under performance have been identified and articulated through various processes at various national platforms and reports. On the production side, our major challenges include limited access to quality seeds and crop protection chemicals, labor shortage, and poor agronomic and post-harvest practices. On top of this, lack of access to finance, lack of coordinated efforts by key stakeholders and the absence of sustainable market linkage constrain the cotton development. Ultimately, this led to a ‘low cost, low output’ farming environment, the sole objective of which is getting a better margin in that particular crop season.

Who’s best placed to improve Ethiopian cotton production?

Cotton is a top cash crop for the country with lopsided strategic importance for the government and the textile industry than for the cotton farmer. The government, through a well-designed institutional structure/support, is best placed to benefit from the establishment of an integrated local value chain that serves as a catalyst for increased investment with significant job creation potential. If this is in place, textile and apparel manufacturers could benefit from improved cost (materials account for 60-70% of garment production cost), compliance with international market requirements, and deliver with speed, which is a critical competitive edge in the fast fashion market. In such a manner, the existing gap between the textile industry and cotton farmers needs to be bridged.  

On the other hand, the introduction of innovative private-sector-driven business models that could incentivize farmers to produce cotton at the right quality and quantity would result in incentive led improvements on the production side. Only then can we ensure return on investments in cotton production trickles down to the farmer, who will be motivated to produce quality cotton for an internationally competitive cotton and textile value chain.

Contract farming as the best model

I strongly believe that customizing and adopting a contract farming model that is fit for the Ethiopian farming environment is the preferred model to respond to the existing market failure which comes at the cost of farmer livelihood and the existence of commercial cotton farming in Ethiopia. The primary goal of contract farming is vertical alignment of farmer and manufacturer to improve incomes and profitability. Moreover, if designed and implemented properly, it could be the magic business solution to organize and shape strategic partnerships, promote innovation and learning, and facilitate access to finance, which leads to sustainable value chain partnership.

If all strategic partners look up and take in a long view beyond, they might well take up contract farming as one of the options toward a developed cotton industry in Ethiopia that benefits all. 

Disclaimer: These are the views of the author and do not necessarily reflect those of Enterprise Partners or UKaid.

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ADDIS ABEBA, 22th November 2019 — The Workers Engagement and Retention (WEAR) soft skills training programme of Enterprise Partners aims at building a resilient and productive workforce in the Ethiopian garment industry by aligning basic human needs with industry requirements. The newly-developed national soft skill audio-visual training content provides the skills and knowledge that operator-level factor workers require for better industrial orientation. 

The training content is comprised of 10 modules each illustrated by a 3-4 minute video narrated by “Aster” – a character based on would-be trainees. The training modality also includes learning boards to guide discussion on key ideas facilitated by a factory trainer who is supported by external master trainers, and continuous learning circles to reinforce messages. The training topics include transitioning into urban life, value chains, nutrition, health and safety, communication and problem solving, and valuing diversity. The material is available in Amharic, Tigrigna and Afan-Oromo languages.

To implement the training programme, factories may request the Ethiopian Textile Industry Development Institute or contact Enterprise Partners.

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ADDIS ABEBA, 5th November 2019 — Enterprise partners in partnership with Ethiopian Textile Industry Development Institute (ETIDI) organized a consultative workshop, entitled, ‘’Cotton Research and Development in Ethiopia.’’ The key objective of the workshop was to identify the challenges in cotton production and provide solutions for the way-forward plans.  

During the workshop, presentations and discussions took place with topics such as the global and Ethiopian cotton productions, Bt cotton experience, contract farming, China cotton production and government support for the cotton sector.

Tewodros Belachew, EP Intervention Manager, presented cotton development benefiting technologies and their adoption rate and progress in Ethiopia. Building on the effort within contract farming and minimum support price (MSP), Tewodros reiterated EP’s commitment to strengthen the cotton industry and address critical constraints in the cotton production.

EP has been supporting cotton farmers to improve productivity and increase the market for the past six years. Participants also appreciated EP’s contribution and the effort made through contract farming to create market linkage.

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Enterprise partners (EP) organized a half-day workshop on September 5, 2019 at Magnolia Hotel for Accounting and Fiscal concerned officers of Head Office, Addis Ababa and Adama District. The main objectives of the workshop was to identify specific accounting and fiscal related challenges to DBE’s lease finance activities and encourage dialogue between members that would contribute significantly to the resolution of some of the most critical  challenges in the market.

In his opening remark, Henok Tenna, Enterprise Partners TA Manager for Lease Financing, welcomed the participants and highlighted the workshop’s agenda and objectives. Following the opening speech, Stephen Strauss, EP’s International Lease Financing Adviser, presented general concepts of accounting and fiscal treatment of leasing in Ethiopia in light of International practices particularly related to IFRS 16 and IFRS 9. He further emphasized specific accounting and fiscal related issues to DBE’s leasing activities.

The workshop was very informative and was attended by 20 participants from the Development Bank of Ethiopia (DBE). Successfully, general concepts of accounting and fiscal treatment of leasing were shared with international best practices during the workshop. Participants engaged and asked questions related to accounting and fiscal treatments of leasing, as well as of DBE’s overall lease financing activity portfolio. Partners showed commitment and collaboration to facilitate activities within lease financing moving forward with recommendations and solutions presented.  

As a next step, EP will continue to organize similar workshops for the rest of the district officers of select regions and ensure that all the international best practices of accounting and fiscal treatments are incorporated into DBE’s new draft procedures manual.

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Enterprise Partners organized a two-day workshop on lease finance from Aug 14 – 15, 2019 at Magnolia Hotel, Addis Abeba. The objectives of the workshop, titled Introduction to leasing, were to build on knowledge on the flow of leasing transactions, key stakeholders for a leasing operation, the leasing legal framework, and accounting treatment for lessee and lessor. The workshop was designed to provide participants with advance knowledge on lease financing. The workshop was attended by eight banks including Abay Bank, Addis International Bank, Oromiya International Bank, Lion Bank, Zemen Bank, Dashen Bank, Nib Bank and Debub Global Bank.

Asfaw Abera, Licencing and Supervision of Lease Financing Head at National Bank of Ethiopia, presented a wide range of topics related to the legal and regulatory framework of leasing, financial statements and accounting treatment. The participants at the workshop participated in an interactive Q&A session on lease finance. They also discussed the accounting and tax treatment and the difference between loan and lease. At the end of the discussion, the current state of lease finance in Ethiopia was presented. ‘’Lease finance is currently at its infant stage of development and constitutes five capital good finance companies,’’ he said. The workshop was the ideal occasion for the banking sector to understand the concept of lease finance in Ethiopia. Participants also described the workshop as ‘informative’ saying it has been as an eye-opener regarding lease finance.

 

 

 

 

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Enterprise Partners and PAN Ethiopia held a three-day discussion on Contract Farming from  August 5-7 in Arbaminch, SNNPR. In their discussion with over 30 participants, EP and PAN Ethiopia provided a direction on the contract farming model and other relevant issues as well as the new contract farming between MNS and Shelle-Mella natural crop producers cooperatives. In addition to the issues related to the contract farming model, they have discussed last year’s achievements of organic cotton production. Participants included the Ethiopian Textiles Industries Development Institute, the Regional and Zonal agricultural officials and farmers’ cooperatives. Three groups were formed to discuss thematic areas the drafted contract farming model. The first group discussed on store supply, price arrangement, cooperatives development and shared their views on the new contract along with recommendations on the best possible ways for better result. Group two also discussed the relevant issues regarding the contractual agreement, including the rights and responsibility of cotton supplier and buyer.  Group three mainly discussed on production and marketing issues. They raised key issues, including inputs for organic farming, market suitability and transportation. Furthermore, they suggested insurance schemes for natural disasters.

The discussion was productive, inclusive and informative, giving participants a platform to raise various questions related to contract farming and created a better understanding of the new contract farming.  In response to queries raised, the organizers reiterated the importance of organic cotton production. Furthermore, they shared the benefits of contract farming including EP and PAN Ethiopia willingness in supporting organic cotton production. Concluding the discussion, MNS manufacturing signed a memorandum of understanding to pay the farmers a price in line with a specified method and time. On the other hand, the farmers agreed to sell organic cotton based on the agreement. The memorandum of understanding has different articles including buyer and seller responsibility, product quality and quantity, product cost, conflict resolution, and contract amendment. The contract also includes special agreements and third party responsibility.

 

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