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UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
STRATEGIC PLAN
STRATEGIC PLAN
Uganda Cotton, Textiles and Apparel Industry
Strategy developed by the National Planning Authority of the Government of Uganda, With assistance from Msingi East Africa
Team: Andy Salm (Team Leader), Tom Mshindi (Editor) 1 John Walugembe, Andres Saldias, Ollen Kahurubuka,
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UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
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UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
Contents
List Of Tables
1 6 8 10 11 12 13 15 15 16 17 18 19 19 20 21 21 23 24 24 25 25 26 26 27 27 28 29 30 32 32 37
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1. Executive Summary 2. Introduction 3. Vision 4. Success Drivers 4.1 The Markets 4.1.1 The United States Market 4.1.2 The European Market 4.1.3 The Domestic and EAC Market 4.1.4 SADC 4.1.5 Uganda’s Balance of Trade in Cotton, Textiles and Apparel 4.2 Logistics 4.3 Infrastructure 4.4 Labour 4.4.1 Third Level Industry Specific Education 4.4.2 Labour Representation 4.5 Raw Materials 4.5.1 Cotton 4.5.2 The Drive for Sustainable Cotton Production 4.5.3 Blending Cotton with other Fibres 4.5.4 Imported Fabric 4.5.5 Other raw material inputs 4.6 Utility Provision 4.6.1 Electricity 4.6.2 Information and Communication Technology (ICT) 4.6.3 Water 4.7 Government Commitment to the CTA Value Chain 4.8 Investment Entrepreneurs 4.9 Access to Finance 5 Market Dynamics and Uganda’s Potential 5.1.1 Strategy to Achieve the Vision 5.1.2 Potential Expansion Scenario 5.1.3 Action Plan
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UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
List of Tables Table Table Table Table Table
1: 2: 3: 4: 5:
Global Apparel and non-Apparel manufacturing market growth forecast Apparel Export Value in Million US$ Textile & Apparel Exports by East African Countries under AGOA East Africa Apparel Exports to the EU Uganda Electric tarrifs
11 11 12 14 25
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List of Figures Figure 1: CTA SWOT Analysis Figure 2: European Apparel Imports Figure 3: Uganda CTA imports in 2018 Figure 4: Uganda Total CTA exports in 2018 Figure 5: Uganda Lint Production Figure 6: Global fibre Consumption by Type Figure 7: Virtuous Value Chain from Farm to Finished Goods Figure 8: Comparative Electricity Tariffs Figure 9: Buyers' Interest in Sourcing from Africa Figure 10: Potential Increase in Investment start ups Figure 11: Potential Growth in CTA Employment Figure 12: Potential Annual Wages earned by CTA workers Figure 13: Potential Export Earnings from the CTA sector Figure 14: Potential expansion of Cotton lint Usage in Uganda
III
4 14 16 16 22 23 24 26 31 33 34 35 35 36
UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
STRATEGIC PLAN
1.0
1
Executive Summary
UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
The Government of Uganda has highlighted the Cotton, Textile and Apparel (CTA) value chain in a number of its strategic documents as having the potential to simulate economic activity and create thousands of new jobs particularly impacting on youth and women.
STRATEGIC PLAN
In order to harness the significant opportunity represented by the CTA industry, the National Planning Authority (NPA), with support from Msingi East Africa, has prepared this strategy. The strategy incorporates views from a cross section of key ministries, agencies, private sector players and other stakeholders and is intended to inform proposals and recommendations made on the sector in Uganda’s Fourth National Development Plan that will cover the years 2020 to 2025.
Currently, Uganda produces more than 30,000 tonnes of high-quality cotton lint suitable for a wide range of applications but up to 90% of this lint is exported without local value addition. There are only two operational spinning mills and both are part of integrated textile plants producing yarn, fabric and garments. These mills produce mainly for the domestic and regional market with minimal quantities being exported into the international market.
buyers to create virtuous value chains where the end users of the product contribute to farmer livelihoods with the introduction of branded cotton production methodologies.) The Government of Uganda, cognisant of the constraints that have restricted economic growth in the past, has embarked on a number of ground-changing reforms both in terms of infrastructure and process that have resulted in increased investment and economic activity but this has not positively impacted on investments in the textile and apparel industry to any significant extent.
Some of the reasons for the poor export performance include low product quality and factory efficiency; non-compliance with internationally acceptable standards in terms of environmental and social factors and lack of knowledge of the market requirements in terms of degree of service required. All of these constraints could be mitigated easily if the owners of the factories could commit to it. A new vertically integrated factory is currently under construction with the potential to double the yarn spinning capacity in Uganda.
In recent years, major improvements have been made to the country’s road infrastructure, power generation and transmission, the ICT infrastructure, Customs procedures, financial transaction processes, ease of doing business, investment incentives, etc. This transformation should be attractive to textile and apparel investors, particularly when Uganda’s preferential
While Uganda is in a position to sell its cotton lint, the recommended action is for it to sell quality value added yarn and fabric into the region and to become a primary producer of apparel for the domestic, regional and international markets. Farmers are already experiencing the impact of climate change through unpredictable weather patterns.
While Uganda is in a position to sell its cotton lint, the recommended action is for it to sell quality value added yarn and fabric into the region and to become a primary producer of apparel for the domestic, regional and international markets
The cotton yields are below the international average because of the inclement weather, land fragmentation, declining soil fertility, poor crop husbandry and a number of other factors. At the same time, international brands and retailers are interrogating their supply chains to embed environmental and social sustainability concerns into all production processes. (The possibility exists to leverage the concerns of
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UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
$785billion
trade access to the major markets of the United States of America (USA) and the European Union (EU) are taken into consideration. The lack of inward investment in the CTA sector is principally due to a lack of investor understanding of the opportunities within the sector and the knowledge and resources to market these effectively.
Value of the international market for textiles and apparel is vast and continues to grow. The USA and EU dominate the market in terms of per head consumption and they are serviced by major country producers like China, Vietnam and Bangladesh as well as significant production facilities in Southeast Asia, Central and South America.
Africa, and in particular East Africa has, in the past few years, attracted the interest of international buyers who wish to diversify their source of production and a large number of investors have set up in Ethiopia, Kenya and Madagascar. There is no doubt that this trend will continue and, as the industry continues to mature, regional value chains will develop as yarn and fabric move across borders to satisfy the raw material requirements of the emerging industry.
50,000
20,000
Workers who will be employed by the CTA sector within eight years, as envisaged by this strategy. These workers would earn in excess of US$50 million, which would lift economic activity.
Tonnes of cotton lint that would be produced in Uganda. Foreign exchange earnings in the CTA sector would rise to over US$650 million annually
other programmes presented in the strategy and Action Plan. Since the growth of the CTA industry will have a transformational impact on the economy creating many thousands of jobs, particularly for women and youth, it is likely that the government will be in a position to leverage additional funding through partnering with donor agencies that have a similar developmental agenda. This strategy envisages a CTA sector that will employ 50,000 workers within eight years. These workers would earn in excess of US$50 million, which would lift economic activity.
Uganda can develop an extensive CTA industry with potentially transformational benefits. A relatively conservative scenario included at the end of this strategy document envisages the creation of 50,000 jobs directly within eight years, with a knock-on effect on the livelihoods of hundreds of thousands of Ugandans.
More than 20,000 tonnes of cotton lint would be produced in Uganda. Foreign exchange earnings in the CTA sector would rise to over US$650 million annually although this will be partly offset by the importation of essential raw materials for the garment industry.
But the Government of Uganda must commit financial resources to take advantage of the CTA opportunities. Finance will be needed to build the necessary compliant infrastructure, and also cover the costs for implementing the
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At US$785 billion, the international market for textiles and apparel is vast and continues to grow. The USA and EU dominate the market in terms of per head consumption and they are serviced by major country producers like China, Vietnam and Bangladesh as well as significant production facilities in Southeast Asia, Central and South America.
UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
CTA Sector SWOT analysis Strengths • • • • • • •
High-quality cotton lint and organic production capabilities Duty-free market access for apparel products to U.S. and Europe Trainable and competitive labour attractive to high volume manufacturing processes Uganda’s political stability Competitive electricity costs, logistics and infrastructure to major ports Unprecedented interest from brands and retailers to source T&A in East Africa Current legislation to promote investment at industrial parks
STRATEGIC PLAN
Weaknesses • 90% of cotton lint exported as raw material • Uganda does not have a market position and competitive advantages are unknown by investors and buyers • Limited existence of private sector investments • Limited existence of local entrepreneurs • No turn-key manufacturing infrastructure to attract potential investors • No major new investments in the country in the last 10 years, no upgrading of technologies and no market expansion
Opportunities • Integrate Uganda into the success of the growing CTA sector in East Africa • Leverage East Africa’s CTA success to penetrate large international markets • Build Uganda’s reputation as a reliable source of compliant, sustainably produced textiles and apparel • Build Uganda’s environmental credentials by emphasizing use of hydro electric power, biofuels and sustainably produced cotton lint • Improve supply chain efficiency to become internationally competitive • Potential for small and medium company development • Create 50,000 CTA jobs within eight years • Increase added value in CTA sector based on the creation of vibrant textile and apparel sector growth • Growth and development of a skilled and productive labour force, including middle management and mentoring • Develop internal demand for Uganda’s cotton integrated into Uganda’s CTA value chain
Threats • Fierce promotion competition from other regional countries to attract investors and buyers • East African countries providing “red carpet” to potential investors with aggressive policies and turnkey manufacturing infrastructure • Brand and retailer interest in diversifying their supplier base may be temporary due to current tensions between the U.S and China
Figure 1: CTA SWOT Analysis
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UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
and apparel clusters in, for example, the UFZA land holding near Entebbe Airport. Marketing Uganda as an attractive investment destination for the CTA industry is central to the strategy. Uganda’s offer needs to be formalised and a marketing strategy developed that will provide consistent messaging to targeted audiences. Potential investors need to be facilitated by officials that understand the requirements of the CTA value chain.
In order to attract foreign investment, it will be essential for Uganda to develop one of its industrial estates in such a manner that CTA investors can visualise their location. Investors need to be shown something other than undeveloped land.
The coordination of the planning, costing, fundraising, budget allocation and implementation of the strategies will be essential for their effective delivery. This strategy recommends a Designated Authority to be established under the NPA to coordinate the activities of the relevant Ministries and Government Agencies. This Designated Authority should be empowered to hold agencies and government departments responsible and accountable for the effective and timely delivery of their assigned activities.
Given the urgency of the requirement for implementation, the scale of the strategy and the potential impact for transformational job creation, it is recommended that the designated authority is established as a separate entity within the NPA with fulltime professional management, office resources and budget
Given the urgency of the requirement for implementation, the scale of the strategy and the potential impact for transformational job creation, it is recommended that the Designated Authority is established as a separate entity within the NPA with fulltime professional management, office resources and budget. The establishment of the Ethiopian Textile Industry Development Institute is accredited as one of the leading factors in the success of the development of investment in the textile and apparel industry in Ethiopia. Significantly Dr. Arkebe Oqubay, Economic Advisor to the Prime Minister, has been empowered to champion the development of the industry and is seen as a trusted partner to industrialists and the brands that source from Ethiopia.
The Uganda Free Zone Authority (UFZA) has a 25-acre land holding in Jinja that may be ideal for this purpose. The building of 10 garment production factories that are responsive to all occupational safety and health standards required by international buyers would capture the interest of investors enabling them to commit. The success of this initial development could trigger development of other textile
This report is divided into two sections - the Strategy and the Situation Analysis. The Strategy takes the findings of the Situation Analysis and summarises the principal conclusions in order to distil the strategy and produce an actionable plan to achieve the vision of building a vibrant, sustainable and equitable CTA value chain.
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The SWOT analysis clearly indicates that Uganda has considerable potential to penetrate the international apparel markets. However, the government will need to commit to the vision and actively promote the CTA sector while providing the necessary physical infrastructure essential for attracting new investment. A comprehensive marketing and communication strategy will need to be developed and vigorously implemented.
UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
STRATEGIC PLAN
2.0
Introduction
UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
Over a period of five months in 2019, a team of consultants working for the National Planning Authority met with multiple stakeholders and produced a Situation Analysis of Uganda’s Cotton, Textile and Apparel Value Chain. The analysis, conclusions and recommendations contained in the Situation Analysis have informed the development of this strategy. The main finding of the Situation Analysis indicate that Uganda has much to offer prospective CTA investors and the country should be considered competitive in terms of these offerings. The constraints identified can be mitigated to attract inward investment and enhance the current production capacity. This Strategy Report summarises the most pertinent findings of the Situation Analysis and how they impact on the potential development of the value chain.
The market for textiles and apparel is massive and continues to expand. The sourcing of these commodities is dynamic and constantly changing. Currently, major interest is being expressed by international buyers to source from sub-Saharan Africa and East Africa in particular. Given the preferential trade advantage Uganda enjoys into some of these key markets and its many other positive indicators, the country is in an excellent position to develop a vibrant textile and apparel industry built on locally produced cotton and drive transformational change.
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From an international economic integration process point of view, all countries face the challenge of developing and promoting labour intensive production activities as the initial step to development. In this sense, the CTA value chain can have a highly transformative effect in a developing economy, generating skilled jobs, foreign currency income, technology transfer, internal retail and wholesale economic activities, private investments, industrial development, improvement of the financial system, enhanced international image of the country and integration into large scale markets.
STRATEGIC PLAN
UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
75%
50k
$50m
Value added to Uganda’s lint production through growth contemplated in this vision
New CTA jobs to be created within eight years, as envisaged by the strategy
Direct wages that will be earned annually by CTA workers in Uganda
3.0
Vision
UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
Uganda will develop a vibrant, sustainable and equitable CTA value chain that will have a transformational impact on the country’s economy by adding value to locally produced cotton products, attracting investment in downstream processing and creating tens of thousands of quality jobs particularly for youth and women that will stimulate economic activity and drive export led growth. Specifically, the strategy envisages the creation of 50,000 new CTA jobs within eight years through the establishment of five new fully integrated factories, five standalone spinning mills and 30 garment sewing factories by the end of 2028. The achievement of the growth contemplated in this vision will result in adding value to 75% of Uganda’s current lint production within the country. Export earnings from the CTA sector will grow from the current US$20 million annually to more than US$650 million, while US$50 million in direct wages will be earned annually by CTA workers significantly lifting the economic activity in Uganda.
In order to consolidate the existing CTA industry and stimulate large scale investment, the first meeting of the CTA strategy development steering committee agreed that there should be a three-pronged approach:
Objective 3: Support the existing industry to develop integrated value chains exporting full value apparel products. Objective 4: Enhance the CTA capacity of the UIA to effectively market Uganda as a strong prospect for CTA Foreign Direct Investment.
1. Increase cotton fibre production and farmer incomes. 2. Stimulate investment in a vertically integrated industry. 3. Stimulate investment in high labour intensive apparel manufacturing factories.
Objective 5: Promote targeted FDI in CTA sub-sector with strong backward linkages to the domestic industry and international standards.
To achieve these overriding targets, it is suggested that eight broad objectives be adopted each of which will be expanded into key activities, targets and responsibilities.
Objective 6: Build Uganda’s reputation as an attractive investment and compliant sourcing destination.
Objective 1: Secure sustainable smallholder cotton production and facilitate large scale commercial production.
Objective 7: Enhance the CTA capacity of the UEPB to assist manufacturers to access international export markets.
Objective 2: Improve the cotton, textile and apparel related infrastructure and business climate.
Objective 8: Enhance small-scale industry CTA opportunities and linkages
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Strategy to achieve the Vision
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UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
4.0
Essential elements for success
UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
There are three major players that are essential for the successful expansion of Uganda’s CTA value chain - Investors, Buyers and Government. Other critical elements include raw materials incorporating a fabric supply chain, trade access, logistics, infrastructure, labour, utility quality/costs and access to finance. If these elements are all in place, Uganda will become an investment destination of choice for investors and an attractive sourcing destination for international brands and retailers.
4.1
The markets
The value of the global apparel manufacturing market was $785.9 billion in 2016. The AsiaPacific region accounted for 61% of this market value and Europe accounted for 15.2%.
2021, an increase of 26.2% since 2016. The compound annual growth rate between 2016 and 2021 is forecast to be 4.8%. This indicates a sustainable and continuously growing demand that justifies public and private investments with a long-term vision. Table 1: Global Apparel and non-Apparel manufacturing market growth forecast
Year
US$ Billion
% Growth
2016
785.9
3.30%
2017
822.2
4.60%
2018
861.4
4.80%
2019
902.5
4.80%
2020
948.2
5.10%
2021
992
4.60%
CAGR: 2016-21
4.80%
Source: Marketline
Historically, China has been and remains the number one exporter of apparel worldwide. During the last 10 years, however, new large CTA manufacturing countries have emerged like Bangladesh and Vietnam. China’s apparel exports have declined while fabric exports continue to rise. China’s market share in the world’s top three largest apparel import markets, namely the United States, EU, and Japan also indicate a clear downward trend in the past five years. A large number of Chinese apparel manufacturers have relocated their apparel industry to low wage countries to remain competitive.
Table 2: Apparel Export Value in Million US$ Country
2007
2010
2015
2016
2017
Ten Year Trend
China
115,520
129,820
174,694
159,340
158,462
42,943
Bangladesh
8,855
32,290
26,603
28,668
29,212
20,358
Vietnam
7,400
10,390
21,948
23,005
27,782
20,382
Italy
23,249
20,122
21,248
21,794
23,324
75
Germany
16,717
17,303
16,954
17,353
20,942
4,224
India
9,930
11,229
18,374
18,192
18,617
8,687
Turkey
13,866
12,760
15,121
15,047
15,101
1,214
Hong Kong, China 28,765
24,049
18,416
15,688
14,490
-14,274
Spain
5,723
7,151
11,790
12,827
14,345
8,622
France
10,941
10,066
10,767
10,891
11,732
791
Source: Marketline
STRATEGIC PLAN
The global apparel manufacturing market is forecast to reach $992 billion in value in
UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
4.1.1 The United States Market
agreements or preference programmes such as the African Growth and Opportunity Act (AGOA), while others do not.
The value of US apparel imports reached $91.3 billion in 2017, up 40.3 per cent from 2000. It is estimated that the value of US textile and apparel imports could change between -2.2% and 7.6% and between -1.2% and 5.3% respectively in 2019.
AGOA is an important preference programme to boost business and growth in sub-Saharan Africa. It offers a duty-free trade preference of between 17% and 32% depending on fabric composition of the apparel imported. AGOA remains in effect until 2025 and so far has stimulated apparel imports representing less than one per cent of total US apparel imports. AGOA has however contributed significantly to labour creation and exports growth in the countries it applies to, as per the chart below.
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Because the United States is no longer a major apparel manufacturer but one of the largest apparel consumption markets in the world, apparel products accounted for 75.7 per cent of total US textile and apparel imports in 2017. The US imported apparel from as many as 150 countries in 2018. Recent studies show that US fashion brands and retailers continue to diversify their sourcing bases. While three-quarters of the value of the 2017 US apparel imports come from the top 10 suppliers, it is worth looking at the up-andcoming suppliers. By highlighting suppliers with substantial growth in 2017-2018, it is possible to identify future trends. Some of these countries are coming to market as new providers; some have duty-free access through free trade
83%
99%
Kenya’s apparel exports to the US under AGOA
AGOA exports from Tanzania that were apparel.
Textile & Apparel Exports by East Africa Countries under AGOA in ‘000 Dollars Year
Ethiopia
Kenya
Madagascar
Mauritius
Tanzania
Uganda
Total
2014
$11,980
$373,647
$7
$216,398
$17,297
$39
$619,451
2015
$17,275
$367,109
$39,753
$206,855
$27,262
$1
$658,429
2016
$32,341
$339,338
$93,476
$187,375
$36,931
$36
$689,957
2017
$51,866
$333,866
$147,901
$139,617
$40,511
$359
$720,112
2018
$110,042
$391,719
$187,372
$137,588
$41,884
$62
$870,677
Total
$223,504
$1,805,679 $468,509
$887,833
$163,885
$497
$3,558,626
Table 3: Textile & Apparel Exports by East African Countries under AGOA
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Ethiopian exports have expanded impressively since 2014 from US$12 million to US$110 million, with a doubling of exports in 2018 alone. Ethiopia has positioned itself as a lowcost, light industry investment destination and has attracted significant investment in export-oriented production. A number of large apparel and footwear companies have set up operations in the country and these investments have partly contributed to its steady growth.
country’s competitiveness for the US market. Some factories are relocating their CMT business to other East African countries that are also AGOA beneficiaries, while Mauritius continues to produce fabrics competitively due to their knitting/weaving and dyeing infrastructure and continues to export apparel to Europe. Before Madagascar lost AGOA eligibility in 2009, annual AGOA exports were over US$200 million per year. Following the reinstatement of Madagascar’s AGOA eligibility in June 2014, exports to the US have significantly increased. In 2014, apparel exports were only US$7 million but had increased to US$187.4 million in 2018. There is a continuous interest from buyers to source from this country, which is reflected in its export growth. Uganda’s AGOA exports have fluctuated over the past 15 years reaching a peak of US$5 million in 2004. By 2009, exports declined to less than US$1 million. The closure of exportoriented factories led to this decline. It is apparent that Uganda has not benefitted much from this lucrative market under AGOA as exports in 2018 totalled a mere US$62,000. This represents 0.02% of EAC exports to the USA. This is an opportunity lost.
Tanzania’s AGOA apparel exports increased from US$17.3 million in 2014 to US$41.9 million in 2018. More than 99% of AGOA exports from Tanzania were articles of apparel.
4.1.2 The European Market
Kenya is the largest East African exporter to the US under AGOA, with apparel constituting over 83% of the exports. In 2018, Kenya’s exports reached a record value of US$391.7 million.
The combined European market is larger than the US market but is more fragmented thus the size of production runs can be smaller than those intended for the US market. All the large European brands have sustainability built into their sourcing strategies and require high levels of compliance with social and environmental criteria.
AGOA apparel exports from Mauritius have been on a downward trend over the past three years after a peak of US$216.4 million in 2014. Increasing labour costs have affected the
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STRATEGIC PLAN
Kenya is the largest East African exporter to the U.S. under AGOA, with apparel constituting over 83% of the exports. In 2018, Kenya’s exports reached a record value of US$391.7 million
UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
European apparel imports in US$ billions
European apparel imports in US$ billions
45 40 35
39.9
30 25
25.5
20
23.5
15
17.8
17.5
Spain
Italy
10 5
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0
Germany
France
UK
Figure 2: European Apparel Imports
The demand in the European market for imported apparel is currently fairly static and likely to remain so as the population has stabilised. Penetration of this market is therefore dependent on displacing current suppliers which, given Uganda’s potential for global competitiveness, should be possible.
billion, 7%), India (EUR6.0 billion, 6%) and Cambodia (EUR4.0 billion, 4%). Uganda enjoys preferential trade access to the EU market through the EBA (Everything but Arms). The EBA preference is granted to Least Developed Countries (LDCs) on the condition that they meet certain criteria, such as complying with basic standards of human rights. The duty on apparel entering the EU is currently 11% so this preference gives the equivalent competitive advantages to EBA countries.
Currently, imports of clothes and footwear from non-EU countries comes mainly from China (EUR33.4 billion, or 35% of total extraEU clothes and footwear imports), Bangladesh (EUR14.6 billion, 15%) and Turkey (EUR9.1 billion, 9%), followed by Vietnam (EUR6.7 Table 4: East Africa Apparel Exports to the EU
EXPORTS OF APPAREL (HS61-62) TO THE EUROPEAN UNION (IN EURO) 2014
2015
2016
2017
2018
Kenya
8,702,929
4,083,915
6,887,022
5,778,138
5,560,338
Rwanda
144,859
673,586
499,092
416,188
471,394
Tanzania
1,163,939
961,612
811,312
708,152
578,254
Uganda
762,392
822,213
1,005,329
743,427
1,604,371
Ethiopia
1,060,191
1,646,304
1,363,067
2,079,277
1,636,160
TOTAL
10,776,133
6,543,341
9,204,771
7,647,922
8,216,375
Source: Eurostat
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Continental East Africa’s total exports to the European market are EUR8.2 million (US$9.2 million), which is minuscule. The island states of Mauritius and Madagascar have had far more success in penetrating the EU market with apparel exports of US$ 318 million and US$ 369 million respectively in 2018 .
Uganda’s trade with the East African region is dominated by the exportation of cotton lint and yarn. The total value of exports into the region was US$ 10.2 million in 2018 while total imports from the region totalled US$ 22.4 million. Uganda performs well in exporting cotton lint and yarn to the COMESA region but exports of other made-up textile articles have also been substantial. Total exports into COMESA were US$ 20.2 million in 2018. Uganda imports made-up textile items and man-made staple fibres from the COMESA region. Imports from COMESA totalled US$ 11.9 in 2018.
Kenya dominates EAC exports to Europe while Uganda currently exports US$ 1.6 million or 19.5% of EAC exports to Europe. Uganda’s apparel export to Europe is currently based on a single virtuous cycle through the production of CmiA branded cotton processed through Fine Spinners to produce garments for CmiA brand members in Europe. There is enormous opportunity for Uganda to increase its share of the European market.
4.1.4 SADC
4.1.3 The Domestic and EAC Market There is a growing demand for locally manufactured textile and apparel products in Uganda and in the region. The BUBU policy of 2014 estimates the local demand for local textiles and apparel by key institutions such as schools, prisons, the army and the police to be in excess of US$ 63 million.
The market is important because South Africa, uniquely in the region, is home to a number of large trading conglomerates that include chains of retail outlets operating in the region and beyond. The consolidated purchasing power of these retail chains enables them to place relatively large orders.
Total imports for the CTA sector in Uganda alone are currently over US$ 252 million. Of this, US$ 56 million is for new clothing and US$ 83 million for worn clothing. Uganda imports some US$ 38 million of furnishing fabrics, drapes, blankets, sheets, towels tarpaulins, homeware and the like. There is certainly opportunity to replace a significant volume of these imports if efficient and diversified manufacturing industries were established.
Currently Uganda is not a member of SADC but will potentially gain access if the tripartite agreement between SADC, EAC and COMESA comes to fruition. Given the potential for Uganda producers to manufacture apparel through all stages of the transformation
$63million
$252million
Estimated local demand for local textiles and apparel by key institutions such as schools, prisons, the army and the police, according to the The BUBU policy of 2014
Total imports for the CTA sector in Uganda. Of this, US$ 56 million is for new clothing and US$ 83 million for worn clothing. Uganda imports some US$ 38 million of fabric
$20.2
Eur33.4billion
Uganda’s total exports into COMESA in 2018. Imports made-up textile items and man-made staple fibres from the COMESA region. Imports from COMESA totalled US$ 11.9 in 2018.
Value of imports of clothes and footwear from non-EU countries like China, which accounts for 35% of total extra-EU clothes and footwear imports
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The 15 countries making up the Southern Africa Development Community form a large integrated and important market for textiles and apparel. Of these 15 countries only 13 signed up to a free trade zone in 2008, allowing goods to move across borders without attracting tariffs subject to compliance with rules of origin requirements.
UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
and beyond. The consolidated purchasing power of these retail chains enables them to place relatively large orders. process, fibre, yarn, fabric and apparel, were just over US$ 43 million while the Currently Uganda is not a member of SADC butimports will potentially gain access if the tripartite Uganda would be able to meet virtually any next largest category at US$ 37.8 million was agreement between SADC, EAC and COMESA comes to fruition. Given the potential transformation requirements specified under other made-ups including furnishing fabrics, for Uganda producers to manufacture apparel through stages of the transformation Rule of Origin requirements. Uganda officials drapes,all tarpaulins, awnings, blankets, sheets, process, shouldyarn, vigorously pursue completion and would be towels, the like. Of the US$ 35 fibre, fabric and the apparel, Uganda ablehomeware to meet and virtually any transformation implementation specified of the tripartite agreement it million exports,Uganda about US$ 33 million was requirements under Rule ofasOrigin requirements. officials should would bring considerable benefits to Ugandan in form of baled cotton lint. Around 10% of vigorously pursue the completion and implementation of the tripartite agreement as it manufacturers. Uganda’s cotton lint is used domestically with would bring considerable benefits to Ugandan the manufacturers. balance being exported
4.1.5 Uganda’s Balance of Trade in The apparel sector currently produces mainly Cotton, Textiles andBalance Apparel 4.1.5 Uganda’s of Trade in Cotton, Textiles and for the domestic andApparel regional market but there is potential for existing producers to expand
In 2018, Uganda imported around US$ 252 into international markets they chose to do In 2018, Uganda imported around US$ 252 million cotton, textile andif apparel products and, million cotton, textile and apparel products and, so and are prepared to upgrade their plant in sameperiod period exported just35US$ 22 million in these categories. in the the same exported just US$ million
FFIBRE IBRE
20,515,000
35,775,000
1,014,000
2,386,000
28,620,000
42,234,000
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UGANDA TEXTILE IMPORTS 2018 IN USD
37,886,000
83,613,000
and procedures to attain acceptable levels of competitiveness and social and environmental compliance.
in these categories. Of the imports, around US$ 140 million was made up of clothing of which US$ 8: 83.6 million was worninclothing. Total fabric Table Uganda CTA imports 2018
W OVEN WOVEN FFABRIC ABRIC
KKNITTED NITTED FFABRIC ABRIC
YYARN ARN
W OVEN KKNITTED NITTED WOVEN G GARMENTS A R M E N T S GGARMENTS ARMENTS
SSECOND ECOND HHAND AND CCLOTHING LOTHING
OTHE R OTHER MADE MA DEUP UP ARTICLES ARTICLES
Figure 3: Uganda CTA imports in 2018 Figure 1: Uganda Total CTA exports in 2018
Of the imports, around US$ 140 million was made up of clothing of which US$ 83.6 million was worn imports were just overIN US$ 43 million while the next largest 35 clothing. Total fabric UGANDA TOTAL CTA EXPORTS 2018 category at US$ 37.8 million was other made ups including furnishing fabrics, drapes, 30 tarpaulins, awnings, blankets, sheets, towels, homeware and the like. 25
20 20 million exports, about US$ 18 million was in form of baled cotton lint. Of the US$ Around 15 10% of Uganda’s cotton lint is used domestically with the balance being exported 10
The apparel sector currently produces mainly for the domestic and regional market but 5 there is potential for existing producers to expand into international markets if they chose 0
Series1
Cotton Fibre
Cotton Yarn
Fabric
Apparel
Home Textiles
Other
33
0.2
0.5
2
0.1
2.2
16
Figure 4: Uganda total CTA exports in 2018
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UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
4.1.6 Market Dynamics International brands and retailers are showing unprecedented interest in establishing sourcing destinations in East Africa. Ethiopia has attracted tens of billions of dollars in CTA related FDI in the past 10 years. Kenya has established itself as sub-Saharan Africa’s largest exporter of apparel to the USA under AGOA. Many of the large European brands are actively sourcing in the region. Uganda is in a position to benefit from this groundswell of interest. The ongoing trade dispute between the USA and China is undermining the competitiveness of China’s apparel exports. In June 2019, India had its GSP status revoked by the USA putting its US$ 5.4 billion apparel exports to the USA at risk. A number of other South East Asian countries, such as Cambodia and Myan-
that all aspects of production are compliant with environmental and social standards, including the conditions of employment. Many are tracking their water and carbon footprint and attempting to build long term sustainability into every input and action involved in the production of their merchandise. The use of branded cotton and other fibres is becoming increasingly important. When buyers commit to a major sourcing programme in a country they expect to engage with Government at the highest level. Producer countries must be aware of this and be fully informed about the needs and aspirations of the buyers to be able to engage in a meaningful manner.
4.2 Logistics
When buyers commit to a major sourcing programme in a country they expect to engage with Government at the highest level. Producer countries must be aware of this and be fully informed about the needs and aspirations of the buyers to be able to engage in a meaningful manner mar, are coming under increasing scrutiny by European and USA authorities with regard to their human rights record. All these factors are driving interest in establishing new sourcing destinations. As production in East Africa grows, an increasing number of brands will establish sourcing offices in the region. This trend will lead to greater volumes of orders being placed in the region. The major brands and retailers are conscious of the value of their brand name and are extremely averse to reputational risk. They all interrogate their supply chains to ensure
The longer the shipping time the more basic the merchandise ordered and the lower the price. Because Uganda is endowed with a surplus of excellent quality cotton, vertical manufacturers can spin yarn and manufacture fabric to order without the delay implied in importing fabric from a third country. With carefully managed long-term buyer/vendor partnerships, Ugandan manufacturers can exploit this advantage.
With the improvement in road infrastructure, border customs facilities and streamlined customs procedures transit times from Uganda to the Mombasa port have been reduced to between 5 and 7 days. This is acceptable and reasonably competitive. Access to an international airport is crucial for the textile and apparel industry as virtually all orders placed require a large number of samples to be exchanged between the vendor and the buyer. The location of industry within reasonable access to airfreight facilities is therefore important. Congestion on the national roads, particularly around Kampala, would suggest that the best place to establish
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Speed to market and on time delivery are an essential element of a successful exporting strategy. Fast fashion demands the fastest turnaround times and commands the best price.
UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
an initial textile and apparel cluster would be in Jinja. This would ensure a reduction of three to four hours in transit time compared to Kampala and is also sufficiently close to Entebbe airport to expedite the shipment of samples. Once the Entebbe/Jinja Express Way is constructed this would open up Entebbe as a viable T&A production hub.
physical infrastructure facilities and buildings in Uganda. However, the Government has allocated land in Entebbe and Jinja, among others, for this purpose. UFZA has given assurances that the Government has availed funds for piloting one of these parks and work should be commencing shortly. There are 22 industrial business parks (IBPs) that are either proposed, planned or established. These parks are managed by the Uganda Investment Authority. Currently the UIA has purchased the land for nine of these parks and they are in various stages of planning and completion. The priority sectors are similar to those of Free Zones and include: strategic agricultural commodities, manufacturing, commercial handicrafts and services. It is possible for an investor with an export orientated business to establish in an industrial business park and receive free zone status from the UFZA.
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4.3 Infrastructure When considering possible investment locations, prospective investors need to visualise what their future operation would look like. In this respect, it is important to show them serviced industrial sites preferably in an established industrial business park or a free trade zone. Large scale investors interested in establishing vertically integrated factories will be interested in green field sites. These should preferably be in established industrial parks or close to amenities such as water and electricity. Investors will review Uganda’s profile in depth and compare conditions with other targeted regional countries. Uganda’s offering across a wide range of factors needs to be competitive in order to attract investors.
A number of private industrial parks have been developed in the country and more are planned. An investor, planning an industrial park near Jinja, stated that he is prepared to erect buildings for investors and rent them at $2 per square metre, which is a competitive rate. A number of Chinese investments in business park infrastructure have been made in Uganda, including the Kapeeka Industrial Park that has attracted considerable investment. An established Chinese manufacturer producing high quality work wear, hunting wear and casual wear for the European and USA markets has committed to investing in this park. This is an early indicator of the potential of Uganda to
Smaller scale investors such as apparel manufacturers would prefer to be shown turn-key existing factory buildings into which they can locate virtually immediately. It is not feasible to attract apparel investors without completed buildings unless there is already established industries in an industrial park and the erection of new factory buildings is imminent. Currently there is no functional Free Zone with serviced
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40million
Industrial business parks (IBPs) that are either proposed, planned or established. These parks are managed by the Uganda Investment Authority.
Uganda’s estimated population, of which 12 million fall into the 15 to 29 age bracket (30% of the population) and a further 18 million are below 15 years of age.
53.6%
$65
Percentage of population that have completed primary education, 24.3% have completed secondary education and 12.2% have completed post-secondary education
Average monthly starting wage in the industry, which is a relatively competitive rate, and factory managers have confirmed that the workforce is very trainable
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UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
At the same time, land held by the UIA and UFZA that is suitable for textile and apparel clusters should be identified and their development fast tracked. Jinja, given its location on the main trunk road to Mombasa, good infrastructure, access to trainable labour and power availability, is considered to be an ideal location.
The management of the two major factories in Uganda indicated that the average starting wage in the industry was in the region of US$ 65 per month. This is a relatively competitive rate and the managers confirmed that the workforce was very trainable, conversant with factory operating procedures and easy to communicate with as they have English as a common language.
4.4 Labour
Competitive wage rates are attractive to investors setting up new business in a foreign country in the initial training stages, but it is not the only consideration as other factors such as trainability, education, literacy, work ethic and ability to adapt to a factory work environment are equally important. As workers develop skills and increase efficiency, the factory management are generally prepared to pay higher wages.
One of the main attractions for foreign direct investment in the apparel production sub-sector is the availability, cost and quality of labour. Uganda has a population in excess of 40 million of which 12 million fall into the 15 to 29 age bracket (30% of the population) and a further 18 million are below 15 years of age. The median age of the entire population is only 15.9 implying that there is a considerable number of youths annually moving into the job market and this number will continue to grow significantly over the next ten years.
4.4.1 Third Level Industry Specific Education
According to the Uganda Bureau of Statistics, 53.6% of the population have completed primary education, 24.3% have completed secondary education and 12.2% have completed
For the CTA industry in Uganda to thrive, investors need to be assured of skilled manpower. There appears to be a skills gaps in areas of
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post-secondary education. The literacy rate is 78.4% and is higher among males at 85.3% than it is among females at 71.5%. For the most part, the medium of instruction is English. This is a key factor for investors when considering the establishment of labour-intensive industries like the apparel sector.
attract downstream garment manufacturers. In order to successfully market Uganda to prospective CTA investors, it’s important to identify available factory premises suitable for garment sewing factories either in UIA business parks or private sector industrial estates.
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UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
textile engineering and technology, textiles, fashion and design skills, as well as middle management skills. As such, most of the middle management roles in the leading textile and apparel factories are held by expatriates. Formal tertiary education support for the CTA sector is limited.
edge. The local technical training centres both private and public as well as the university system should design courses aligned to the CTA industry needs.
Both Busitema and Kyambogo universities run degree courses in the technical aspects of CTA processes and include an industrial attachment or internship component, through which students are mentored, supervised and assessed by their industrial supervisors in addition to their academic supervision.
Given that there are only two relatively large textile and apparel factories operating in Uganda, it would appear that this sub-sector has not been a focus for trade union activity. Both factories indicated a low level of trade union membership. This was confirmed by a representative of the National Organisation of Trade Unions (NOTU) who stated that the union only represented around 9% of workers in the sector.
4.4.2 Labour Representation
The lack of modern industrial equipment at the universities is a disadvantage and, at this point, there is limited coordination between the factories and the universities. Despite this, the students receive a thorough grounding in the technical aspects of industrial production and graduates are sought after by industry.
The apparel industry globally has earned itself a poor reputation in terms of worker exploitation with malpractices such as child labour, forced labour, lock ins, poor health and safety, lack of collective bargaining agreements, and the like. Currently, there is far better monitoring of labour conditions in factories supplying reputable brands and retailers in the international market. Labour abuse is simply not tolerated as it poses reputational risks that can seriously damage brand image.
As the CTA sector develops there will be a need to promote the training of middle management. The majority of staff performing these roles not only in Uganda, but also in East African factories are expatriates mainly from Bangladesh, Sri Lanka, China, Taiwan, Honduras, Egypt or India who are more expensive than local staff could be.
In the modern CTA sector, effective communications with workers is encouraged with many forward-looking companies developing cordial working relationships with their worker representatives be they trade unions or worker elected representative bodies. It is companies with this sort of ethos that Uganda should be encouraging to invest with the clear under-
It is important to build a strong local Ugandan management base that, in future, can occupy management positions, and potentially become local entrepreneurs to continue growing the sector based on the industry business knowl-
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UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
standing that quality Foreign Direct Investment will create quality jobs.
Uganda. Each farmer has an average of 6 dependents, therefore up to 2,100,000 Ugandans rely on cotton production. Cotton is currently entirely rain fed and is handpicked.
Ensuring that the right job opportunities exist for Uganda’s emerging workforce is essential for economic growth and, indeed, for the stability of the country. The mass unemployment is a ticking time bomb and the development of a vibrant textile and apparel industry is one of the most efficient ways for the Ugandan government to ensure employment opportunities for many thousands, and possibly hundreds of thousands, of its population. Uganda’s potential to supply labour to the downstream textile and apparel industry is attractive to prospective investors and this should be communicated when promoting Uganda as a viable investment destination.
The rain fed characteristics gives the cotton a certain element of sustainability, which is important in the downstream market while the fact that it is handpicked and, for the most part, roller ginned, contributes to the overall length of the fibre, which is desirable. Cotton production is dominated by smallholder farmers with average plot sizes of 0.5 hectares. Yields are relatively low at around 1,200 kilogrammes per hectare but, given the beneficial conditions for growing cotton, could be significantly higher if farmers adopted more regenerative farming methods, practised better integrated pest management techniques and had access to better seed.
4.5 Raw materials
Uganda produces an abundance of cotton lint of medium to long staple length making it readily marketable and most of which is now exported as lint in bale form. It is understandable that the Government wishes to see more of this cotton processed locally where an enlarged and invigorated downstream industry adds value to this valuable raw material. The benefits accruing from this include increases in employment, economic activity, foreign exchange earnings and import replacement.
The apparel industry globally has earned itself a poor reputation in terms of worker exploitation with malpractices such as child labour, forced labour, lock ins, poor health and safety, and the like
Seed cotton production is the main source of income for around 300,000 households in
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4.5.1 Cotton
UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
Table 11: Uganda Lint Production
Annual lint production in bales (1000's)
Annual Lint Production in Bales (1,000s) 200 180 160 140
120 100 80 60
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40 20 0
2010
2011
2012
2013
2014
2015
2016
2017
2018
Figure 5: Uganda Lint Production
Uganda’s cotton output has dropped considerably over the last 50 years but now appears to Uganda’s cotton output has dropped production costs compared to just 11 to 24 per have stabilised around annum. considerably overat the last 50 the years30,000 but nowtonnes of lint centper for crops like cassava, groundnuts, rice, appears to have stabilised at around the 30,000 tonnes of lint per annum.
sesame and sugarcane.
There are a number of factors that have served to disadvantage cotton farming, such as Right up to the millennium, cotton was the competition fromofother crops due served to its low profitability (relative to other crops). According There are a number factors that have dominant fibre consumed by world markets but to disadvantage cotton farming, such as the advent of petrochemical based polyester 4 to Uganda’s Economic Policy Research Centre (ERPC) 40 per cent of the revenue gained from competition from other crops due to its low has gradually eroded that dominance to cotton goes(relative towards production costs compared to just to 24 62% perofcent for crops like profitability to other crops). the point that,11 currently, the global fibre market is polyester while 26% is cotton. cassava, groundnuts, rice, sesame and sugarcane. According to Uganda’s Economic Policy Research Centre (ERPC) 40 per cent of the revenue cotton goes towards Right upgained to thefrom millennium, cotton was
Polyester has achieved this dominance by being cheaper, more consistent, more versatile and stronger. dominant fibre consumed by world markets but
the the advent of petrochemical based polyester has gradually eroded that dominance to the point that, currently, 62% of the global fibre market is polyester while 26% is cotton. Polyester has achieved this dominance by being cheaper, more consistent, more versatile and stronger.
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UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
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Figure 6: Global fibre Consumption by Type
Despite the dominance of polyester, the cotton market continues to grow but at a much lower rate than polyester. Current demand for cotton fibre globally is in the region of 27 million metric tonnes and is expected to grow to around 32 million metric tonnes by 2030. Consumption of cellulosic fibre, that is fibre obtained from plant cellulose, has also started to grow significantly and is projected to reach 10 million tonnes by 2030.
both environmental and social elements in the producing countries. Conventional cotton production has received bad media reports over the past two decades and is accused of depleting water resources, degrading the quality of the agricultural land and surrounding landscapes, poisoning farmers through injudicious use of agrochemicals such as pesticides and promoting forced and child labour.
4.5.2 The Drive for Sustainable Cotton Production
Sustainability standards and programmes have been developed in the last 30 years to address the issues associated with conventional cotton cultivation. These standards provide guidance for farmers on more sustainable farming practices and assure buyers that the product meets the specified requirements.
The problems associated with climate change and sustainability are playing an ever-increasing role in the sourcing strategies of apparel brands and retailers. Consumers, Government agencies and others are insisting that the apparel industry addresses the negative impact that fabric and apparel production is having on
The ground-breaking programme was organic cotton in the late 1980s, followed by Fairtrade
23
in terms of the standards themselves and the systems supporting them. Of all these standards, organic cotton pays a premium to farmers. The costs involved in UGANDA COTTON, TEXTILES ANDonly APPAREL INDUSTRY implementing sustainable cotton production and tracing it through the transport and production processes generally falls on the producer. Uganda has a Made history of both sustainable production. The country in 2004, Cotton in Africa (CmiA) in 2005 and organic Uganda cotton has a history of both sustainable and 5 and Better Cotton (from the Better cotton production however More thanthere 8,300 farmers currently produces about 765 Cotton tonnes of organicorganic cotton annually. Initiative – BCI) in 2009. Each standard brings is currently no significant organic cotton are involved in organic cotton production and farm on 12,600 hectares of land. This makes something different to the table, both in terms production in the country. of the standards themselves andproducer the systems Uganda the second largest of organic cotton in Africa after Tanzania. Branded sustainable cotton production in Uganda, while nascent, is achieving results Of all these standards, only(CmiA) organic is cotton by linking directly international Cotton Made in Africa also pays active in the country and,tothrough the brands closedand loop a premium to farmers. The costs involved in retailers. Cotton Made in Africa (CmiA) is active production system, is responsible for providinginfibre for the majority of Uganda’s apparel implementing sustainable cotton production the country and, through the closed loop and tracing through the transport and production system, is responsible for providing exports toitthe international markets – in this case, Europe. production processes generally falls on the fibre for the majority of Uganda’s apparel producer. exports to the international markets – in this Table 13: Virtuous Value Chain from Farm to Finished Goods case, Europe.
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supporting them.
Aid by Trade
CMIA works with Farmers & Ginners
Fine Spinners
Produce under strict social and environmental compliance criteria
Otto Group, Jack and Jones
Garments are sold making a verifiable sustainable integrity claim
Figure 7: Virtuous Value Chain from Farm to Finished Goods
The cotton produced by CmiA is spun and knitted into fabric by Fine Spinners. It is then The cotton produced CmiA is spun knitted fabric member by Fine Spinners. It is then manufactured intobygarments thatand are sent into to CmiA companies in manufactured Europe, into garments that are sent to CmiA member companies in Europe, principally the Otto Group and Jack principally themost Otto Group benefit and Jack and Jones. and Jones. The important of branded sustainable cotton production is that it can provide access to business with some of the largest brands pursuing a sustainable sourcing strategy. Additional benefits include soil quality and landscape preservation, better farming practice, increased farmer The most important benefit of branded sustainable cotton incomes and, in certain cases, investment in community amenities suchproduction as schools. is that it can provide
access to business with some of the largest brands pursuing a sustainable sourcing strategy. 4.5.3 Blending Cotton with Additional benefits include soil other qualityFibres and landscape preservation, better farming practice, increased incomes in certain cases, investment amenities Cotton lint isfarmer available in surplusand, in Uganda and this would be attractivein to community both standalone spinning such as mills and vertically integrated industries. Market demand for 100% cotton products is strong but schools. many textile and apparel applications require the blending of cotton fibre with other fibres to improve strength, durability, handle, drape and other features.
4.5.3 Blending Cotton with other Fibres
The most common blending fibres are polyester, nylon, viscose, rayon, silk, wool, linen and hemp. Currently, none of these fibres is available within the region and have to be imported. There is no duty on fibreslint imported into the in EAC. For a vibrant CTA value to be established it is vital that there is Cotton is available surplus in Uganda and chain this would be attractive to both standalone no hindrance to the importation of fibres.
spinning mills and vertically integrated industries. Market demand for 100% cotton products is strong but manyFabric textile and apparel applications require the blending of cotton fibre with 4.5.4 Imported other fibres to improve strength, durability, handle, drape and other features. The establishment of viable apparel factories targeting the export market requires the ability to import a wide range of fabrics in significant volumes. As the fabric will be primarily used for the production of
The most common blending fibres are polyester, nylon, viscose, rayon, silk, wool, linen and hemp. Currently none of these fibres is available within the region and have to be imported. 5
2018 – Organic Cotton Market Report - Textile Exchange
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UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
export products, the fabric will be brought in under bond or into a free trade zone area where it would not attract import tariffs or VAT. Stimulating the domestic and regional apparel production industry will rely on either 0% duty on fabric or a very favourable rate in order to compete with cheap made up imports and worn clothing. Currently, the import duty set by the EAC is between 10% and 25% but this has been revised under customs remission to 0% to 10%. Uganda needs to work closely with the East Africa Commission to ensure that duty on fabric is zero-rated or at least favourable to industry supplying the domestic market and that it matches any moves by its neighbours in the EAC so as to avoid unfair competition.
4.5.5 Other raw material inputs Besides fabric there is a wide range of accessories and trims that make up a garment including buttons, studs, sewing thread, elastic, interlining, labels, etc., that should also be 0% or favourably duty rated to ensure the competitiveness of the domestic market producers.
4.6 Utility provision 4.6.1 Electricity
The provision of a stable power supply at a competitive tariff is critical to the spinning, weaving, knitting and finishing segment of the value chain. For spinning and weaving the power consumption can contribute up to 35% of overall costs. The Electricity Regulatory Authority is mandated to set the electricity tariff in a sustainable manner in order that the costs of generation and transmission are fully covered. Generation is currently costing 8c/KWh and transmission a further one cent. The regulator argues that a 5c/KWh tariff is unsustainable and cannot be approved. Setting this tariff for one particular industry would also be seen as an unfair practice.
Domestic/ Households
Commercial
Medium Industrial
Large Industrial
Extra Large Industrial
Ush/kWh
760.2
675.4
604.7
371.2
307.9
USD/kWh
20.2
17.9
16.0
9.8
8.2
Table 5: Uganda Electricity Tariffs
The current rate for large scale industrial users in 8.2c/Kwh. Industrialists and potential investors are being offered an electricity tariff rate of 5c/Kwh by the Government. They are billed by their service provider at the rate set by the ERA and then receive a tax rebate for the difference. The 5c rate is competitive in the region and would certainly contribute to attracting large scale investment in the sector. There is the problem of how to apply this rebate to new investors taking advantage of the 10-year tax holiday currently offered. This needs to be urgently addressed to facilitate a coordinated marketing strategy with which to approach potential investors.
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Uganda has made enormous strides in the generation and transmission of electricity in recent years. It is now generating surplus electricity, tariffs have dropped significantly and additional capacity will shortly come on line.
Households Commercial 760.2 675.4 Ush/kWh UGANDA COTTON, TEXTILES 20.2AND APPAREL INDUSTRY 17.9 USD/kWh
Industrial 604.7 16.0
Industrial 371.2 9.8
Industrial 307.9 8.2
Table 15: Comparative Electricity Tariffs8
Electricity tariff per kilowatt hour in US cents
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Electricity Tariff per Kilowatt Hour in US cents Ethiopia Zambia Uganda Mozambique DR Congo Botswana South Africa Nigeria Malawi Tanzania Zimbabwe Cameroon Cote d'Ivoire Kenya Rwanda Senegal Table 15: Comparative Electricity Tariffs Ghana Sierra Leone Liberia 0
10
20
30
40
50
60
9
Figure 8: Comparative Electricity Tariffs
The current rate for large scale industrial users in 8.2c/Kwh. Industrialists and potential investors are being offered an electricity tariff rate of 5c/Kwh by the Government. They a reliable and inexpensive connectivity. 4.6.2 by Information andprovider Communicabilled their service at the rate set bythe the ERA ofand then receive a tax rebate fo Under Ministry Information and tion Technology (ICT) Uganda has in contribute to the difference. The 5c rate is competitive inCommunication the region Technology, and would certainly recent years significantly increased its capacity Most modernlarge businesses rely on ICT systems attracting scale investment in the sector. There theneeded problem of how to apply this to provide thisis much ICT infrastructure to communicate with their suppliers and to government, business, communities and rebate toand new of the 10-year holidaytocurrently customers thisinvestors is especiallytaking so in theadvantage case individuals. Ugandatax is connected the world offered. Th of the CTA industry industry. In a situation through an optical fibre cable that connects needs to belong-term urgently addressed to facilitate a coordinated marketing strategy with which where strong vendor/customer through Mombasa. partnershipspotential exist, the need for constant approach investors. exchanges of information is crucial.
Information technology systems are constantly developing in this sub sector with massive transfers of data essential for not only tracking order progress but also for transferring order specifications, designs, patterns, cutting markers, certification, shipping documents and other data. In short, the industry relies on fast,
Within Uganda, a network of optical fibre cable has been planned with most major commercial centres currently connected.
4.6.2 Information and Communication Technology (ICT)
Businesses are able to connect directly to the optical fibre network thus ensuring fast and reliable service. In addition the costs of connection and service have dramatically reduced in recent years.
Most modern businesses rely on ICT systems to communicate with their suppliers and customers and this is especially so in the case of the CTA industry industry. In a situation where strong long-term vendor/customer partnerships exist, the need for constant exchanges of information is crucial. Information technology systems are constantly 26 transfers of data essential for not only trackin developing in this sub sector with massive
UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
Given the current and developing infrastructure and the reducing tariffs, the ICT provision in Uganda should be more than adequate to attract CTA investment.
4.6.3 Water Downstream industry in the CTA value chain uses large volumes of water particularly in the fabric dyeing and garment finishing processes. In recent years there has been a concerted drive to reduce the water footprint but water remains crucial to the operation of many processes. Access to a reliable and plentiful source of water is therefore important. Uganda is endowed with a plentiful supply of water in locations adjacent to Lake Victoria and the major rivers.
In order to achieve sustainable growth in the CTA industry, the Government will need to champion its development by actively promoting the sector and committing the financial and human resources required. The necessary infrastructure needs to be fast tracked, the offer to potential investors must be formalised and the marketing tools developed to target and raise the interest of potential investors on a global scale. Many of Government’s plans and strategies highlight the importance of the textiles and apparel as an important element of building “the industrial sector into a modern, competitive and dynamic sector fully integrated into the domestic, regional and global economies.” The 2010 - 2015 National Development Plan commits to the following actions that are relevant to the CTA value chain. Create a business-friendly environment for private sector-led industrialisation in which industries will develop, improve productivity and the quality of products through, inter alia, creativity and innovation, and become more competitive in the global economy; • Improve infrastructure development for an effective and efficient industrialisation programme;
The National Textile Policy (NTP) 2009 is a well-considered document that effectively outlines some of the constraints faced by the sector and proposes mitigating actions that, if implemented, would have gone a long way to fostering growth in the downstream industry. This policy makes the following actionable proposals for the first two years: • Improve the capacity of production, marketing and competitiveness of the existing textile enterprises, • Reduce the cost of doing textile business in Uganda by benchmarking against regional and international best practices, and enhancing the up-gradation and modernization of equipment, • Stabilize the home and regional markets by curbing undervaluation and under declaration of imports as well as enhancing public sector business support to the textile sector,
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4.7 Government Commitment to the CTA Value Chain
• Encourage and foster innovation, entrepreneurship, adjustment and adoption of best management practices in the quest for improved competitiveness; • Increase integration with the agriculture sector; • Facilitate improved supply chain efficiency and market responsive product and brand development; • Encourage Foreign Direct Investment in industry and industry related services; • Promote environmentally sustainable industrial development to reinforce national goals of long-term growth and development; • Support the growth and development of a skilled and productive labour force and to ensure that a body of experienced entrepreneurs and trained managers are particularly focused on industrial development; • Promote safe work place practices in all industry sub-sectors; • Promote the participation of disadvantaged sections of society in industrial development activities; • Create support systems for sustainable small and medium industries development; and • Create jobs for the widest section of the population.
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UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
This is followed by actionable proposals for years 3 to 4:
would likely have led to a strengthening of the breadth and sustainability of the sector. It appears, however, that this policy was not fully implemented. There are resources in various Ministries in Uganda that have good understanding of the constraints facing the sector, the opportunities available and actions that need to be taken.
• Improve the quality and quantity of products from the textile sub-sector by developing textile industrial parks that, attract garmenting as well as developing a strong multi-fibre raw material base for the sector given, the labour intensiveness of the activity and therefore relevance to the economic emancipation of especially women and the youth in Uganda, • Increase the spinning and milling capacity from 20 million metres per annum to 180 million metres per annum in five years, • Make ICT an integral part of the entire value chain of textile production and thereby facilitate the sector to achieve international standards in terms of quality, design and marketing, • Support the industry to withstand pressures of import penetration and maintain a dominant presence in the domestic market.
An empowered and adequately resourced oversight group is necessary to drive the development of the sector by monitoring and coordinating the activities of all stakeholders.
4.8 Investment Entrepreneurs There are currently three investors in large scale integrated industry in the CTA value chain - Fine Spinners based near Kampala, Southern Range Nyanza based in Jinja and the new vertical plant investment being undertaken by Shree Modern Textiles in Jinja. A number of other small plants exist in Uganda that have the potential to service the requirements of the international export market but these are not vertical operations and are currently servicing the domestic market. The
Many of the proposals set out by this strategy indicate a clear understanding of the needs of the CTA sector and, had they been implemented during the last 10 years,
28
UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
growth momentum experienced by Kenya, Ethiopia and Madagascar is mostly driven by Foreign Direct Investment. The majority of this investment comes from investors based in China, India, Sri Lanka, Bangladesh, other South East Asian countries, the United States and Mauritius. They invest in Africa for a number of reasons, the principal of these being:
they need a system of competent transactional facilitation.
• Preferential trade access embodied in trade agreements like AGOA, EBA and GSP. • Competitive labour costs • Political Stability • Brand and Retailer interest in diversifying their supplier base
4.9 Access to Finance
It is also important to note that international brands can play a major role in facilitating the location of factories into the region, as was the case with PVH encouraging brands to invest in Ethiopia.
Access to capital finance is a challenge for domestic entrepreneurs particularly if they wish to finance plant upgrading or finance the input costs of large orders. Domestic interest rates average 19.5% with a maximum term of five years and collateral such as land or buildings is required to secure the loan. Dollar denominated loans can be negotiated for 8.5% interest.
When making their investment decisions they weigh up a number of factors including:
The Uganda Development Bank does now provide preferential interest rates (12.5%) and long-term loans to approved projects including manufacturing making it easier for local investors to upgrade and expand their businesses. Letters of credit and order discounting are available, which help to ease the operational finance requirements of domestically owned industries. Access to finance is not a problem for major investors and the repatriation of profits is simply managed. Foreign investors participating in international markets generally rely on off shore financing both for their capital expenditure and operational costs.
Uganda scores well on many of these considerations and should be attracting far more interest than is currently being shown. Potential investors need to be identified and targeted through a comprehensive and professional marketing plan. When potential investors visit Uganda, they should be facilitated and informed on all aspects relevant to their decision making.
Uganda scores well on many of these considerations and should be attracting far more interest than is currently being shown. Potential investors need to be identified and targeted through a comprehensive and professional marketing plan
Preferably, they should be processed through a single government institution such as the Ugandan Investment Authority that should handle all aspects of their due diligence process. Should they wish to investigate further,
29
STRATEGIC PLAN
• The availability of serviced industrial sites and/or buildings including the leasing cost of factory compliant infrastructure. • A proactive government that is willing to engage • The cost and reliability of utilities • Speed to market – the cost and time to manage imports and exports including the transit time to ports, both ocean and air. • Fast and reliable ICT • Security of investment and the legal framework • Raw material availability both within the country and the region in order to offer full package operations • Time required to establish • Ease and cost of employing expatriate staff • Demonstrable success of similar business operating in the country.
STRATEGIC PLAN
UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
5.0
Market dynamics and Uganda’s potential
UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
According to United Nations projections, sub-Saharan Africa will have the highest growth globally in working-age population over the next 20 years. By 2035, the working-age population is expected to be as large as China’s today—more than 900 million people. This massive labour pool is capturing the attention of several industries, including apparel. The governments of Ethiopia and Kenya are taking steps to develop their domestic textile and garment industries. Within sub-Saharan Africa, East African countries—especially Ethiopia and Kenya, and to a lesser extent Uganda and Tanzania—are of interest to international apparel buyers.
Figure 9: Buyers' Interest in Sourcing from Africa
STRATEGIC PLAN
Source: McKinsey survey of chief procurement officers. 2015
31
UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
STRATEGIC PLAN
The massive inflows of Foreign Direct Investment in the apparel sector is transforming the economies of Ethiopia and Kenya. There is a groundswell of interest from international brands and retailers. It’s important that Uganda, with minimal apparel production capacity for export, is showing some interest to foreign buyers. If Uganda can demonstrate its competitiveness then it is probable that investment will follow. In order for Uganda to attract CTA investment, the following actions need to be taken:
desired by buyers by improving efficiency particularly in the garment production facilities. All of the above issues can be remediated if factory owners wish to expand into the international export markets and are prepared to commit the necessary effort and resources to do so.
Potential Impact of Proposed Strategy
• Fully develop and articulate Uganda’s unique selling points with regard to cotton, textiles and apparel. • Develop clear messaging to potential CTA investors with a professional marketing strategy developed to identify and target these investors • Provide adequate resources to the Export Promotion Bureau and the Uganda Investment Agency with specific incentives and targets to market CTA investment and its produce. • Build compliant factory buildings that could allow quick establishment of CMT factories • Formalize the offerings to investors. • Establish the 5c/KwH power tariff as official policy. • Government should include opportunities in export led development in its efforts to promote domestic and regional markets, import replacement and BUBU.
Based on the effective implementation of the strategy, a relatively modest scenario has been developed that should be realistically achievable over the next eight years. This scenario looks at the impact of downstream investment on the employment of labour, foreign exchange earnings, wages injected into the economy and lint usage. From a starting point of just two vertically integrated factories, the scenario predicts seven integrated factories, five standalone spinning mills and 30 garment sewing factories by the end of 2028. This scenario envisages export lead growth supported by the existence of opportunities in the international markets where Uganda has a competitive advantage. While the National Development Plan has a five-year span, this scenario effectively covers eight years as embedding proposed interventions will take some time before their full impact is realised.
Similarly, in order for existing large scale manufacturers to achieve international market penetration, the following should happen: • CTA industrialists should be made aware of the complexities of dealing with international buyers. They must improve their level of customer service and response times. • Industrialists should be knowledgeable about market segmentation. • Quality standards of yarn, fabric, finishing, sewing and embellishment must be improved to be acceptable to international buyers. • Occupational Safety and Health standards must be enhanced to be compliant with international standards • Factories will need to reach international standards of price competitiveness
Uganda, with minimal apparel production capacity for export, is showing some interest to foreign buyers. If she can demonstrate her competitiveness then it is probable that investment will follow
32
end of 2028. This scenario envisages export lead growth supported by the existence of opportunities in the international markets where Uganda has a competitive advantage. While the National Development Plan has a five-year span, this scenario effectively covers UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY eight years as embedding proposed interventions will take some time before their full impact is realised. CTA expansion scenario
CTA expansion scenario 35 30 25 20 15 10 5 0
2019
2020
2021
2022
2024 vertical
2025
2026
2027
2028
apparel
Figure 10: Potential Increase in Investment start ups
The underlying the development supply. of the Investors scenarioshould are relatively The assumptions assumptions underlying the development be enabled modest to buy but of the scenario are relatively modest but should their factory buildings and build additional should be attainable with minimum risk. The scenario assumes the commitment by the be attainable with minimum risk. The scenario factories for their expansion at no cost to the government to fast-track promotion of the CTA industry by committing the resources assumes the commitment by the government Uganda government while releasing finance to fast-track promotion of the CTA industry by to fund further textile and apparel cluster required to market the investment opportunities effectively, formalising the offer to committing the resources required to market expansion. potential investors and providing the investment opportunities effectively, the infrastructure to host both local and foreign formalising the offer to potential investors and Uganda must offer better or similar conditions investments. providing the infrastructure to host both local than competitor countries in the region in order and foreign investments.
STRATEGIC PLAN
spinning
2023
to attract investors. Initially, Uganda should actively market thethe country a destination While Ethiopia has been very successful in attracting FDI into CTAassector by establishing While Ethiopia has been very successful for CMT investment based on the ability to large T&A industrial complete with infrastructure many buildings, in attracting FDI into theparks CTA sector by import fabricand from fabric factory mills designated by this establishing large T&A industrial parks the buyers. strategy proposes that Uganda takes a staged approach to the sector development in order complete with infrastructure and many to minimise risk.this strategy proposes that factory buildings, These mills are likely to be based mainly in Uganda takes a staged approach to the sector Asia. As the industry develops and additional development in order to minimise risk. fabric mills come on stream, the industry will A modest number of factories specifically designed to house apparel industry transform to usingthe fabric from Uganda and should be A modest number of factories specifically the region resulting in greater capture of value built. This will enable Uganda to market tangible investment opportunities to investors in designed to house the apparel industry should addition in Uganda. be built. This willalso enable Uganda to marketgreen field sites for larger integrated investments. As the apparel while having available tangible investment opportunities to investors suggests that over 50,000 interest and investment grows, more factoriesThe canscenario be built to balance demand and supply. in apparel while also having available green direct new jobs could be created in the field sites for larger integrated investments. industry within the next 10 years bringing total employment in the large formal industry to over Investors should be enabled to buy their factory buildings and build additional factories for As the interest and investment grows, more 53,000 workers. factories can be built and their expansion at to nobalance cost todemand the Uganda government while releasing finance to fund further
textile and apparel cluster expansion.
33
fabric from Uganda and the region resulting in greater capture of value addition in Uganda. UGANDA COTTON, suggests TEXTILES ANDthat APPAREL INDUSTRY The scenario over 50,000 direct new jobs could be created in the industry within the next 10 years bringing total employment in the large formal industry to over 53,000 workers.
Total employment
Total Employment 60,000
NUMBER OF WORKERS
50,000 40,000 30,000 20,000
STRATEGIC PLAN
10,000 0
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
Figure 11: Potential Growth in CTA Employment
Each direct job created will contribute not only to creating a skilled labour force in the apparel manufacturing, but also to the support of theirsupplies families In transport, andand trimsdependents. (packing materials, polybags, cartons, print shops, etc.) addition, the cash injected into the economy will create many thousands of indirect jobs accommodation, food and other services to providing transport, supplies and trims (packing polybags, cartons, print shops, the materials, workforce. The wages earned at a constant The wages earned at a 2009 rate of pay will reach over $47 million etc.) accommodation, food and other servicesper to year the inworkforce. The wages earned at a 10 years. This scenario assumes that constant 2009 rate of pay constant 2009 rate of pay will reach over $47 Uganda millionwill perbeyear in 10quality years. targeting foreign direct
will reach over $47 million per year in 10 years. This scenario assumes that Uganda will be targeting quality foreign direct investment that will provide a full package offering to its clients
investment that will provide a full package offering to its clients and not merely Cut, Make and Trim operations.
The development of full package operations will start with imported fabric at early stages, while developing a vibrant local textile industry to provide yarn and fabric to the apparel industry. This will have a huge impact on foreign exchange earnings, which should expand to over US$ 658 million per year by the end of year 10. Finally, there will be a positive impact on the volume of Uganda’s cotton lint processed domestically. It is envisaged that over 20,000 tonnes of fibre will be spun in Uganda, most of which will be cotton lint. In this scenario, over half of Uganda’s current cotton lint production would be used domestically.
Each direct job created will contribute not only to creating a skilled labour force in the apparel manufacturing, but also to the support of their families and dependents. In addition, the cash injected into the economy will create many thousands of indirect jobs providing
34
34
Wages in US$ UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
60,000,000 50,000,000
Wages Wages in in US$ US$
40,000,000 60,000,000
30,000,000 50,000,000
20,000,000 40,000,000
10,000,000 30,000,000
0 2019 20,000,000
2020
2021
2022
2023
2024
2025
2026
2027
2028
500,000,000
Export Earnings in USD
700,000,000 400,000,000 600,000,000 300,000,000 500,000,000 200,000,000 400,000,000 100,000,000 300,000,000 0 2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
200,000,000
Figure 13: Potential Export Earnings from the CTA sector
Finally, there will be a positive impact on the volume of Uganda’s cotton lint processed 100,000,000 domestically. It is envisaged that over 20,000 tonnes of fibre will be spun in Uganda, most of 35 half of Uganda’s current cotton lint which will 0be cotton lint. In this scenario, over production2019 would be used 2021 domestically. 2020 2022 2023 2024 2025 2026 2027 2028
STRATEGIC PLAN
This scenario assumes that Uganda will be targeting quality foreign direct investment that 10,000,000 will provide a full package offering to its clients and not merely Cut, Make and Trim operations. The development of full package operations will start with imported fabric at 0 early stages, developing industry to provide and fabric 2019while2020 2021 a vibrant 2022 local 2023textile 2024 2025 2026 yarn 2027 2028 to the apparel industry. This will have a huge impact on foreign exchange earnings, which should over US$earned 658 million per year by the end of year 10. Figure 12:expand Potential to Annual Wages by CTA workers This scenario assumes that Uganda will be targeting quality foreign direct investment that will provide a full package offering to its clients and not merely Cut, Make and Trim Export earnings in USD operations. The development of full package operations Export Earnings in USDwill start with imported fabric at early stages, while developing a vibrant local textile industry to provide yarn and fabric to 700,000,000 the apparel industry. This will have a huge impact on foreign exchange earnings, which should expand to over US$ 658 million per year by the end of year 10. 600,000,000
UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
Fibre usage in tons
Fibre Usage in Tons 25,000
20,000
15,000
10,000
STRATEGIC PLAN
5,000
0
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
Figure 14: Potential expansion of Cotton lint usage in Uganda
An important added benefit from an expanding CTA industry is the opportunity it will An important added benefit from an expanding CTA industry is the opportunity it will provide for SME provide for SME entrepreneurs to utilise thesecond yarn and fabric second quality entrepreneurs to utilise the yarn and fabric overruns, quality fabricoverruns, and waste to manufacture a fabric wide range of products for the domestic market at competitive prices. and waste to manufacture a wide range of products for the domestic market at competitive prices.
ACTION PLAN The Action Plan below lays out the implementation matrix to achieve the vision of a vibrant, sustainable and transformative Cotton, Textile and Apparel industry in Uganda.
36
Farmers better connected to decision making structures, better informed and more able to access inputs and technical services.
Decline in soil fertility addressed and soil fertility recovers Farmers better connected to decision making structures, better informed and more able to access inputs and technical services. Sharp practice by unscrupulous buying agents diminished.
Effective agricultural Service Delivery models replicated across the country.
Soil fertility in the East addressed through soil replenishment interventions.
Cotton farmers facilitated to form representative associations that are directly linked to national structures.
Farmers are guaranteed a minimum purchase price for seed cotton based on the indicative price with limited adjustment for distance from Ginnery.
Improved seed varieties developed, multiplied and distributed to farmers
Outcome
The majority of Ugandan cotton farmers are producing cotton sustainabily and profitably.
Cotton seed development adequately resourced to develop new varietals of seed that are region specific and adapted to changing climatic conditions.
Objective 1: Secure sustainable smallholder cotton production and facilitate large scale commercial production
Branded sustainable cotton production initiatives to be encouraged and facilitated.
Action
Ojectives
Action Plan for the development of the CTA sector in Uganda
Ginners working with brands, funders and brand cotton organisations (CMiA, BCI, Textile Exchange). Ginners/NARO/CDO
NARO/NaSARRI
CDO/Ginners
CDO/Ginners
Cotton production effectively integrated into sustainable farm practice with increased yields, reduced expenditure on inputs. Increased yields and income for cotton farmers Increased yields and income for cotton farmers Increased income for remote cotton farmers
National Semi Arid Resources Research Institute (NaSARRI) & CDO
Responsibilty
Increased yields and income for cotton farmers
Increased yields and income for cotton farmers
Impact
LOW
LOW
MEDIUM
MEDIUM
LOW
LOW
Risks
YEAR 1
YEAR 1
YEAR 1
YEAR 1
Year 1 ongoing
Year 1 ongoing
timing
$5,230,000
costing
In addition, a sum of US$25 million has been proposed as a Contingency Fund to be held by the Uganda Development Bank to facilitate co-financing of infrastructure including buildings as well as plant and machinery investments.
Significant funding has been allocated to the UFZA to kick start the development of a free zone by developing the site, providing infrastructure such as roads, security fencing, sewerage and drainage as well as erecting a number of compliant, apparel manufacturing ready factories.
The Action Plan below lays out the implementation matrix to achieve the vision of a vibrant, sustainable and transformative CTA industry in Uganda. Each Objective within the Action Plan has been given an indicative budget and the plan indicates the responsible agencies. Allocation is also made for the Designated Authority to drive the implementation of the Strategy.
Action plan
STRATEGIC PLAN
37
38
List of factory buildings available with manufacturing and factory compliance conditions for immediate access and marketing. Land identified, development plan agreed, finance raised/committed Site plan developed and basic infrastructure completed. (Roads, fencing, security, storm water, electricity/water supply, waste water disposal) Factories designed, tendered, contracted and built to match apparel manufacture requirements and compliant with local and international health, industrial and safety standards. A number of dynamic large-scale textiles mills producing a diverse range of fabrics from a variety of fibres, some integrated into spinning and/or garmenting.
Identify vacant buildings suitable for apparel manufacture
Identify suitable development land for textile and apparel cluster such as EPZA land allocation in Jinja.
Fasttrack planning of site design and provision of basic services
Build 10 factory shells suitable for apparel manufacture
Identify further site/s for expansion of textile and apparel industry (Entebbe?)
Objective 2: Improve cotton, textile and apparel related infrastructure and business climate.
Outcome
Action
Ojectives
Action Plan for the development of the CTA sector in Uganda
Integrated textile millsand new apparel factories create over 50,000 new jobs in eight years
Apparel factories start recruiting creating over 10,000 jobs in first three years.
Impact
STRATEGIC PLAN
UFZA/UIA
UFZA/UIA/NPA
UFZA/UIA/NPA/ERA/ NWSC
UFZA/UIA/NPA
UFZA/UIA
Responsibilty
LOW
MEDIUM
LOW
LOW
LOW
Risks
YEAR 1
YEAR 1 &2
YEAR 1
YEAR 1
YEAR 1
timing
$35,420,000
costing
UIA is able to market Uganda more effectively
Buyers interested in sourcing from Uganda identified and introduced to factories and their products Updated factories are better able to compete in product development, product diversification, price, quality, speed to market and productivity.
Introduce formal policy to maintain the preferential energy tariff
Match production capabilities to prospective buyers and develop trade linkage activities to matchmake factories with prospective buyers
Promote competitive financial mechanisms to facilitate industrial plant upgrading and incentives for technology investments at spinning and weaving/knitting and apparel factories.
Factories imbed effective quality control systems resulting in improving quality standards of production processes and finished products.
Conduct quality assurance audits and plan quality upgrading programmes.
Intervention plan established to train workers and job seekers in hard and soft skills Management and supervisory training courses developed and implemented. 1000 workers receive training in hard and soft skills. 100 middle managers receive industry specific training.
Factory infrastructure conditons in industrial safety, environmental and social compliance are identified and remediated.
Conduct compliance audit
Conduct training skills gap analysis and formulate remediation plan.
Constraints in factory ergonomics, sewing efficiencies, effective costing, production methods, materials control and productivity for cost effectiveness are identified and remediated.
Conduct productivity audits and production improvement intervention by industry experts, local and expats.
Objective 3: Support the existing industry to develop integrated value chains exporting full value apparel products.
Outcome
Action
Ojectives
Action Plan for the development of the CTA sector in Uganda
UDB, Private Sector Banks, NPA, UIA, Ministry of Trade.
Increased orders and employment
HIGH
LOW
UEPB with donnor technical assistance
USD50 million in additional exports achieved
LOW
LOW
LOW
LOW
Risks
LOW
Factories, Private Sector training providers,TVET, Universities.
Ministry of Trade, UEPB with donor technical assistance and factories commitment
Ministry of Trade, UEPB with donor technical assistance and factories commitment
Ministry of Trade, UEPB with donor technical assistance and factories' commitment
Responsibilty
30 new apparel ERA, NPA, Ministry of factories, 5 spinning Trade. mills and 3 vertically integrated factories established within eight years.
Factories become more efficient, industrial peace in maintained, customer service is improved resulting in increased orders and employment.
Factories reach Acceptable Quality Limits (AQL) resulting in increased orders and employment.
Factories upgraded to produce for any international buyer under vendor compliance conditions resulting in increased orders and employment.
Factories reach 80% efficiencies with effective cost control systems and competitive pricing resulting in increased orders and employment.
Impact
STRATEGIC PLAN
39
YEAR 1
YEAR 1&2
YEAR 1
YEAR 1
YEAR 1
YEAR 1
YEAR 1
timing
$760,000
costing
40
Objective 5: Promote targeted FDI in CTA Sub Sector with strong backward linkages to the domestic industry and international standard. Marketing plan developed to target identified investors
Profiles of domestic industry developed including possibilities for joint venture partnerships Annual attendance plan developed for key investment forums/trade fairs UIA and UEPB engage in two country visits per year in partnership with major buyers in order to solicit investment
2. Identify key possibilities for joint venture investment with domestic industry.
3. UIA to identify key investment fora/ trade fairs to promote Uganda investment opportunities.
4. UIA & UEPB to develop relationships with brands and retailers and plan joint visits to the head offices of their key vendors to promote investment in Uganda
UIA develops the financial and human resources to promote Uganda as a viable CTA investment destination.
4. Establish CTA desk within the Uganda Investment Authority (UIA) to promote investment in this sector and provide transactional facilitation to potential investors.
1. Identify key targets for FDI in commercial cotton production, spinning, vertically integrated factories and apparel manufacturers,
Buyers develop interest in sourcing form Uganda. Five additional brands start sourcing programme. Five buyers' and five investors' visits to the country for exploration purposes and establishing Uganda' credentials as a viable sourcing destination.
3. Build Uganda’s reputation as an attractive investment and compliant sourcing destination.
Visiting investors facilitated
Marketing strategy initiated
Target investors identified
Marketing materials produced.
Marketing strategy developed.
Outcome
Uganda recognised as a viable manufacturing destination for potential investors.
1. Assist UIA/UFZA to develop CTA specific marketing strategy.
Objective 4: Enhance the CTA capacity of the UIA to effectively market Uganda as a strong prospect for CTA Foreign Direct Investment.
2. UIA and UFZA actively promote targeted FDI in CTA Sub Sector with strong backward linkages to the domestic industry and international standards.
Action
Ojectives
Action Plan for the development of the CTA sector in Uganda Responsibilty
Five investors established in the country within two years.
Five investors established in the country within two years.
Three Apparel factories, one vertically intergrated factory and one spinning mill establish as new investments in the first two years.
UIA & UEPB
UIA
UIA, UEPB with donor technical assistance
UIA, UFZA with donor technical assistance
Seven integrated facUIA, UFZA with donor tories, five standalone technical assistance spinning mills and 30 garment sewing factories by the end of 2028 employing 50,000 workers
Impact
STRATEGIC PLAN
LOW
LOW
LOW
LOW
LOW
Risks
YEAR 1, 2 & 3
YEAR 1 &2
YEAR 1 &2
YEAR 1
YEAR 1
timing
$10,120,000
costing
Infrastruture Contingency Fund:
Objective 8: Enhance smallscale industry CTA opportunities and linkages
Objective 7: Enhance the CTA capacity of the UEPB to assist manufacturers to access international export markets.
Develop the case for Uganda's green credentials including sustainable/organic cotton farming, hydroelectric power, compliance with social and environmental criteria.
Objective 6: Build Uganda’s reputation as an attractive investment and compliant sourcing destination.
Large scale investors receive part funding of buildings and plant through the UDB at competitive interest rates Updated factories are better able to compete in product development, product diversification, price, quality, speed to market and productivity.
1 Establish a contingency fund within the UDB to facilitate invesment infrastructure and plant purchase for new investments.
2. Promote competitive financial mechanisms to facilitate industrial plant upgrading and incentives for technology investments at spinning and weaving/knitting and apparel factories.
Selected SMEs are incorporated in the export cycle and adjust to quality systems, logistics and productivity to satisfy international markets.
Buyers develop interest in sourcing from Uganda. Five additional brands start sourcing programme
4. UEPB assists producers to market CTA products at international trade fairs.
2. Support vertical integrated capabilities currently available in two factories by promoting subcontracting schemes with smaller firms based on market expansion and overflow capacities.
Commercial representatives appointed in UK, France, Germany and USA.
3. Devise strategy to appoint and manage Independent commercial representatives in key international markets.
Economic growth based on servicing the export sector
Export promotion materials distributed to key outlets such as Embassies and used at international trade fairs.
2. Develop export promotion marketing materials to showcase Uganda's business climate and promote CTA products.
1. Facilitate private sector to provide transport, accommodation, catering, training and other services to factory clusters.
UEPB recruits a CTA marketing specialist.
Uganda recognised as a a risk free source of sustainable textiles and apparel.
Outcome
1. UEPB develops knowledge and capacity to market CTA products internationally.
Attend and present at sustainable apparel production fora
Partner with credible sustainable cotton farming organizations
Action
Ojectives
Action Plan for the development of the CTA sector in Uganda Risks
NPA/UMA
Factories, Ministry of Trade, UMA.
UDB, NPA, UIA, Ministry of Finance.
UDB, Private Sector Banks, NPA, UIA, Ministry of Trade.
SMEs become more robust and start to develop their own clients and international orders. Uganda CTA industry achieves sale through multiple new investment Increased orders and employment
UEPB with commecial repesentatives
UEPB with donor technical assistance
UEPB with donor technical assistance
UEPB with donor technical assistance
CDO, UIA, UEPB
HIGH
MEDIUM
MEDIUM
LOW
LOW
MEDIUM
LOW
LOW
LOW
CDO, individual ginners, LOW sustainable cotton farming organisations
Responsibilty
5,000 Indirect jobs within five years.
Factory expansions, new investments attracted. USD100 million in exports by 2022. USD 600 million exports by 2028.
Improvement in cotton farmer practices, health and income. Sustainable job growth in downstream industries.
Impact
STRATEGIC PLAN
41
YEAR 1
YEAR 1
YEAR 2
YEAR 2
YEAR 1 &2
YEAR 2
YEAR 1
YEAR 1
within 1 year
YEAR 1, 2 & 3
timing
$25,300,000
$50,000
$2,530,000
costing
42
Establish a high level authority empowered to drive the Strategy, convene stakeholders and hold individuals and Agencies accountable for timeous delivery
Designated Authority
Outcome
Impact
Responsibilty
Risks
timing
$2,530,000
costing
Cotton development Organisation MD Jolly Sabune discusses a point with Msingi East Africa executives Antoinette Tesha (left) and Diana Mulili (right) during a learning tour to India and Sri Lanka to study the CTA Industry there.
Action
Ojectives
Action Plan for the development of the CTA sector in Uganda
STRATEGIC PLAN
UGANDA COTTON, TEXTILES AND APPAREL INDUSTRY
STRATEGIC PLAN
43
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