In the third article of the How to Invest series, we will walk you through one of Africa’s oldest and fastest developing industries with evidence dating back to 5000 BC; the Textile Industry.
What began from nets produced from threads by anglers, the craft of basketry was formed by interlacing flexible cane or reeds practised in prehistoric times by Africans and the people of Peru. It has now become the Textile Industry.
What are textiles?
A porous fabric that separates protects or drains the soil used in building roads. A medical dressing fabric that is used for clinical purposes. An aeronautics company in the technical textile industry that uses hemp to power its products. These are the many uses of Textiles.
In the simplest terms, textiles are materials made from the filament, fibre, or yarn which can easily be made into fabric or cloth. They are formed by various methods such as weaving, knitting, braiding, felting, twisting, or webbing, which is interlocking yarns into specific patterns or designs to create cloth.
Textiles that are made from Fibre may be man-made or natural. Therefore, threads, lace, nets, cords, ropes, braids, embroidery, and all fabrics made by weaving, knitting, twisting, bonding, felting, or tufting are textiles.
There are two categories of textiles:
- Technical textiles: These textiles are made for their use or performance first, like an oil filter. However, they can also be made for their performance and aesthetics, like a diaper.
- Conventional textiles: These are made first and foremost for their aesthetic, such as high fashion clothing. However, they can also be utilitarian, like jackets and shoes.
The Textile Industry is segmented by:
- Application Type i.e. Clothing Application, Industrial/Technical Application, and Household Application.
- Material, i.e. Cotton, Jute, Silk, Synthetics, and Wool.
- Process of production, i.e. such as Woven and Non-woven.
- Geography, i.e. North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa.
What is the market size of the African Textiles Industry?
In 2021, the global textile market was valued at $993.6bn. According to Mordor Intelligence, it is expected to grow at a CAGR of 4.2% by 2027. This exponential growth is driven by the increased consumption of natural fibres such as cotton, silk, wool and jute. As reported by Euromonitor International, the African textile industry is valued at $31bn. It is only second to Agriculture. Around 10% of the world’s cotton comes from Africa. However, most of this cotton is then taken to Asia for further manufacturing. 37 of the 54 African countries produce cotton, and 30 are exporters. For this reason, the increased demand for apparel from the fashion industry coupled with the growth of e-commerce platforms is expected to drive the market growth over the forecast period.
What countries in Africa have the biggest market?
Kenya holds the lion’s share in the market as Africa’s largest exporter, followed by Lesotho, Mauritius and Ethiopia. In 2021, Kenya’s textile exports were valued at $28.47 Million. Ethiopia is also a promising ground for investors. Both countries have the potential to become more prominent players in garment manufacturing globally.
The Ethiopian government has identified textiles and apparel as a priority industry to create an industry that will generate $30 billion by export through the Textile apparel and accessories sector in 2030 to help businesses trying to escape the rising wages in countries like China. You can see a factory in a Youtube video here.
Although cotton is one of the largest industries in the textile market, Africa’s textile is not limited to that. South Africa is diversifying the textile industry in Africa through technical textiles. By providing hemp to aeronautics companies for their products. They are also becoming one of the largest mohair suppliers globally and have a leather industry.
AGOA is the African Growth and Opportunity Act, which focuses on increasing trade between Sub-Saharan Africa and the US. Thirty-four countries in Africa can make African products more attractive and available because they can be included in duty-free shops worldwide. The agreement created by AGOA have made African products more widely available than products from other places like Bangladesh and Vietnam.
What companies are the big players in this space?
The confidence of investors and foreign investment in the textile industry resulted from the renewal of the AGOA that President Barack Obama signed on June 11, 2015. As governments across Africa prioritise their textile industries to drive post-pandemic recovery, several private sector initiatives support the segment’s growth. As there have been growing partnerships between both sectors.
In June 2021, there was a private partnership between the government of Togo and Arise Integrated Industrial Platforms- a Singapore-headquartered agriculture company Olam International. The project aims to convert 56,000 tonnes of cotton fibre worth $73m into clothes and apparel worth $1.5bn. It is estimated to contribute up to 21% of GDP.
In 2021, Africa inaugurated its first organic cotton company in Burkina Faso. The $7.1m, the 5000-sq-metre facility is operated by the Organic Cotton Ginning Company- a joint venture between the National Union of Cotton Producers of Burkina and the Burkinabe Company of Textile Fibres – which has a ginning capacity of 125 tonnes per day.
These growths and advancements mean that there is an increase in key players in the market. However, these are some top companies in Africa:
1. CIEL Textile Ltd
CIEL Textile has operational units in Mauritius, Madagascar, Bangladesh and India. The group has eight business units: knitwear, knits, shirts, bottoms, spinning, weaving, dyeing and retail. They have 42million exports yearly. Most of its clients are globally known brands such as Puma, Lacoste and Tommy Hilfiger.
2. Almeda Textile Plc.
Founded in 1997, Almeda Textile is one of the oldest textile companies in Africa, located in Ethiopia. The government-owned company has a diversified range of products and is estimated to be producing up to 40,000 jeans, T-shirts and other fabric products a day.
3. Gelvenor
Gelvenor is a leading textile manufacturer and fabric engineering company. Gelvenor Textiles has been an industry innovator since 1965. Our products include a variety of aeronautical textiles, industrial fabrics, protective workwear, technical apparel and high-performance outdoor textile fabrics.
4. Mediterranean Textile Company S.A.E
Mediterranean Textile Company in Egypt belongs to the reputable Saif Group conglomerate company. They spin and export 100% Egyptian cotton yarns, i.e. Giza cotton (with multiple counts). MTC offers complete traceability with a DNA test guarantee.
5. Saygin-Dima Textile Sc
Established in 2007, Saygin Dima Textile SC is a Private Limited Company based in Sebeta, Ethiopia. They are a manufacturer of yarns and textile fibre. In addition, the company operates as a yarn spinning factory and spins, weaves and dyes natural and synthetic fibres.
6. Kanoria Africa Textiles PLC:
With experience in the textiles and jute industries, Kanoria Chemicals & Industries Limited has incorporated a subsidiary company, Kanoria Africa Textiles Plc. in Ethiopia, Africa. A manufacturing plant set up there to initially manufacture 12 million metres of Denim per annum was inaugurated by the Honourable Prime Minister of Ethiopia in October 2015. The state-of-the-art plant is equipped with comprehensive waste management systems and non-polluting electric boilers, making it a zero effluent facility and one of the first Green Denim plants in the world.
What startups are entering this space?
While it may seem like the big players dominate the market, here are the new startups who are digging into a slice of the pie.
- Aïssa Dione is an internationally recognised Senegalese textile brand that produces traditional handwoven fabrics. Most of these designs are used in interior decoration and woven into seats, curtains and the rest. Through weaving, Aïssa Dione aims to live its philosophy by enhancing the cotton grown in West Africa using contemporary design as a vector. The company’s objective is to unite Art, Design and Industry in a ‘Soft industry.
- Anka is a fashion tech startup that has raised $6.1million in seed funding and is becoming one of Africa’s largest online retail shops. The brand has over 5,000 designers on its platform and has recorded over $4 million worth of transactions. Anka provides the all-in-one solution to sell from anywhere, ship worldwide and get paid internationally and locally. Whether on social media, by drop-shipping or by exports.
- Africa Fashion Guide is the first startup in Africa to promote and support the entire supply chain of Africa’s fashion and textile industry. It has launched the first online sourcing platform gateway for sourcing African fashion textiles and production and brings people to the continent via business mission trips. In addition, through their annual conference, they have been able to get together insiders, professionals and influencers to make a difference and instigate change.
How can I invest in the Textile Industry?
The diverse market of the textile industry has made it one of the most profitable sectors to invest in. However, despite the boom in the industry, it is essential to carry out research before investing.
Before investing, it is pertinent to choose what textile industry application you want. And the geographical location you want to be involved in. With this in mind, here are ways you can invest in the African textile industry.
1. Invest via the stock market
There are only a few textile stocks available, but you may be open to investing in one of them after some research. Here are some that we could find:
- El Nasr Clothes & Textiles – KABO (Egypt)
- Dice Sport & Casual Wear (Egypt)
- CIEL Textile Limited (FKL.mu) (Mauritius)
2. Invest as a manufacturer
Manufacturing is one way to invest in the industrialised section of the market. You can choose an industry and provide textile-based solutions. Mining, Chemical, and Automotive are some of the growing profitable sectors. For instance, the creation of protective clothing for hazardous industrial environments in the Mining and Construction industries or making leather seat covers for the automotive industry. You could find a wool mill that takes raw material and creates a usable end product, such as yarn.
The location of the unit you invest in is strategic. The factory should be in an area that is well linked and has no water and electricity-related issues, and close to the source of raw materials. Is it easily accessible? Is there enough storage space? It also needs to be well-aired because fabrics leave toxic residue and dust during the production. Opening an industrial-scale business also requires a sizeable investment.
Look at the list of textiles here and see if you have any access to some of them.
3. Invest through Logistics
The textile industry is time-sensitive as both manufacturers and retailers need to either move raw materials and finished goods from one site to another or retail stores. If the finished goods aren’t moved quickly, the price drops and losses are incurred. Thus, logistics are an essential part of the supply chain as it’s used to coordinate and monitor resources required to move products reliably and cost-effectively.
Poor-quality roads and a lack of transport infrastructure have long been obstacles to trade in Africa thus inhibiting the development of supply chains and textile markets throughout the region is a fantastic investment.
You should expect to provide services that aid:
- Warehousing – setting up the warehouse with the required space, designing the equipment, and placing the stock
- Packaging – product handling, damage protection, sequences of events and production times
- Managing materials – choosing equipment, picking procedures, selecting suppliers, setting delivery terms, and arranging delivery
- Information organisation – developing control procedures, analysing data, and customs clearance documentation
- The option of a “just in time” system – where the idea is to lower waste and stock storage with an on-demand fast response for the best price
4. Invest in a Product
Investment doesn’t end with raw textile materials alone. You can invest down the production line by working with finished fabrics. This form of investing is rising in the continent with the birth of new brands. Africans in the diaspora are also demanding more home-inspired products. One may decide to create a clothing line or choose to focus on underwear, belts, fur goods, hats, nightwear, bedsheets and curtains and more. The options are limitless.
5. Invest in e-commerce platforms
Technology has made it possible to send and receive goods from any part of the world. By investing in e-commerce, you can set up a platform where people can sell and buy finished textile products globally.
Despite the different ways we can invest, IMB believes every African can invest in the African textile industry by purchasing, wearing and using African products.
What are the risks associated with investing in this industry?
Although profitable, there are certain risks with investing in the African textile industry. Poor logistics is one of the impediments hindering the growth of the textile industry in Africa. In a Logistics report by the World Bank, it was recorded that half of the bottom 60 countries ranked in the report were in Africa. This reflects the blockage experienced by supply chains in producing and distributing goods efficiently. As a result of the quality of transport infrastructure and port inefficiency.
Another thing to consider is the gap and preference in price. Imported goods have an edge in the local market in terms of competitive pricing. As a result, the cost of imported clothing materials is relatively cheaper than clothes made in Africa. Consumers choose cheap products over Made in Africa products. This may lead to a decline in the market share in the future.
High pollution levels and poor quality of fiber, both in fineness and length, are also significant concerns. However, going green in your solution may also help attract more investment to your business as the world becomes more sustainable.
We hope you enjoyed reading. Please let us know your personal experiences investing in textiles in Africa and your suggested do-s and don’ts to help other readers.
