Radar | Feb 12,2022
An apparel company in Hawassa Industrial Park has laid off a third of its staff, leaving 600 workers out of jobs.
The Hong Kong-based Epic Apparel Plc set up shop in the park in 2017 but lost major buyers in North America following Washington's decision to delist Ethiopia from the Africa Growth & Opportunity Act (AGOA), a duty- and quota-free trade privilege the United States granted selected African countries. A month ago, Epic Apparel's senior managers announced to employees their decision to lay off hundreds of employees, including managerial staff, blaming a market loss and substantial drops in orders from international buyers.
In an email response to Fortune, managers said the company began to face a fall in orders following the COVID-19 pandemic in early 2020. American buyers stopped placing orders recently, according to the managers. The Children's Place, a US retailer, is one of the company's significant buyers.
It is a frustration shared with leaders of the company's labour union. Epic Apparel is incurring additional costs in duties following Ethiopia's suspension from AGOA, putting the company's operations in jeopardy and putting machinery idle, according to a letter issued to the union leaders.
Five production lines remain idle, according to Epic Apparel's representatives.
In a letter posted online before Ethiopia was delisted from AGOA privileges in January this year, Rohit Nair, vice president of Epic Apparel Plc, forewarned that “AGOA was the sole incentive that attracted the company to move to Ethiopia.”
“The company shipped some of the machinery abroad,” reads the letter issued to the labour leaders. “It has incurred heavy losses due to the termination [of AGOA].”
Epic Apparel, a subsidiary of Epic Group, has been in apparel manufacturing for 35 years with an annual turnover of 20 million dollars. The Group employs 30,000 people across the globe, with production facilities in four countries, including Bangladesh, Vietnam, and Jordan. It leased two sheds in Hawassa Industrial Park, producing 20,000 pairs of pants a day.
The company has paid six months' salary to the laid-off employees, representing 40pc more than the amount required by law.
Kirubel Zena is one of the workers Epic Apparel let go. Though he had studied sports science, Kirubel had a hard time finding work in sports before landing a job at Epic Apparel two years ago that enabled him to provide for his daughter and wife. He worked as a training manager, grossing 13,000 Br a month.
Although the six months' pay, coupled with his wife's 5,700 Br monthly income, gives him some breathing room, Kirubel is uncertain about his future.
“I don't know when I'll get another job,” he said.
Leaders of the labour union were in month-long negotiations with management to safeguard the interests of the laid-off workers. Two weeks ago, management verbally informed union leaders of the possibility of laying off more employees, according to Segasetu Alemayehu, the labour union leader.
Close to 2,100 employees of Epic Apparel have been organised under the labour union. They are part of the 22,700 employees working for 15 companies in Hawassa Industrial Park. The latter formed labour unions in October 2021 under the auspices of the Industrial Federation of Textile Leather & Garment Workers Trade Union.
Managers of Epic Apparel had communicated their decision to lay off employees to the Federation leaders. Angesom Gebreyohannes, president of the Federation of 54,000 members, told Fortunehe had seen Epic Apparel's financial reports prepared by an independent auditor.
“The audit report shows the company is in trouble," he said.
Epic Apparel invested 6.5 million dollars in Ethiopia. Company managers told Fortunethey ensured compliance with all legal requirements to trim the workforce.
“We can't determine our future plan now,” reads the statement from the company. “Future circumstances will dictate whether to increase or reduce the workforce.”
The saga is a significant development in the history of industrial parks in Ethiopia. Sitting on 400hct, Hawassa Industrial Park was the first – and largest – to be inaugurated six years ago. The federal government envisioned it as a crucial cog in its aspirations to make the country a leading apparel and textile hub.
The Park was expected to create 60,000 jobs and generate one billion dollars in revenue annually. It has not quite lived up to the expectations. Half this number was employed by companies leasing space in the Park. They generated 114 million dollars in export revenues last year, with markets in the US and Europe accounting for the bulk.
In addition to cheap labour, international firms are attracted to Ethiopia due to privileges granted by unilateral and bilateral trade agreements, said Abinet Belay, a senior investment consultant at MPE Business & Investment Consultancy. Abinet noted that many global apparel manufacturers settled in Hawassa Industrial Park to use the opportunities presented by AGOA. Ethiopia generated 240 million dollars exporting under AGOA in 2019, close to 40pc of the total shipments to the US.
The consultant agrees that Epic Apparel made the right investment decision but concedes the consequences will be harmful to the country.
“Ethiopia needs to craft mechanisms to absorb shocks if such events happen again," said Abinet.
In November 2021, Philips-Van Heusen Corp (PVH), an international apparel company that pioneered establishing Hawassa Industrial Park, announced it had terminated its operations in Ethiopia.
Executives of the New York-based fashion giant attributed the closure of their facilities at Hawassa to a volatile security situation.
PVH’s announcement came a few weeks after President Biden's Administration moved to delist Ethiopia from AGOA.
The Industrial Parks Development Corporation executives claim they are not aware of the situation with Epic Apparel. They continue to stress that the impact of Ethiopia’s delisting from AGOA is negligible.
“Not a single company shuts down its operations because of AGOA termination,” Sandokan Debebe, chief executive officer (CEO) of the Corporation, told Fortune.
The CEO disclosed a dozen international companies are in the process of leasing sheds in one of the 13 industrial parks the IPDC oversees.
PUBLISHED ON Apr 16,2022 [ VOL 23 , NO 1146]
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