Ethiopia’s Industrial Hopes Dwindle as Conflict, Sanctions Take Toll

Ethiopia once said it wanted to become the "China of Africa" — that is, a manufacturing hub — with the help of its industrial parks. But the global economic downturn and the country's ongoing conflict have prompted companies to leave the parks and lay off thousands of workers.

The Ethiopian government hoped that one the country’s industrial parks — Hawassa, which was opened in 2016 with the potential to create 60,000 jobs — would help the country move from an agricultural to a manufacturing economy, and that the companies operating there would bring high-tech work.   

Kalkidan Asrat, a logistics manager Nasa Garment at the Hawassa Industrila Park, shared those dreams. 

Her birthplace, she said, is a small town and her family worked in agriculture for a living as subsistence farmers. When she completed her education, she joined the industrial park, where she said she was able to improve her prospects.

There are 10 other industrial parks like Hawassa spread across Ethiopia.  

The government has said it hoped to make Ethiopia a lower middle-income country by 2025, with manufacturing playing a big part. 

That is now looking less likely because of the COVID-19 pandemic, inflation, a lack of foreign currency in the country, and conflict and human rights abuses.    

"Two of the industrial parks have been directly impacted. They’ve been in the combat zone, effectively,” said emerging markets economist Patrick Heinisch. “The most severe hit to the industrial parks is from the loss of access to AGOA. One week after the announcement, the first company announced they would retreat from the Ethiopian market; they sold their factories in Ethiopia. This has been followed by other companies." 

The African Growth and Opportunity Act, or AGOA, passed in the U.S. in 2000 to aid development in sub-Saharan Africa, gave Ethiopia duty-free access to the U.S. market for several products.

With Ethiopian wages much lower than those in China, a country synonymous with manufacturing, and AGOA making it cheaper to import goods to the U.S., many international manufacturing companies set up in Hawassa’s industrial sheds. 

On January 1, however, the U.S. withdrew Ethiopia’s access to AGOA due to “gross violations of human rights.”  

Rights groups have accused the Ethiopian government and its aligned military forces of large-scale human abuses, including ethnic cleansing, against Tigrayans during the country’s nearly two-year conflict.  

Tigrayan forces have also been accused of abuses. 

Thirty-five thousand people worked at Hawassa, but in June, one firm laid off 3,000 workers and others laid off hundreds.  

One factory owner in Hawassa, Raghavendra Pattar, said the country is struggling to adapt.

"We are forging towards a new market, but it will take more time to roll up the market again, so that’s why we are suffering a lot,” he said. “The country is suffering because of foreign currency availability in the country today. They also need support from other countries, big countries, like America.” 

The deputy general manager of the park, Belante Tebikew, said the withdrawal of AGOA was causing more problems than the pandemic or inflation.

“There are some, as I told you, reductions on orders, because they are being injured by the customs, duty-free privileges in the American markets, since most of the commodities are being exported to the U.S.,” he said. 

In another bad sign for the country’s economy, fighting between government and Tigrayan rebel forces broke out again in late August after a five-month cease-fire.