Manufacturing in Africa is expensive

Whether or not major corporations will succeed in Africa remains to be seen. Along with the potential environmental impact and general concern regarding factory safety and worker treatment, resettlement — when communities have to move in order to make room for factories and added infrastructure — is a challenging and often upsetting endeavor.

Some major companies are addressing these issues with transparency — laying out their plans publicly, with frequent updates — they are also emphasising the economic benefits of their arrival.

PVH Corp., the US conglomerate that owns Tommy Hilfiger and Calvin Klein, worked in partnership with the Ethiopian government to build facilities in an industrial park in the city of Hawassa, and plans to hire 30,000 to 60,000 employees over the next three years.

The country’s access to hydroelectric power, which will eventually help power the plant along with geothermal energy, was a deciding factor to build the industrial park there.

PVH, in partnership with third-party suppliers, is also building a zero-liquid discharge effluent treatment facility on the premises that will recycle approximately 90 percent of all wastewater produced there.

Vocational and life skills training, transport infrastructure and waste management systems are also being implemented in partnership with the global donor community and local government in order to make PVH’s presence in the community worthwhile for both the country of Ethiopia and the company’s future employees.

“We handpicked our suppliers — the best suppliers we had, who have the same corporate responsibility values that we as a corporation have — people who we felt could have a vision that is similar to ours,” says Bill McRaith, PVH’s chief supply-chain officer.

“Here’s an opportunity to stand up for something, but do it in a different way than anything we’ve done before. Let’s look back at what we could have done better, or been smarter about the first time around.”

One of the biggest reasons to manufacture in Africa is the tax break it affords companies. The African Growth and Manufacturing Act (AGOA) which gives duty-free and quota-free status to apparel made in more than 45 countries in sub-Saharan Africa, allows companies to import goods from Africa into the US for zero duty taxes.

(Northern African countries, including Morocco, Libya and Egypt, are not included.) The United States trade act was first implemented in 2000 and is now set to remain in place through 2025.

Of course, as the Trump administration has begun to outline its protectionist strategies around trade — pulling out of the Trans-Pacific Partnership and threatening to disassemble the North American Free Trade Agreement — questions of whether AGOA will indeed last are being raised. Right now, making items in Africa does keeps taxes lower. If AGOA were to cease to exist, that would no longer be the case.

Retail executives are less concerned with AGOA, however, believing that Trump has more significant trade policies to tackle, such as the “border adjustment tax” proposed by Congress, which could significantly raise income taxes for companies that import goods.

And yet, it’s something that can’t be swept under the carpet. “If he gets rid of that,” James says, “We have a whole ‘nother set of issues.”

By Snave (Snave kollection)