Madagascar expects the country's textiles and apparel industry to create 200,000 supplementary jobs in the next five years. The African country is among few in the world that has been seeing an acceleration in both textile imports as well as apparel exports. This is a country that has had cultural and trade ties with India since the early fourth century, and with the Indian government opening a $10 billion line of credit over the next five years for Indian companies wishing to invest in Africa, it is a land that beckons, Jozef De Coster, reports from Antananarivo.
While global textile trade continues growing at a sluggish pace, in some particular countries an impressive acceleration of textile imports and garment exports can be noticed. One of these countries is the Indian Ocean island of Madagascar. During the 7th edition of the annual event Origin Africa at Antananarivo last November, a number of Malagasy and foreign garment manufacturers testified they are strongly expanding or setting up new production capacities in Madagascar responding to fast rising demand.
Madagascar is no terra incognita for India. Cultural and trade relations between India and Africa go back to ancient times-from early fourth-century trade, through Britain's shipments of Indian labour to work on colonial projects, to political cooperation during the struggle for Africa's independence. Trade between the two countries is on the rise. Data from the Indian government and the African Development Bank show that bilateral trade between India and Africa rose from a very modest $1.1 billion in 1995 to $75 billion in 2015. Overall, since 2010, India's exports to Africa have increased by 93 per cent while imports rose by 28 per cent.
China and US far ahead
Though India is apparently successful in its relations with Africa, it's still no match for the US and China in terms of political and economic influence and foreign direct investment. Prime Minister Narendra Modi wants to do something about that. At the end of the 2015 India-Africa Forum Summit, a three-yearly event, he announced a $10 billion line of credit over the next five years for Indian companies wishing to invest in Africa. In July 2016, Modi made a four-nation African tour (his first-ever), on the heels of President Pranab Mukherjee who made a first-ever visit to Africa a month prior. At the opening of the Annual Meetings of the African Development Bank (AfDB) Group in Gandhinagar in May 2017, Modi said his government has made Africa a top priority for foreign and economic policy. Pitching for an Asia-Africa growth corridor, Modi said India's commodity trade with Africa in 2015-16 was higher than its commodity trade with the US.
In markets like the US and Europe, many Indian FDI-and trade projects greatly benefit from the market knowhow and business advice offered by the Indian diaspora. There's also an Indian diaspora in Africa. The Indian population in Africa, including people of Indian descent, was estimated to be about 2.7 million in 2015. More than half of them are settled in South Africa, and a third in Mauritius. Many of them are successful as manufacturers and traders. So, it was no surprise that people with Indian names and looks were conspicuously present at the Origin Africa event in Antananarivo, here Mauritian and South African companies dominated foreign participation.
From deep crisis to steep growth
At the beginning of the new millennium Madagascar seemed well-positioned to conquer the title of the biggest Sub-Sahara African exporter of apparel. It failed, ultimately, to beat countries like Mauritius, Kenya, Lesotho and Swaziland, because political rivalry in the country caused two serious crises in 2002 and 2009. One of the consequences was that Madagascar lost AGOA-eligibility in December 2009 (AGOA, the African Growth and Opportunity Act, granted the country duty- and quota-free entrance to the US-market for products like apparel and footwear). As a result, apparel exports to the important US-market plummeted from $279 million in 2008 to $40 million in 2011.
Since the end of June 2014, Madagascar is again AGOA-eligible. Apparel exports to the US grew threefold from $17 million in 2014 to more than $50 million in 2015. According to John Hargreaves, vice-president of GEFP, the Madagascar Export Processing Zone Association, apparel exports to the US again doubled in 2016. Among Madagascar's American customers are American Eagle, Levi's, Wrangler, Jordache Group and Perry Ellis.
Much bigger than apparel exports to the US are those to EU markets, where Madagascar enjoys duty-free access under the Everything But Arms system. In 2015, apparel exports to the EU reached around $350 million, making Madagascar the No 1 Sub- Saharan exporter to the EU. European customers include Zara, Marks & Spencer, Hermes, Trois Suisses, Karstadt, Kaufhof, Adidas, Puma and Petit Bateau. Also South Africa, with customers like Woolworth, Mr Price and Foschini Group, is an important export market (around $100 million of Malagasy apparel exports in 2015), while sales to Australia and China are developing quite well.
New presidential elections must take place in 2018. Existing companies and would be-investors in Madagascar hope that political stability can be maintained during the pre-election period. If that is the case, it's expected that apparel exports will grow steeply.
How big can the Malagasy textile and garment industry grow? At Origin Africa 2016, the President of Madagascar said he expected this industry to create 200,000 supplementary jobs in the next five years. John Hargreaves thinks that, in case of consistent good government policy, the sector could ultimately employ 500,000 people.
Encouragements from the Indian subcontinent
At one of the Origin Africa seminars, Ashish Agrawal of Indian company Kanoria Chemicals & Industries Ltd encouraged Malagasy entrepreneurs to learn from the faults made by companies in other countries. He advised them not to procrastinate in the field of sustainability. Ecological sustainability should be an absolute priority. Agrawal presented Kanoria's new denim factory in Ethiopia as a bright example: it's the greenest denim factory in the world. Kanoria aimed much higher than merely respecting Ethiopian environmental laws; it wanted to set a new standard for denim factories in Africa and everywhere.
Bangladeshi media entrepreneur and consultant Mehdi Mahbub compared the situation of Malagasy exporters to that of their Bangladeshi counterparts. Yes, garment exporters in Madagascar have to perform in very tough conditions (unreliable electricity supply, bad infrastructure, stifling bureaucracy, insufficient government support, lack of textile and garment education). However, in Bangladesh the situation is even worse, and yet this country is the second largest garment exporter in the world after China.
One could argue that Bangladesh has a stronger textile supply chain than Madagascar. This may be true, but at Origin Africa several Malagasy garment exporters like Actual Textiles and Index-Oi insisted that beside cut, make and trim (CMT) production they are also able to do free on board (FOB) production partly relying on domestic inputs. The integrated textile company Cotona in Antsirabe (group Socota) with a production capacity of 12 million metres cotton fabrics per year mostly caters to export processing zone (EPZ) garment factories. The sewing thread supplier Coats Madagascar in Antananarivo has a dyeing and winding capacity of 20 tonnes per month. Two Seas in Antananarivo is supplying all kinds of accessories, packaging materials, fabrics and interlinings.
Abundant cheap labour
The population of Madagascar is growing fast. Today, it is estimated at 25.2 million. According to the economic development board of Madagascar, the national unemployment percentage does not exceed 3.6 per cent. This very low percentage, which is even lower than that of India (officially 4.8 per cent) hides an enormous problem of underemployment. The numerous people who in the cities earn a paltry income by peddling on the footpaths cheap, mostly Chinese textile goods and electronic items, and the millions who in the countryside fulfill petty tasks, e.g. guarding one single cow, do not appear in the unemployment statistics.
About 78 per cent of Madagascar's active population is still working on the land. All this means that an enormous pool of cheap labour is available for industry. It does not matter that many youngsters are not very fond of a job n the garment industry, where for a month of hard work they only get 200,000 ariary (around $62), and where companies sometimes require them to perform overtime. Often, they do not have other options.
High growth expectations
Today, around 120,000 people, of whom 60 per cent are women, are employed in Madagascar's textiles and garment industry. Most factories are clustered in the country's capital Antananarivo and in the city of Antsirabe, at a distance of 162 km from the capital. At the inauguration of Origin Africa, the President of Madagascar said that the government has the intention to stimulate the textiles/garment industry. It will do so by offering a terrain of 100 hectares where a Textile City for 200,000 workers can be developed. However, the idea of a Textile City seems still to be in a conceptual phase. Till recently, no information about the exact location of this City (Antananarivo, Antsirabe, Toamasina) or about the private partners of the public-private partnership which will develop the site was available.
Up till now, the Malagasy garment factories which are expanding their capacity and the foreign investors who set up new factories in Madagascar do not have problems in attracting labour. A spokesman of BNI Bank said that one of their Malagasy textile customers in one year increased employment from 1,000 to 6,000 people without problems. At Origin Africa, several manufacturers praised the aboveaverage dexterity of the Malagasy workers, who after a relatively short in-factory training period (1-3 months) attain a level of efficiency and quality that is higher than e.g. in South Africa or Bangladesh.
Mauritian and other investors
John Hargreaves says that the EPZ legislation, passed in 1989, played a major role in boosting industry. Hargreaves launched Madagascar's first Mauritian-owned factory for the textile manufacturing giant Ciel Textile in 1990. During the Nineties, more Mauritian companies were driven to Madagascar by a lack of workers, and the much lower labour cost.
The political crises of 2002 and 2009 chased many Mauritian and other foreign companies away from Madagascar. Since Madagascar became again AGOA-eligible in June 2014, some of them have returned. This was also the case of the important Mauritian group Compagnie Mauricienne de Textile (CMT) that left Madagascar because of the crisis of 2002 and returned to the island in 2016. CMT is the No 1 jerseywear supplier for leading brands in Europe. In September 2016, it started a full-fledged sewing factory in Antananarivo, Compagnie Malagasy de Textile SARL. This first factory-other ones may follow- has been equipped with the same technology and is operating with the same standards as CMT's factories in Mauritius and Bangladesh. CMT Madagascar is specialising in high sewing minute's garments, products with high embellishment (embroidery and print) and handembellished products. All fabrics and trims will be processed and supplied by CMT Fabric Mills in Mauritius. Aquarelle Madagascar, the subsidiary of a Mauritian group that is producing shirts and blouses, is increasing its capacity and efficiency. Aquarelle is part of CIEL Textile (17,000 employees), with four factories in Madagascar.
The fabric mill Cotona in Antsirabe (production of 12 million metres/year), a key part of the group Socota Textiles and Apparel, the largest local supplier to the Malagasy EPZ factories, recently invested in new weaving and washing machinery and is planning to increase its capacity.
South African company Madagascar Clothing Manufacturers (brand Metro Beaver) is setting up a new shirts factory in Antananarivo. It already has one big South African customer and a big American customer. Eugene Havemann, CEO of the company, explains that, for shirts in synthetic fabrics, in comparison with countries like India and China, Madagascar has an edge of 32 per cent for exports to the US and of 45 per cent for exports to South Africa.
Increasing interest for sourcing from Africa
Africa, included Madagascar, is not yet a well-established sourcing destination for Western clothing groups. But the interest for what Africa has to offer is rising. The American fashion industry is especially watching the moves of PVH in Africa. PVH, which owns brands as Calvin Klein and Tommy Hilfiger, is reportedly changing its strategy and will invest in a number of own manufacturing units in Africa. Europeans are closely watching the sourcing efforts of Swedish retail giant H&M, who's not only sourcing knitwear from Ethiopia, but recently also started there sourcing trousers.
On November 29, 2016, an interactive discussion was organised at the House of Lords in London about the potential for Africa's textiles and leather industry to become a major ethical supply source for European and UK markets in the post Brexit scenario. One of the organisers of the event was the non-profit Proudly Made in Africa that facilitates trade between ethically produced African shelf-ready products and European retailers.
A project in Madagascar with ethical and sustainability ambitions is the preservation and increase of natural silk production. The goal is to preserve the domestic silk worms and the tapia woods in which they live. The natural silk production has the potential to create many textile jobs (spinning, weaving, eco-dyeing) for the rural female population. The organisation, Ny Tanintsika, which already catered wild silk to the fashion brand Edun (funded by the U2 frontman Bono) for manufacturing jackets, tries hard to expand exports of raw silk shawls to the US, France and the UK.