Digital production technologies could help African manufacturers pick up business lost by Chinese rivals because of the trade war in the US, with brands looking to take advantage of the free trade agreements that many African countries have with the US and Europe.
Among these potential substitute sourcing hubs are Egypt and South Africa, with potential also being seen in Morocco and Tunisia, experts at a trade exhibition and conference Destination Africa, which was held in Cairo on 17-19 November, told WTiN.
“If the trade war continues, we are hearing China could move 20% of production to Egypt and elsewhere, either by setting up shop, through mergers or full acquisitions of local companies. Part of the attraction is shorter lead times and cheap labour,” says Mahmoud El Kotb, vice president of El Kotb Textiles Company, a third-generation Egyptian warp-knitting producer, which has a PrintPlus Fabrics digital printing wing.
The need to boost supply chain efficiencies through digitisation was an important topic among delegations and companies from several African textile and garment producing countries attending Destination Africa, which is held every year to bolster business ties and assess what the continent needs to move ahead.
But the truth is that there is much work to be done to integrate these new technologies into African textile and clothing industries that have until now often struggled to hold their own against Asian – especially Chinese – competitors, even in their home markets.
High costs are an issue in the digital printing segment, especially, which can help lead manufacturers into digitisation of other aspects of their work. At present, such digital technologies are primarily clustered around South Africa and Egypt. “Digitisation is on the up, but the price of machinery and equipment is holding things back as the latest innovations are from Europe but it doesn’t correlate with our economy, so how can we keep up as the print quality is not yet up to scratch for export?” said Hazel Govender, director of Pitbull Print & Media, a dyeing, printing and finishing company in Durban, South Africa, at the Destination Africa event.
Moreover, the fact that digitisation is taking hold at the extreme ends of the African continent, poses supply chain challenges, unless such investment takes place in countries in between – the distance between Cairo and Cape Town is around 10,000km. So, it is unlikely that South African digital printers and manufacturers using other digital technologies will be able to competitively supply North African garment hubs – and vice versa.
“Logistically it is a problem, with both of us extremely north and extremely south. If companies invest in South Africa, we’d service them, but Egypt is positioning themselves at the heart of everything [in Africa] so they’ve turned the tables,” added Govender. Opportunities would improve, she said, if there was better cooperation and development with other African countries that excel in traditional prints, such as the Democratic Republic of Congo (DRC).
Digital printing in Egypt is expanding, although confined to a handful of players. One of the largest is ASK Clothing, based in Alexandria, which has doubled its capacity over the past year to 20,000 meters per day after investing €1m in two digital printing machines. Around 70% of sales are for export, focused on polyester, primarily screen printed. Nick Lever, ASK’s sales and development director, put the increase in production down to low polyester prices, competitive pricing and rising demand for activewear in the Egyptian market. Cost-wise, however, Egypt is more expensive than China, at US$1 compared to US$0.40, although of higher quality, added Lever.
Yet while digital printing is on the rise, driven by demand in the US, according to El Kotb, there is not yet much pressure on the Egyptian-owned garment and textile sector to adopt other new technologies and digitisation. “Demand for technical garments is not that high, although we need more technological and manmade fabrics,” says Samer Riad, general director of the Riad Group, which includes the Egyptian Textiles Company, although he noted that a lot of Turkish and South Korean companies operating in Egypt have installed digital systems in their administrative and backroom logistical management systems – ‘but digitisation is not big on the shop floor.’ He said that Egyptian companies have generally not adopted enterprise resource planning (ERP) software, primarily because their clients have different systems and installing suppler software that can interact with a number of client systems is tough: “You need their ERP, which is tough, as you need to customise production for each customer, and for many companies that is difficult due to the investment required.” Riad adds that his company has barcodes for production, “but we’ve not gone as far as a rail or automated system, so semi-digitised.”
Furthermore, buyers are not yet demanding digitisation from African manufacturers, saying – for the time being at least, with an American buyer for major brands, who wanted anonymity, at Destination Africa, telling WTiN: “If we want more advanced garments and textiles, we go to Turkey and East Asia, not Africa. Sure, they are starting from scratch in a way, but we are looking at buying from Egypt and Africa because the labour cost is lower than anywhere else, that’s the motivation.”
Nonetheless, the influx of major producers and buyers into Egypt and Ethiopia is upping development, while Morocco and Tunisia are gradually modernising production.
“Moroccan companies are using software to manage production and stock, but they don’t have a strong system, just around 100 out of 5,000 firms,” says Elasri Mustapha, a textile advisor to the Moroccan Agency for Development, Investment and Exports (AMDIE – Agence Marocaine de Développement des Investissements et des Exportations). Morocco primarily imports fabric from Turkey, Portugal and Spain, and yarn from India. Morocco is starting to develop its US export market, but to enter tax free under the US-Morocco Free Trade Agreement, Moroccan manufacturers will have to abide by rules of origin pushing them towards using US-made yarn, a further disincentive from investing in yarn production. Morocco and other north African countries do not benefit from the USA African Growth and Opportunity Act (AGOA), which gives free trade access to sub-Saharan African countries.
Efforts are underway to develop the value chain in Morocco and Tunisia through the Switzerland-based International Trade Centre, which could include the installation of digital technologies. The aim is to encourage trade and develop a Mediterranean hub for textiles and clothing through the Agadir Agreement, a free trade deal removing barriers to trade between Egypt, Jordan, Morocco and Tunisia. “We import from China and Turkey, but the volumes of raw materials from Egypt are low, so we want to encourage that,” says Rachid Zarrad, a member of the Executive Bureau of the Federation Tunisienne du Textile et De L’Habillement (FTTH – Tunisian Textile and Clothing Federation).
Tunisia is looking to diversify exports away from Europe and focus on higher quality as it is unable to compete with the rest of Africa with its higher monthly wages of US$250 – and new technology is part of that strategy. “Laser technology is being implemented in many companies, as well as specific dying machines,” says Zarrad. “We are trying to go hi-tech to reduce energy usage and environmental impact.”
Companies such as the Sartex Group, a major denim manufacturer, based in Ksar Hellal, the country’s key textile manufacturing centre, have acquired machines from Germany and Italy, while local engineering teams improve the machinery further to speed up delivery times and quality.
Of course, one major impediment to such investment is that digital manufacturing technologies are not made locally: “Sourcing from Africa is not an option,” he notes.
And there is the rub – Asian competitors have not just undermined African rivals, the resulting loss of revenue has stopped investment, and thinned out upstream Africa-based supplies., and not just of digital tech: “I don’t know where Africa belongs as China’s taken everything, and we have to follow them. Our dyes and fabrics are imported from China, and local manufacturers cannot compete. How do we catch up with China, the engine of growth of the textile industry?” said Hamma Kwajaffa, director general of the Nigerian Textile Manufacturing Association, at the Destination Africa conference.
Indicative of this is that African ring spinning capacity “has faced decline and stagnation since 2010,” declining from 5.2 million spindles in 2010 to 3.5 million spindles in 2017, said Navdeep Sodhi, partner at the Switzerland-based Gherzi Textile Organisation.
China on the other hand has accounted for one in every two short-staple spindle machines sold over the past few decades, a trend which is continuing, according to the International Textile Manufacturers Federation (ITMF).
Are there reasons to hope that digital technologies maybe installed in African textile and clothing industries between Egypt and South Africa? Maybe. In shuttleless weaving and circular knitting capacity there has been something of a recovery in Africa, rising from 14,000 in 2010, to 19,000 in 2017. Notably, there have been more purchases of shuttleless weaving and circular knitting machines less than a decade old, from 3,000 to 5,000, in the same period, according to the ITMF, signalling a move towards more modernisation and inbound investment.
“Africa is not a big player yet, and it will take time before it changes, for all the obvious reasons: infrastructure, clusters, and starting first with a good and strong garment industry,” says Christian Schindler, ITMF director.
Nonetheless, with renewed interest in Africa as a sourcing hub, acquisition of machinery is increasing, albeit very low compared to global figures.
An example is A to Z Textile Mills Ltd (A to Z), in Arusha, Tanzania, which has been highlighted in a study by UK-based development programme Supporting Economic Transformation (SET) (https://set.odi.org), as a locally-owned company making garments and insecticide-treated bed nets that uses a modern laser fabric-cutting machine for garment manufacturing.
In Africa and the Middle East, man-made fibre production was 800,000 tonnes in 2017, and is forecast to reach 900,000 tonnes in 2020, a 13% increase, according to the ITMF.
Egypt has acquired more short-staple spindles, 13,440 in 2016, and 18,492 in 2017, according to the ITMF, while open end rotors has gone from zero in 2016 to 760 in 2017. As a whole, Africa bought 4,834 in 2016, and 1,040 in 2017, out of the global 638,096. Imports of texturing spindles has increased, buying 12,000 in 2016, and 4,560 in 2017, and Egypt, 4,560 in 2016 and 3,120 in 2017.
In shuttleless looms, Africa acquired 479 in 2016 and 1,533 in 2017, and 690 circular knitting machines in 2016, and 626 in 2017. The number of electronic flat-knitting machines has also risen, acquiring 653 in 2016 and 449 in 2017, while finishing machines has doubled, from 30 in 2016 to 64 in 2017, according to ITMF figures.
“There has been an increase in shuttleless weaves to Africa, and an encouraging rise in knitting machinery is taking place. Compared to spinning it is an upward movement, so there is money being put into the backward supply chain,” says Sodhi.
Driving specific investment is the high costs of machinery versus labour costs, with African nations wanting to bolster employment in the immediate term rather than have high-tech industries. “One job in spinning needs US$100,000 [of investment], compared to employing 2,500 in a factory,” says Sodhi.
Further obstacles are the energy costs and financing. Only Egypt at US$ cents 0.065 per KwH and Ethiopia at US$ cents 0.035 KwH have lower costs than the Indian subcontinent and East Asian countries, which range from US$ cents 0.075 in Vietnam, US$ cents 0.10 in India and Bangladesh, to US$ cents 0.13 in China, according to Gherzi figures. Interest rates are also higher, ranging from 6% in Egypt to 12% in Kenya.
Faced with such challenges, Jas Bedi, chairman of Kenya’s Export Promotion Council and chairman of the African Cotton and Textile Industries Federation, says: “It is not a question of digitisation but modernisation and speed to market.”
The SET report, however, is more hopeful that Kenya – “a lower-middle-income country at the forefront of technological progress in sub-Saharan Africa” – will embrace digital technologies. It said: “Kenya is found to be more digitalised than Ghana, Tanzania, and Uganda. It is also found to rank higher in the ability to finance digitalisation, in connectedness and in skill-development. In the period 2001–2016, internet penetration steadily increased in Kenya. This growing digitalisation is tracked to improvements in infrastructure, customs and trade regulations.”
And with Kenya being right between Africa’s other digital hubs – Egypt and South Africa – maybe, just maybe, a digitally assisted clothing and textile supply chain might be established in Africa that does not stretch so far, it breaks.
*Additional reporting by Keith Nuthall
