DAKAR, Senegal — When the management of Chinese clothing firm C&H Garments set its sights on opening a West African factory for the first time, few would have guessed they would pick Senegal, a country where apparel exports were valued at less than $1 million last year.
But C&H has rarely opted for the obvious. Founder Helen Hai has shown a knack for spotting opportunities that others overlook, and is now spearheading a group of Asian entrepreneurs driving forward a sector that has languished in Africa in recent years.
Hai’s investments in Ethiopia, Rwanda and Senegal — rather than established players in manufacturing like Egypt, Kenya or South Africa — have raised eyebrows, but other Chinese entrepreneurs are now only too eager to follow where she has led.
Hai opened a shoe factory in Ethiopia in 2011 for Huajian, one of China’s largest shoe brands, recruiting 4,000 local workers within two years. She then went on to found C&H Garments with associate Candy Ma, opening a factory in Rwanda in 2015 and the Senegalese facility this year.
In these emerging markets, a span of several years can mean exponential leaps. Total foreign investment in Ethiopia’s textile industry stood at $166.5 million in 2014, but exploded to $36.8 billion by 2017. Hundreds of Chinese investors rushed to catch the tail of Hai’s factory there, by then producing for Coach, Michael Kors and Nine West.
“[Hai] has pushed the Made in Africa story and she is not just talking the talk, she is walking the walk,” noted Jacqueline Shaw, founder and director of Africa Fashion Guide, which helps companies wanting to enter the fashion business on the continent.
Africa’s textile export market was hit badly from 2005 onward by the end of quotas under the global Multifiber Arrangement, the agreement that regulated exports to the European Union and U.S. When caps imposed on Chinese and Indian exports were lifted, the Asian giants severely impacted factories and suppliers in African and Middle Eastern countries.
Despite this, North African nations such as Morocco and Tunisia have since successfully expanded their market share thanks to established infrastructure and supply routes to Europe. But sub-Saharan Africa lagged far behind.
Faltering electricity, a lack of constant water supply and logistics issues persist in major economies like Nigeria, but some governments — such as Ethiopia’s and Senegal’s — have invested heavily in utilities and transport, while benefiting from better proximity to key export markets in Europe and the U.S. than Asian competitors.
While manufacturers caught onto the Ethiopian opportunity several years ago, Senegal is only now beginning to jockey for position. The country is perceived as a stable democracy with low levels of corruption in a region where Al-Qaeda and Islamic State offshoots are flourishing, such as is the case with Burkina Faso, Mali, Niger and Nigeria, or where graft is entrenched, as in Guinea-Bissau, Sierra Leone and again in Nigeria.
Senegalese President Macky Sall has a long list of reforms aimed at transforming his nation from an agricultural minnow into a manufacturing powerhouse. He welcomed C&H’s offer after watching Hai’s success in Ethiopia and Rwanda — countries previously deemed too challenging for the international apparel business.
The nation has something of a tradition in textiles, too. Senegalese tailors are respected across West Africa and can be found in nearly every neighborhood in the capital, Dakar, in small workshops. The country, though, aims to become an exporter of apparel rather than just meeting domestic needs through this artisanal tradition.
C&H Garments is now recruiting and training hundreds of employees at its new factory in Diamniadio, Senegal, a vast hangar in which workers — donning pink headscarfs — produce T-shirts and uniforms, with promises of thousands of more jobs down the line.
“This factory will increase production of the industrial fabric, create a subcontracting framework with the local private sector and diversify exports,” Abdoul Aziz Tall, the Senegalese minister in charge of Sall’s “Plan Senegal Emergent” reforms, told Chinese state media.
According to a Deloitte investment report last year, Senegal has key advantages over its neighbors, offering “protection against nationalization, a stable currency, free repatriation of profits and funds, and equal treatment between local and foreign entities with access to raw materials, customs and tax incentives.”
There are other sweeteners, the report’s authors added. Among them: a three-year exemption on customs duty for capital goods imports and a VAT exemption on production and purchase of local products.
For several African governments, C&H’s achievements on the continent speak to a broader desire among nations dependent on crops, minerals or oil to tilt toward manufacturing and deliver jobs and wealth for a much larger section of the population.
Hai and Ma set up a factory in Rwanda on their own after struggling to find a single investor prepared to build a facility in the landlocked East African nation. They’d spied opportunity, but with strong backing for their project from President Paul Kagame, who over the last two decades has taken his nation from the ashes of genocide to a well-regulated, tech-driven economy.
C&H’s Rwandan garment factory employs 1,200 people and produces for brands including Guess and Pink Mango. The opportunities for silk cultivation in Rwanda were also a draw, company officials said.
Challenges remain. Rwanda is also an example of a small African nation whose clothing producers struggle to compete domestically with the mountain of secondhand clothes exported by the U.S.
Kagame increased tariffs on secondhand clothes to protect the nascent textile industry this year, and the U.S. responded by suspending Rwanda’s status in the Africa Growth and Opportunity Act, which allows African nations to export to the U.S. tariff-free.
Regardless, the reasons for investing in Africa have as much to do with the shifting fortunes of China’s domestic apparel industry as with the potential of countries like Ethiopia and Rwanda.
Although China remains the dominant global force in textiles and apparel, rising labor costs are forcing firms to look elsewhere to make clothes. The Trump administration’s trade war with China has also driven U.S. companies specifically to look for alternative sources of production.
“China’s market share in world apparel exports fell from its peak — 38.8 percent in 2014 — to a record low of 34.9 percent in 2017. Meanwhile, China accounted for 37.1 percent of world textile exports in 2017, which was a new record high,” wrote Sheng Lu, assistant professor of fashion and apparel studies at the University of Delaware, in an August blog post.
The focus on textiles rather than finished products allows China to export fabric to lower wage economies in Bangladesh, Cambodia and Vietnam. Meanwhile worries over safety in Bangladesh and the sharp increase in wage costs in Vietnam are making those countries less attractive to investors, opening up opportunities in Africa.
“The fashion industry doesn’t sleep. They are looking for somewhere with electricity, and good — and unfortunately cheap — labor,” Shaw said.
In 2015, Hai also established the Made in Africa initiative, which advises African governments on industrialization and how to prepare their nations to attract some of the estimated 85 million manufacturing jobs the NGO estimates will relocate out of China in the next few years.
“They need the capacity. They need the knowledge. They need experience from China, and they want to learn how the Chinese have achieved such successful economic development of the past 40 years,” said Matt Liu, executive director of the Made in Africa Initiative.
Sub-Saharan Africa is starting from a low base. The African continent accounts for only around 16 percent of the production in the $1.6 trillion global textiles market, while Asia-Pacific accounts for almost 60 percent, according to the Africa Development Bank.
Today, however, China’s workforce is increasingly skilled, and aging. Africa is the continent with a booming youth population, chronic unemployment and a nascent manufacturing sector, and the next challenge is to develop its supply chains, often from scratch.
Thirty-seven African countries produce cotton, for example, and 30 are exporters, but very little of that cotton is transformed on the continent.
“So far none of the African countries can provide a full supply chain in any single sector,” noted Liu.
Textile manufacturing requires a minimum $10 million investment for a factory, Made in Africa Initiative’s Liu noted, meaning companies want to be absolutely sure they will get a return on their investment. And with the increasing pace of automation, Africa’s window of opportunity must be exploited fast.