The fast-growing, southern city exemplifies Ethiopia’s development potential.
Flying into Hawassa, the southern Ethiopian city presents itself as a giant Lego board of sorts, with identical gray blocks adorned with teal and red detailing lining up for what seems like miles. Upon closer inspection, of course, the “blocks” become buildings, a cluster of massive steel factories recently built on a 300,000-square-meter plot of land outside of the city. This is the Hawassa Industrial Park, and it is not only transforming the face of the city but also repositioning Ethiopia as a globally competitive hub of light manufacturing.
With just under half a million residents, Hawassa — the capital of Ethiopia’s Southern Nations, Nationalities and Peoples’ region — stands out among Ethiopian capitals for how quickly it has developed. The area that now serves as the city’s urban center was formerly a camp and grazing ground for Sidama and Oromo pastoralists, until the city was founded by the imperial government in 1960. The following year, the government granted over 400 military veterans and their families land to settle in the area, and it soon became an official municipality.
The town continued to grow over the decades that followed, and in the early 1990s, Hawassa was named the capital of the SNNP regional state, which is home to more than 45 different ethnic groups. The SNNP borders Kenya and South Sudan to the south and southwest, and the Ethiopian regions of Gambella and Oromia to the northwest and northeast. Geographically, the state is perhaps most well-known for its bodies of water, including the Omo River and the many Rift Valley lakes (in fact, Hawassa’s name derives from the Sidama word for “wide lake”).
The city offers a significantly warmer climate than Addis Ababa and is home to the placid Lake Hawassa, making it an increasingly popular retreat for those seeking to escape Ethiopia’s capital for some rest and relaxation. Several new hotels and resorts have popped up in recent years, including the lakeside Haile Resort owned by the legendary world-champion athlete Haile Gebreselassie. Lake Hawassa offers visitors the chance to take hippo-watching boat rides or spot local bird species such as Maribou storks and fish eagles on its shore, and the city makes for an ideal jumping-off point to explore nearby attractions such as Wondo Genet and Abijatta-Shalla National Park.
Yet despite all of this growing ecotourism potential, Hawassa’s main source of recent international attention focuses on the industrial park — one outcome of the government-run Industrial Parks Development Corporation’s strategy to make Ethiopia’s manufacturing sector globally competitive.
Africa’s largest industrial park
The US$250-million park is the only such facility on the continent exclusively dedicated to textile and garment manufacturing, and it will eventually encompass 1.3 million square meters — making it Africa’s largest manufacturing park. Over 15 major international manufacturers have already pledged to set up factories in the Chinese-built facility, including such headliners as Swedish apparel company H&M and PVH Corp, the American firm that owns the Calvin Klein and Tommy Hilfiger brands.
When fully operational, the HIP is expected to employ up to 60,000 workers and generate a total export value of $1 billion — more than enough to transform the regional economy. Its large size speaks to the government’s aim to attract investors by creating efficiencies wrought from economies of scale. In an interview with the Ethiopian Herald last year, Fitsum Arega, director of the Ethiopian Investment Commission, expressed the hope that parks such as the HIP will have “comparative advantages in terms of cost and efficiency,” allowing manufacturers to “pool resources and curb shortages” in the course of production.
While Ethiopia’s textile and clothing exports are currently low by global standards, the Hawassa Industrial Park cloud play a large role in enabling the country to become a significant player in the global apparel industry. Following the example of southeast Asian nations such as Taiwan and South Korea, the Ethiopian government seeks to develop apparel production and other “light manufacturing” sectors as a way to kickstart industrial development across Ethiopia. In addition to Hawassa, similar parks are being planned for Dire Dawa, Mekelle and Kombolcha.
The primary goal of these parks is to boost and diversify Ethiopia’s export earnings, which currently come mainly from agricultural products such as coffee and sesame. The vast majority of Ethiopians currently derive their livelihoods from agricultural production, but as urbanization and population growth continue to increase, employment opportunities need to be created in and around Ethiopia’s major cities. Light manufacturing offers a reliable source of large-scale employment, and Ethiopia is in an excellent position to become a significant node in the competitive international supply chains that facilitate garment manufacturing.
Indeed, Africa has been seen as the “next frontier” for apparel manufacturing for some time, as many international brands seek alternatives to rising production costs in China while also maintaining environmental and labor standards. Alongside countries such as South Africa and Kenya, Ethiopia has risen as one of the most promising locations for more apparel manufacturing on the continent.
Entering the global manufacturing arena
In addition to the fact that Ethiopia’s manufacturing costs are very globally competitive, the strategic planning of the public sector has also attracted investor interest. Ethiopia also benefits from the United States’ African Growth and Opportunity Act, a law that gives many African countries duty-free export privileges to the U.S. market. Thomas Crockett, a representative of a major American footwear trade association, hailed this benefit, along with other advantages that Ethiopia offers U.S. manufacturers in an October 2016 interview with Business of Fashion, a major apparel industry website.
“Some U.S. shoe duties are astronomical, so, with Ethiopia, we have nine more years of duty-free certainty ahead of us,” Crockett noted. “That’s good news for companies and for consumers.” The sector also enjoys duty-free entry into European Union countries and Canada, as well as preferential duty treatment from other countries such as Japan.
When it comes to the Hawassa Industrial Park specifically, the park’s eco-friendly development strategy makes for another major selling point for international companies. The entire park has been constructed to be a “zero-liquid discharge” facility, meaning that all wastewater from the factories will be recycled onsite and not released into the local water system or ground water supply. Additionally, the park will eventually be a beneficiary of Ethiopia’s massive hydroelectric projects, which promise to provide manufacturers with a long-term source of renewable energy.
According to Mark Green, an executive vice president at PVH, his company “set out to learn from social and environmental challenges in other production countries, and establish an operation we can be proud of.” Ethiopia fit the bill for PVH, to the extent that an entire chapter of the company’s latest annual report is dedicated to the Hawassa Industrial Park.
The Hawassa Industrial Park has been conceived as a one-stop shop for manufacturers. All relevant government agencies that exporters interact with will have a presence onsite, including customs, tax and immigration offices. Banking and logistics services will also be provided within the park. This streamlined business environment is not intended to only attract international investors; in fact, the IPDC has reserved between 25 and 30 percent of the space in the park for domestic investors, and a range of incentives are being offered to lure Ethiopian manufacturers to Hawassa.
If all goes as planned, in a few years’ time Hawassa will indeed be known as the capital of Ethiopian textile and garment production, and the apparel industry will stand as a major contributor to the national economy. Futhermore, if the city succeeds in emerging — seemingly from nowhere — to become an economic powerhouse, it will serve as an example of what even a small Ethiopian city can offer to the nation and to the rest of the world.
As the Ethiopian government seeks to kickstart “light manufacturing” and other industrial development across the country, here’s a quick look at where things currently stand for the Ethiopian market:
(Data: 2014, BACI: International Trade Database courtesy of the Observatory of Economic Complexity)
Although Hawassa lays far south of the popular “northern route” that draws most of Ethiopia’s tourists, last year Ethiopian Airlines began offering four weekly direct flights to the city from Addis Ababa, making Hawassa much more accessible for both foreign and domestic visitors. (Travel time is a mere 40 minutes.)
Road transport from Addis has also become easier since the 2014 completion of the Addis-Adama expressway, a six-lane toll road that will eventually connect to the 203-kilometer Modjo-Hawassa Expressway currently under construction. All of these improving transportation links are bringing Hawassa closer to the rest of Ethiopia, and indeed to the globe.