In collaboration with Ethiopia, the United Kingdom and Germany have set up a new fund to support Ethiopia’s textile and garment industry, with special consideration of COVID-19’s effect on the economy. The partnership has $6.5 million invested at its launch and aims to safeguard the industry.
Textile factories located in Ethiopia’s industrial parks can apply for wage subsidies and incentives to reward businesses that are able to adapt in response to the coronavirus pandemic. Moreover, the partnership has the possibility of expanding its reach through additional support in the coming months, it was reported.
The wage subsidy the partnership offers will cover a portion of total employment costs for textile factory workers in Ethiopia’s industrial parks. The fund hopes to protect jobs, enable textile factories to keep running, and support factories to build back better.
The related innovation incentive will reward factories that have been able to demonstrate their ability to make their businesses more resilient in the face of COVID-19, including through the development of new production lines and partnerships.
To be eligible for the support, businesses will need to show they have experienced an economic shock and that they have a business recovery plan. Businesses will also need to commit to certain principles like adhering to International Labour Organization core labor standards.
The Commercial Bank of Ethiopia will be responsible for assessing applications and disbursing the funding to factories. Continuing the international collaboration at the heart of the fund, UK Aid-funded FSD Africa will implement the project in partnership with First Consult, an Ethiopian consulting firm.
Ethiopia’s textile and garment industry is a leading provider of jobs in the country’s manufacturing sector. However, the collapse of demand both in the country and globally is expected to hit the sector hard. Ethiopia’s Jobs Creation Commission (JCC) estimates that between 1.4 and 2.5 million jobs could vanish over the next three months.
At the start of the pandemic, textile and garment factories in Ethiopia’s industrial parks employed 95,000 people, with women accounting for 70 percent of these jobs. Due to low demand caused by the pandemic, 13 textile firms have already stopped operating and with many firms under financial stress, the landmark fund will provide them with liquidity to maintain operations while protecting jobs.