How will West Africa benefit from a shift in textile industry supply chains?

Industry

Economic News

2 Nov 2021
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– West Africa currently exports raw cotton and imports finished textiles

– Bolstering processing capacity could result in significant economic gains

– Transport infrastructure remains the key to expanding the industry

– The AfCFTA could result in a spike in trade and help redraw supply chains

Amid attempts to increase textile production in West Africa and capitalise on the added value that comes from cotton processing, efforts are being made to reform supply chains both regionally and globally.

At present, the West African cotton and textile industry is concentrated at the early stages of the global supply and value chain.

West Africa is the world’s sixth-largest cotton producing region, with Benin, Côte d’Ivoire and Burkina Faso the sixth-, seventh- and eighth-largest cotton producing countries in the world, respectively.

Once it is grown and collected, the vast majority of the region’s cotton yield is sent abroad as raw cotton, to be processed and turned into textiles and clothing. In fact, some 90% is sent to Asia, with just 2% being processed locally.

The nature of global supply chains and West Africa’s role in the textile industry are illustrated by the case of African wax prints, which are clothes with colourful patterns made out of 100% cotton fabric.

Despite being most popular in West Africa, the majority of African wax prints are made in the Netherlands. In terms of the supply chain, this means that the cotton is exported from West Africa to the Netherlands, where the clothes are produced, and then sent back into the region as finished products.

Bolstering processing capacity

By exporting lower-value spun or unspun cotton, only to import more expensive finished textiles, West African countries cannot capture the added value that comes from textile production.

For example, although Benin, Burkina Faso and Mali export 1.8m tonnes of cotton worth $922m per year, they import $2.8bn in cotton textiles and apparel.

The West Africa Competitiveness Programme, created as a partnership between the EU and ECOWAS, estimates that establishing a garment supply chain in the region could boost the industry’s value by as much as 600%. This would involve building capacity along the entire supply chain: spinning cotton into yarn, weaving yarn into fabric, and dyeing, printing and designing finished clothing.

To this end, efforts are being made to bolster the supply chain and increase processing capabilities across West Africa.

As OBG has detailed, one of the most significant developments in recent times was the opening of Togo’s Plateforme Industrielle d’Adetikopé Textile Park in June.

A public-private partnership between the government of Togo and Arise Integrated Industrial Platforms, the textile park is seeking to transform the industry by increasing processing and exports of finished garments.

The project aims to convert 56,000 tonnes of cotton fibre worth $73m into clothes and apparel worth $1.5bn. The park is expected to create 20,000 direct and 80,000 indirect jobs, and those involved in its development estimate that it could contribute up to 21% to GDP.

Elsewhere, construction work is ongoing on a textile park in Glo-Djigbé – around 45 km from Benin’s economic capital, Cotonou – which will have the capacity to process around 100,000 tonnes of cotton fibre a year and house up to 30 factories for clothing production.

It is thought that the project will create as many as 250,000 jobs related to cotton spinning, weaving and clothing manufacturing.

West Africa is particularly well positioned to capitalise on certain global trends in textile production.

As labour costs in many countries in South and East Asia continue to rise, the region will be seen as an attractive alternative.

In addition to this, cheap and easy access to cotton is a huge competitive advantage, massively reducing the costs – and environmental impacts – associated with cotton being transported around the world for processing.

“Reducing cotton exports from Africa to Asia and other regions and processing it locally could also significantly contribute to curbing carbon emissions, bringing supply chains closer to the raw materials, reshaping internal logistics and leveraging Africa’s carbon endowment,” Gagan Gupta, founder and CEO of Arise, told OBG in June this year.

Trade and logistics remain key

Another key element of the supply chain relates to transport and logistics.

Poor-quality roads and a lack of transport infrastructure have long been obstacles to trade in Africa, thus inhibiting the development of supply chains and textile markets throughout the region.

According to the African Development Bank, the continent needs $130bn-170bn of annual investment in infrastructure such as roads and railway to meet baseline targets by 2025.

Although this remains a significant challenge for West African nations, in recent years there have been some attempts to improve logistical services throughout the region.

An example is Kobo360, a Nigerian start-up that connects truckers and companies to delivery services through its online platforms.

After launching in its home market in 2017, Kobo360 has since expanded to six additional countries – Burkina Faso, Côte d’Ivoire, Ghana, Kenya, Togo and Uganda – and plans to move into another 10 after securing $30m in funding in 2019.

Another development that could significantly transform the textile supply chain in West Africa is the African Continental Free Trade Area (AfCFTA), which officially came into effect on January 1 this year.

AfCFTA obliges members to slash 90% of tariffs on goods traded within the area, facilitate the movement of capital and people, and take steps to create an Africa-wide Customs union.

In terms of the textile sector, industry figures say the agreement could lead not only to a rapid increase of exports, but also to investment in textile-related infrastructure.

“In the wake of the Covid-19 pandemic and its impact on global supply chains, and at a time when the long-awaited AfCFTA agreement has come into effect, we are presented with a strategically important moment to invest in the West African textile sector,” Gupta said.

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