Awassa Textile to Commence Expansion through 168m Br Loan

The loan secured from the Development Bank of Ethiopia, is expected to triple revenues

Eyasu Atnafu, general manager of Awassa Textile S.C.

By addisfortune.net

Awassa Textile S.C. is to undertake a 168 million Birr expansion project in its plant in one month through a loan agreement that it concluded on April 17, 2015 with the Development Bank of Ethiopia (DBE).

The loan will be used to undertake the 168m Birr expansion project, of which 134 million Birr will be used on capital expenditure, while the remaining sum is for working capital, said Eyasu Atnafu, general manager of Awassa Textile S.C.

During the third quarter of the current fiscal year, DBE had allocated 11 billion Birr in loans and approved 7.8 billion Birr for the three priority sectors by the government of Ethiopia, according to Esayas Bahre, president of DBE. These are, manufacturing, textile being one aspect of it, with agriculture and agro-processing being the other two priority sectors that the government is striving to improve.

Awassa Textile, which is located in the city of Hawassa, 273Km south of Addis Abeba, was established in 1989 under state ownership. However as of 2011, the ownership was transferred to Dukem Textile Plc. at a cost of 37 million Birr. The company produces bed sheets and foam mattress covers, school uniforms, workers’ uniforms and threads.

Of all its products, only semi-finished thread products have made it to the international market, Kenya being their major export destination, according to Eyasu. However, this expansion project is set to change that, he added.

Currently, the company produces four tonnes of textiles on a daily basis and earns around 15 million Birr monthly.

But after five or six months, when the expansion project is finalised with the procurement and installation of new textile machinery, its production capacity is expected to double and reach eight tonnes of textile production daily, said Eyasu. Accordingly, the textile factory revenue is also expected to increase to around 45 million Birr in a month, expanding its export destination to Europe and the United States markets.

Performance of the textile industry comes with high expectations for the generation of foreign currency for the country. In the first Growth and Transformation Plan (GTP) period, which started in 2010/11 and will be concluded by the end of this fiscal year in about two months, the government had planned to earn one billion dollars from textile exports. However, export earnings during the entire GTP I, including the three quarters of this fiscal year, were only around 427 million dollars.

There are 130 medium and large-scale textile factories in Ethiopia, of which 37 are owned by foreign investors. Challenges such as lack of managerial skills, commitment from the textile industries, high cost of cotton and low productivity are issues that are raised in relation to the low export performance of the factories according to government, experts in the field and people from the textile factories.

In order to encourage and attract investors to the sector, the government provides various incentives such as duty-free privileges, financial loans and lands. Furthermore, in order to enhance the level of productivity, the government is developing a benchmark that defines the production capacity of an employee on a daily basis and which will also be a standard for calculating the wages earned, said Bentihun Gessesse, corporate communications director of the Ethiopian Textile Industry Development Institute.

In third quarter of this fiscal year, Awassa Textile generated 26,000 dollars from exports, according to the Ethiopian Textile Industry Development Institute data. The quantity of the export is insignificant but in the near feature, with the completion of the expansion project and improved productivity, the company plans to increase its export capacity by making 20pc to 30pc of its total production available to the international market, said Eyasu. Moreover, for the realisation of its goal, the company will hire seven foreign textile experts to train and enhance the production and efficiency of its 980 employees, he added.