Ethiopia has unveiled Africa’s largest industrial park in the city of Hawassa 275km southeast of the capital Addis Ababa. The project is inspired by China and the Hawassa Industrial Park (HIP) – like many equivalents in China – will be dedicated solely to just one sector, textile and apparel. At 1.3 million square meters it is the biggest in Africa and also the largest dedicated solely to export, said Zemdeneh Negatu, managing partner at Ernst and Young international consultancy firm.
Speaking at the inaugural ceremony last week, Ethiopian Prime Minister Hailemariam Desalegn said the manufacturing sector’s share in Ethiopia’s gross domestic product (GDP) for many years stood at only 0.5 percent, showing the need for economic re-structuring if the country was to fulfil its economic promise.
Ethiopia’s economy, despite a period of rapid economic growth, still largely depends on agriculture. Volatile commodity prices, a severe drought, and political unrest have all curbed expansion.
The HIP has attracted 15 major manufacturing firms from China, Indonesia, the US, and Ethiopia itself. But Yuan Li, chairman of the China Civil Engineering Construction Corporation (CCECC) which designed and built the industrial park, says it has even wider significance.
Fourteen global fashion firms, including giants like H&M and PVH Corp. are tenants in the new textile industrial park. The park is also open for Ethiopians and so far some six local companies have been confirmed to have leased sheds inside the park while the government is in talks with more than 20 local companies.
Built by a Chinese contractor, the 1.3 million square meters HIP is designed to house over 20 apparel and textile manufacturers. It is also expected to double the number of jobs for Ethiopians in the sector and increase revenue generated by textile exports by 10 folds, government officials said.
The park has different standards. The biggest factory shed facilities are sited on 11,000 square meters of area and PVH as anchor investor in the park have leased these big facilities. Meanwhile, the smallest facilities have 5,000 square meters in area, which according to officials, is quite unmanageable. Hence, the park operators were forced to revise the original plan by partitioning the smallest sheds into smaller sheds of 1,000 square meters thereby increasing the intake capacity to attract more local companies.
The Hawassa complex will be the single most dominant contributor to the country’s manufacturing sector, and will help the country generate USD one billion from export revenues, Arkebe said.
Currently, the export of Ethiopian made textile and apparel sector stands at USD 110 million, but, according to Arkebe, the industrial park will eventually generate 10 times more hard currency.
It will double employment in the sector as well, Arkebe said. For years, the entire industry has employed around 53,000 people, while the factories being set up in Hawassa Park are expected to create some more 60,000 jobs at this stage and will employ a total of 84,000 when fully completed.
Built by China Civil Engineering Construction Corporation (CECC) for a reported USD 250 million, the park comprises of 37 factory sheds that rested on a 300,000 square meters plot, with additional 120,000 square meters of land slotted to be developed on the next phase of the project. In total, the park is a 1.3 million square meters estate which comprises 18kms asphalt road inside the park, 21.5kms of electric lines, 16kms of telecom lines and 23kms freshwater supply pipelines.
The park also includes shared facilities such as dormitories and commercial buildings covering land area of more than 26,000 square meters.
US fashion firm PVH Corp. (owner of the Calvin Klein and Tommy Hilfiger brands), Sweden’s H&M, and China’s Wuxi Jinmao Foreign Trade Company are among the 15 foreign companies to be stationed in the park, along with others from India, Sri Lanka and China.
On the event, Arkebe briefed reporters regarding the low participation of local companies in the manufacturing investment and what he describes as the government’s new initiatives to offer them new packages of privileges to encourage them in the sector.
“Most of them (local investors) are engaged in commercial businesses and/or service sector. The manufacturing sector, indeed, is a very difficult and complex investment type that requires competency while export is a very tough competition business. Because of this, most of our investors do not dare to engage in it,” he said, adding: “Government has put in places several incentive packages to encourage local companies to come to the sector.”
Underlining that the advantages that can be obtained from the inside-park investment, Arkebe also argued that investment in industrial parks brings more conducive environment and privileges including the opportunity to access loans that amounts up to 85 percent financial requirements they need.
The new mega industry facility was also welcomed by the government and foreign investors for its shorter construction period, latest technology as well as an eco-friendly facility that featured a state of the art technology equipped with a zero liquid discharge, otherwise termed as ZLD technology.
According to available documents, Hawassa and its surrounding has a large pool of labor force which goes up to five million making it an ideal investment destination for labor-intensive industries. This means a labor cost that is 20-25 percent lower than that of Addis Ababa and a lower turnover rate of employees due to less competition from other industries and sectors, such as construction.
The park incorporates a natural green environment thereby providing a soothing landscape.
According to Arkebe, the park‘s operational and management responsibilities has been granted to two Chinese and one Indian companies.
According to Arkebe, the contractor, CCECC and Chinese firm known for industry park Management, Kun Shan, will jointly have the role of operation management and maintenance related responsibilities. Meanwhile, the Indian company who installed the ZLD was granted the technology part of the park management for three years.
CEO of the Ethiopia Industrial Park Corporation, Sisay Gemechu, said that the three companies will receive three million dollars each for their park operation and management contract.