Why Invest in Tanzanian Textiles and Garments?
1. Potential for vertically integrated operations given a plentiful supply of cotton
Tanzania is a major cotton producer with the expertise and infrastructure to sustain the spinning, weaving and manufacturing elements of the value chain. The country can therefore be a base for vertically integrated textile and garment operations. Major firms are already successfully using this model in Tanzania. The majority of cotton produced in Tanzania is grown in the Western Cotton Growing Area (WCGA). The map below shows the concentration of cotton growing across regions. As can be seen on the map, cotton growing is not limited to any one area, giving scope to set up upgrading operations in several regions. There are new cotton growing regions, Geita and Simiyu, which are not shown on the map. The new region of Geita is located between Kagera and Mwanza regions, whereas the new region of Simiyu lies between Mwanza, Shinyanga, and Mara regions.
Tanzania’s production of seed cotton for the past seven years is shown below:
While there has been variability in production levels in recent years due to price instability and weather fluctuations, there has been recent progress in introducing contract farming in some of the growing regions, which is already leading to higher and more stable yields, as well as higher quality cotton.
The Tanzania Cotton Board regulates the cotton sub-sector on behalf of the Government. It ensures adherence to cotton farming procedures and regulations, ensures steady supply of agro-inputs, maintaining a level playing ground for the cotton business companies and collecting, refining and disseminating information to stakeholders. It guarantees producers availability of cotton lint throughout the year.
2. Preferential access to a number of lucrative export markets
Tanzania boasts a large domestic market and an emerging middle class, pushing up demand for quality garments. This situation is replicated across many East and Southern African countries, creating a substantial regional market for apparel. As a member of both the East African Community (EAC) and Southern African Development Community (SADC) regional trading blocs, Tanzania is ideally placed to take advantage of this. These regional markets show increasing demand for imported clothing, much of which is currently being met by China. There is scope for regional exports to replace current imports from Asia.
Furthermore, textiles and garments are among the 6,500 products from Tanzania that enjoy duty- and quota-free access to the US market through the African Growth and Opportunity Act (AGOA). Additionally, Tanzania, as part of the EAC, has an interim Economic Partnership Agreement (EPA) in place with the European Union (EU). This guarantees tariff-free access to EU markets. A new EPA was expected to be signed in 2014.
3. Competitively priced labour in an industry with a commitment to improving manufacturing skills
As wages in garment and textile producing countries continue to rise, investors are looking for new economies which offer more competitive rates. Wages in Tanzania are far lower than those in large garment-producing Sub-Saharan countries. The table below demonstrates the distinct cost advantage Tanzania has over competitor economies in Sub-Saharan countries:
In a survey for the 2012 UNIDO Tanzania Competitiveness Report, 83% of industrial firms said it was easy to find a suitable low-skilled workforce, and 66% of firms said it was easy to find a suitable medium-skilled workforce. In the World Bank’s Africa Competitiveness Report 2013, only 6.7% of firms in Tanzania said an ‘inadequately educated workforce’ was a problem for their firms – below the Sub-Saharan African average. Fewer firms in Tanzania report it as a problem than in competitor countries in North Africa like Algeria and Morocco and in Sub-Saharan Africa like Mauritius and South Africa. Skill levels are set to rise. The Government has backed a scheme, initiated by the Textile Development Unit, to educate a group of trainers to improve the skill level of supervisors and thus of operators working in the Tanzanian textile and garment sub-sector. This scheme, currently being piloted in Western Tanzania, is expected to be rolled out nationwide.
4 Competitive Power Costs
Power costs in Tanzania are cheaper than in most of the Sub-Saharan countries in Africa. The table below shows the power cost advantage Tanzania has over these countries:
Low cost labour, combined with very reasonable electricity charges, means that Tanzania enjoys significant cost advantages over many of its major international rivals.
5 Strong and growing Government support for the sub-sector
The relationship between the Tanzanian Government and the textile and garment sub-sector is growing stronger day by day.
In 2012, the Government formed the Textile Development Unit at the Ministry of Industry and Trade, with the main task of supporting the development of a large and internationally competitive textile and garment sub-sector.
In 2013, the Textile and Garment Manufacturers Association of Tanzania (TEGAMAT) was formed to represent the interests of the industry. The Government, TEGAMAT and the TDU are working closely to improve the regulatory environment, the incentives for investors, the quality of inputs, and the upgrading of the industry. Furthermore, the TDU will help new investors to locate empty factory space in identified regions and can link investors to joint venture partners.
6 Investment support in the regions
All areas in the country have their own investment committees. The TDU is in constant touch with these committees, and can therefore advise on the availability and suitability of opportunities in any part of the country. The TDU is also in touch with all of the current textile and garment operations, and is able to advise on potential joint venture opportunities, as well as the availability of yarn and fabric for garment manufacturers.