- 3rd Destination Africa Conference 2018 - New prospects for Sourcing & Value addition in African Textile & Apparel Industry For Cairo 19 th November 2018 ITMF Presentation Page 1
CONTENT 01 Key messages 02 African textile & apparel industry - Trends 03 Opportunities & challenges 04 Gherzi in Africa 05 Q&A ITMF Presentation Page 2
Key messages 5 positive trends for African textile & apparel industry 01 1 Shifts in global textile chain present new opportunities..and risks for international buyers 2 Renewed interest of international buyers in sourcing from Africa. and lessons from emerging countries 3 Preferential market access is still a key driver for FDI in Africa 4 Besides sourcing, Africa is also a large domestic market(e.g.,ecowas 350 million 5 There is a significant potential for investment across the African textile value chain as the enabling environment improves. ITMF Presentation Page 3
Key messages 01 WORLD POPULATION (billion) by four income levels L1 L2 L3 L4 Low Income (Extreme poverty) Middle Income High Income $2 $8 $32 Source:Factfulness by Hans Rosling ITMF Presentation Page 4
Key messages 01 The journey between the first $1 Bn to $5 Bn in apparel exports takes between 5 to 10 years Evolution of apparel exports(1990-2017) Tunisia Egypt Morocco Myanmar Vietnam 7 Cambodia 5 Srilanka Bangladesh 8 0 5 10 15 20 25 30 35 2017 2010 2000 1990 Source:WTO/Gherzi analysis ITMF Presentation Page 5
Key messages 01 Bangladesh s apparel exports rose from $ 11 Mn in 1982 to $ 29 Bn in 2017 N.Qader Khan, owner of Desh Garments sends 130 trainees to Daewoo Korea Sets up 6 lines with 600 workers $ 1 Bn $ 5 Bn $ 29 Bn $ 11 Mn 2018 1978 2000 1992 1980 1982 Youngone exports $ 1.9 Bn of which 65% comes from Bangladesh Youngone sets up garment factory in Bangladesh 65,000 employees ITMF Presentation Page 6
CONTENT 01 Key messages 02 African textile & apparel industry - Trends 03 Opportunities & challenges 04 Gherzi in Africa 05 Q&A ITMF Presentation Page 7
African textile value chain is highly fragmented Value chain 02 1 2 3 4 Raw materials (Cotton) Traditional textile industry Import trade Apparel export sector ITMF Presentation Page 8
x Value chain 02 5 cotton producing basins in Africa with 2/3rd of cotton originating in West Africa Cotton producing basins in Africa 2 Cotton production & Consumption( 000 MT) (2017/18) Egyptian basin 4 1400 1200 19 West African basin East African basin 1000 800 1 Top priority countries (11) Great Lakes basin 5 Southern African basin 600 400 200 0 1245 191 186 455 150 N.Africa F.Africa S.Africa Production Consumption Potential other countries (5) 3 Source : OCDE, ICAC, Club du Sahel ITMF Presentation Page 9
Textile machinery investments 02 African ring spinning capacity has faced decline and stagnation during 2010-2017 World installed ring spinning capacity [mn spindles]: 2017 5.6 3.5 10 3.4 3.9 1.2 1.2 10 10 Western Europe Eastern Europe 6.5 8 110 105 North America 5.2 10 Turkey 3.5 46 54 10 India 10 China 219 9.4 7.4 10 Africa 198 10 South America 10 Total Asia & Oceania (incl. Pakistan, India, China, Vietnam) Source: ITMF ITMF Presentation Page 10
Textile machinery investments 02 Africa s shuttle-less weaving and circular knitting capacity has shown some recovery (1/2) World installed shuttle-less weaving machines capacity [ 000 numbers] 72 51 North America 63 35 33 109 110 9 2 Vietnam Western Europe Eastern Europe 884 53 40 620 147 147 Turkey 55 55 66 66 66 19 14 China India 56 Africa South America 884 1,247 Total Asia & Oceania (incl. Pakistan, India, China, Vietnam) Source: ITMF ITMF Presentation Page 11
Textile machinery investments 02 Africa s shuttle-less weaving and circular knitting capacity has shown some recovery (2/2) World cumulative shipment (<10 year old) of circular knitting machines [ 000 numbers] 7 5 4 1.0 1.3 2 5 4 3 Vietnam Western Europe Eastern Europe North America 10 10 1.2 1.8 162 189 Turkey 3 Pakistan 5 10 23 China 8 7 Africa India 208 262 South America Total Asia & Oceania (incl. Pakistan, India, China, Vietnam) Source: ITMF ITMF Presentation Page 12
Africa s T&C Trade 02 Africa s global textile & clothing trade at US$35 bn shows a growing deficit Africa: Textile & Clothing trade deficit: US$ Bn 25 20 21.56 18.1 15 14.8 13.54 10 5 0 2010 2016 * All 54 countries in Africa Continent HS Codes: 50 to 63 T&C Exports T&C Imports Source: Comtrade ITMF Presentation Page 13
Africa s T&C Trade 02 Africa s textile & clothing export trade witnessed a slowdown in 2016. Africa* export of textile & clothing [Bn US$] Textile Clothing 10.79 9.27 9.47 9.69 9.69 8.79 8.75 5.53 6.57 6.46 6.09 CAGR Textile= -2% Clothing= -1% 6.36 5.50 4.79 2010 2011 2012 2013 2014 2015 2016 * All 54 countries in African Continent HS Codes: 50 to 63 Source: Comtrade ITMF Presentation Page 14
Africa s T&C Trade Top 5 countries represent 71% share of textile exports 02 Major exporters of textile from Africa* [Bn US$] 2010 2011 2012 2013 2014 2015 2016 Share in 2016% 1.6 1.7 1.7 1.4 29% 15% 10% 9% 8% 0.7 0.8 0.8 0.7 0.4 0.5 0.4 0.4 0.3 0.2 0.5 0.4 0.5 0.5 0.4 0.4 Egypt South Africa Morocco Burkina Faso Tunisia * All 54 countries in African Continent HS Codes: 50 to 60 & 63 Source: Comtrade ITMF Presentation Page 15
Africa s T&C trade 3 North African countries account for 70% of total apparel exports from Africa 02 Major exporters of clothing from Africa* [Bn US$] 2010 2011 2012 2013 2014 2015 2016 3.2 3.2 3.0 3.0 3.1 2.7 2.7 Share in 2016% 2.1 34% 24% 13% 8% 5% 1.3 1.3 1.3 1.1 0.6 0.8 0.8 0.7 0.5 0.6 0.6 0.4 Morocco Tunisia Egypt Mauritius Madagascar * All 54 countries in African Continent HS Codes: 61 & 62 Source: Comtrade ITMF Presentation Page 16
Africa s T&C trade 02 Africa s market share in the US imports has been stagnant around 2.5% with further potential to grow to leverage preferential market access USA import of clothing from World and Africa s* Share [Bn US$] 90 World Africa Share% 3% 85 80 75 70 2.5% 71.4 2.5% 77.7 2.5% 76.8 79.8 2.4% 2.5% 81.8 85.2 2.4% 80.7 2.4% 3% 3% 2% 2% 2% 65 2% 60 2010 2011 2012 2013 2014 2015 2016 * All 54 countries in African Continent HS Codes: 61 & 62 2% Source: Comtrade ITMF Presentation Page 17
Africa s T&C trade 02 EU imports of clothing from Africa have been stagnant around 7% with further potential to grow EU import of clothing from World and Africa s* Share [Bn US$] World Africa's Share 100.0 95.0 90.0 85.0 8.4% 84.7 97.2 8.1% 7.8% 7.7% 89.2 86.9 97.4 7.3% 6.6% 6.8% 90.2 90.0 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 80.0 2.0% 1.0% 75.0 2010 2011 2012 2013 2014 2015 2016 0.0% * All 54 countries in African Continent HS Codes: 61 & 62 Source:EUROSTAT ITMF Presentation Page 18
Competitiveness African countries have competitive wages however many countries face cost disadvantage,especially power Asian African 02 Cost parameters China India Vn B desh IDN Kenya ET Mada Nig EGY UG BF CI Wages Monthly wages USD 600 175 275 130 300 150 75 100 150 125 100 75 125 Electricity Electricity tariff (US$ per kwh) 13 10 7.5 10 9 15 3.5 12.00 12 6.5 12 23 12 Finance cost Interest % pa 6 7* 8 10 12 12 10 10 7* 6 7* 11 10 * Concessional interest rate for textile industry under special programme Source: Gherzi database ITMF Presentation Page 19
African Textile Industry > 4G 02 Several success stories and new entrants in Africa Source: Gherzi database ITMF Presentation Page 20
CONTENT 01 Key messages 02 African textile & apparel industry - Trends 03 Opportunities & challenges 04 Gherzi in Africa 05 Q&A ITMF Presentation Page 21
Myanmar: Sourcing opportunities & challenges Regulatory environment 03 Four regulatory issues need to be understood about African textile & apparel industry 1 Incentives Tax holiday up to 10 years Export incentives Concessional financing Capacity building 100% FDI Miscellaneous 4 Market access Regional market 2 EU GSP Euromed-EU/Tunisia FTA US AGOA US QIZ COMESA EAC ECOWAS Common External Tariff Forex controls 3 ITMF Presentation Page 22
Infrastructure 03 Investment in new infrastructure will reduce the cost of doing business ITMF Presentation Page 23
Infrastructure 02 New industrial zones provided dedicated infrastructure to textile & parks in Africa (1/2) Hawassa Industrial Park, Ethiopia Athi River EPZ, Nairobi, Kenya ITMF Presentation Page 24
G REY G REY YARN YARN G REY G REY YARN YARN G REY YARN G REY YARN HEL IPAD F INISHED YARN F INISHED YARN G REY G REY F ABRIC F ABRIC G REY G REY F ABRIC F ABRIC CRP PLANT & TANK AREA CRP PLANT & TANK AREA 9 Mts. wid e road FIRE STATION COT TON COT TON COT TON COT TON WEIGH BRIDGE F INISHED F ABRIC F INISHED F ABRIC F INISHED F ABRIC F INISHED F ABRIC F INISHED F ABRIC F INISHED F ABRIC G ATE HO USE E X IT ENTRY COT TON COT TON COT TON COT TON GEN. STORE & WORK SHOP F INISHED F ABRIC F INISHED F ABRIC F INISHED F ABRIC F INISHED F ABRIC F INISHED F ABRIC F INISHED F ABRIC ENTRY F INISHED G ARM ENT F INISHED G ARM ENT F INISHED KNIT F ABRIC F INISHED KNIT F ABRIC E X IT Infrastructure 02 New industrial zones provided dedicated infrastructure to textile & parks in Africa (2/2) 325 ACRE TEXTILES & RESIDENTIAL AREA GREEN AREA 03 03 GREEN AREA 03 03 03 03 GREEN AREA 04 WEAVING UNIT - 1 04 WEAVING UNIT - 2 09 YARN DYEING UNIT - 1 GREEN AREA 09 YARN DYEING - 2 29 10 10 05 05 GREEN AREA 28 27 26 25 SKILL DEVPT. R & D TRADING ADMIN. CENTRE CENTRE CENTRE BLDG. 02 SPINNING UNIT 05 05 11 DENIM FABRIC WEAVING UNIT - 1 11 DENIM FABRIC WEAVING UNIT - 2 PU MP R OOM 16 06 PROCESSING HOUSE- 1 06 PROCESSING HOUSE - 2 PU MP R OOM 16 15 07 07 12 12 01 01 21 08 08 08 08 08 08 23 01 01 DENIM FABRIC PROCESSING HOUSE - 1 DENIM FABRIC PROCESSING HOUSE - 2 OVER HEAD TANK 24 SUB STN. HT & LT PANEL ROOM GREEN AREA 01 01 01 20 W ORKER CANTEEN 19 STAFF CANTEEN 18 17 08 08 08 08 08 08 22 01 COMP. HOUSE MAIN EN TRY EXIT CAR PARKING 41 41 42 42 39 GARMENTING UNIT - 1 & 2 39 GARMENTING UNIT - 3 & 4 14 AREA FOR ETP 40 KNIT & KNIT PROCESSING FUTUTR EXPANSION GREEN AREA GREEN AREA GREEN AREA 33 HOSPITAL 34 SCHOOL MAIN EN TRY EXIT ENTRY CAR PARKING 30 BANK 32 GREEN AREA W ORKER W ORKER 37 37 RESIDENTIAL RESIDENTIAL GREEN AREA 37 W ORKER W ORKER 37 RESIDENTIAL RESIDENTIAL GREEN AREA 31 RETAIL STORE GREEN AREA GREEN AREA GREEN AREA 35 35 CAR PARKING STAFF STAFF RESIDENTIAL RESIDENTIAL 35 35 STAFF STAFF RESIDENTIAL RESIDENTIAL 36 STAFF RESIDENTIAL PLAY GROUND 36 STAFF 38 RESIDENTIAL CAR PARKING 25M GREEN AREA GREEN AREA CLUB HOUSE CAR PARKING GREEN AREA Proposed 325 Acre Textile & Apparel Park in Egypt Source: Gherzi database ITMF Presentation Page 25
Silk Route 02 Large Chinese conglomerates are planning investments in industrial zones across Africa Source: Gherzi database ITMF Presentation Page 26
International Brands 02 International brands and retailers are showing an renewed interest in sourcing from Africa Source: Company logos ITMF Presentation Page 27
Opportunities & risks 03 Opportunities in Africa are apparent however challenges must be understood + Trend - Preferential market access to US/EU Interest of international buyers to diversify sourcing Large regional/domestic market Abundant manpower and land Raw material supply(cotton) Incentives Upcoming industrial zones Belt & Road Initiative Enabling environment Cost of doing business Infrastructure Logistics Skills & Productivity Socio-cultural issues ITMF Presentation Page 28
CONTENT 01 Key messages 02 African textile & apparel industry - Trends 03 Opportunities & challenges 04 Gherzi in Africa 05 Q&A ITMF Presentation Page 29
Gherzi in Africa 04 Gherzi has accumulated a very strong experience in Africa with over 100 successful projects with presence through 2 offices Morocco Gromatex COTEF BAW ICOZ SA Texnord AMITH Lamatem Senegal ONUDI CDE / OPICT SOTIBA Cameroon CICAM Ministère de l industrie Sudan Sharat Ministère de l'industrie Banque Mondiale SUR South Africa Atraco Gulf Denim SACU Secretariat Standerton Mills Algeria SONITEX Tunisia Textiles en Biais CETTEX Ministère de l Industrie Filtiss Ivory Coast Banque Mondiale IPS West Africa Burkina Faso Filsah Alok Textiles Ethiopia KWA Ministry of Industry UNIDO Raymond Kanoria Group Sutlej Group Bostwana CNUCED BEDIA Kenya EADB BAW DEG Bedi Textiles EPZA Nigeria Banque Mondiale Chanrai Group Bhojsons Sunflag CHA Group UNIDO VLISCO NNDC Bua Group Ghana Akosombo Textiles Banque Mondiale Ministère de l'industrie Zimbabwe BAW Madagascar Banque Mondiale IFC EDBM Egypt Bank Misr Spaltenstein Holding Banque Mondiale Agico BAW IFC Gulf Denim STIA Santamora SOFI IMC Shamsi Group Nile Holdings Zambia Smith & Nephew BMD Tolaram UNIDO Uganda IFC Ministère de l industrie Fine Spinners Mauritius Vossen Arvind Mills UNIDO ITMF Presentation Page 30
Gherzi in Africa 04 Egypt Textile City Master Plan Source: Gherzi projects database ITMF Presentation Page 31
Gherzi in Africa 04 Source: Gherzi projects database ITMF Presentation Page 32
Gherzi in Africa 04 Morocco site under construction Source: Gherzi projects database ITMF Presentation Page 33
Gherzi in Africa 04 x ITMF Presentation Page 34
CONTENT 01 Key messages 02 African textile & apparel industry - Trends 03 Opportunities & challenges 04 Gherzi in Africa 05 Q&A ITMF Presentation Page 35
Consultants to the Industry since 1929 n.sodhi@gherzi.com a.meghalawi@gherzi.com www.gherzi.com ITMF Presentation Page 36