The UK, Germany and Ethiopia have set up a fund that could save thousands of jobs in the eastern Africa country’s textile and garments industry, while helping to support the country’s economic recovery from Covid-19.
With $6.5 million invested at launch on October 29, the partnership aims to help safeguard a critical industry and protect livelihoods of workers.
Through the fund, textile factories in Ethiopia’s industrial parks can apply for wage subsidies — similar to the furlough schemes operating in many countries including the UK and Germany — and incentives to reward businesses that are able to adapt in response to Covid-19.
The funding will kick start the facility and the partnership may expand its reach through additional support in the coming months.
Ethiopia’s textile and garment industry is a leading provider of jobs in the country’s manufacturing sector.
However, the collapse of domestic and international demand is expected to hit the sector hard. The Jobs Creation Commission estimates that between 1.4 million and 2.5 million jobs could be lost 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 per cent of these.
Job losses would have a significant impact on vulnerable households.
The wage subsidy will cover a portion of total employment costs for textile factory workers in Ethiopia’s industrial parks. The fund will protect jobs, enable textile factories to keep running and support factories to build back better.
Meanwhile, the 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 developing 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 commit to adhere to International Labour Organisation core labour standards.
The Commercial Bank of Ethiopia will assess applications and disburse funds. On its part, the UK Aid-funded FSD Africa will implement the project in partnership with First Consult, a leading Ethiopian consulting firm.
The government has put protection of jobs at the heart of the economic response to the Covid-19 crisis and has been working with businesses to cope with the impact.
Already, 13 textile firms have stopped operating due to low demand and with many firms under financial stress, the landmark fund will provide them with liquidity to maintain operations while protecting jobs.
Today’s announcement recognises the important contribution Ethiopia’s garment and textile industry has played in the country’s industrialisation strategy over the past decade.