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Africa

Africa: Ethiopia’s Industrial Parks Leave Workers to the Fate of Global Shocks

todayFebruary 4, 2024 2

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As a symbol of economic globalization, Industrial Parks occupy a central place in debates on the foreign direct investment in the South from the so-called Global North. A central argument for the parks is their potential to absorb a large labor force, build an industrial skill base and stimulate export growth.

Africa’s infrastructure boom is reshaping the landscape and physical connections while creating new power dynamics within elite-driven development initiatives. Industrial Parks are territorially demarcated and administratively exceptional spaces. Copying China’s model of Special Economic Zones, the Ethiopian government has developed several Industrial Parks across the country.

The strategy is to lure foreign investors with a “Golden Reception” of economic incentives and preferential treatment. However, beneath the allure of glittering promises lies a less glamorous reality, fraught with struggle and turbulence. The largely female migrant workers who toil in these factories feel the brunt of these challenges.

The Hawassa Industrial Park (HIP) is one of Ethiopia’s leading industrial parks. Built by the China Civil Engineering Corporation, HIP is located in the city of Hawassa, about 280 miles south of Addis Ababa. The construction of HIP started in July 2015 and the park was inaugurated on 13 July 2016. Considered a flagship project, HIP is the largest textile and apparel IP in Africa and cost more than GBP 200 million. Approximately 90 percent of the factory sheds have been reserved by 23 organizations and anchor investors from the US, India, China, Sri Lanka and Indonesia.

There are 28,000 employees working in HIP as of November 2023. The government anticipated that HIP would generate up to 60,000 jobs and GBP 790 million in export revenues at the time of its construction. Due to a lack of a robust analysis and projection, the park has yet to meet this aim. The total jobs created by the park were 24,000 and over 80 percent of employees are women.

Shocks and coping strategies

Ethiopia’s urban migrant landscape is undergoing profound change due to extraordinary social, economic, and political upheavals. Global and regional shocks- such as the COVID-19 pandemic, Ethiopia’s removal from the US’s African Growth and Opportunity Act, and the Russia-Ukraine war are exerting significant pressure on the country’s economy and workers.

COVID-19, in particular, has had a profound impact on the parks. As the virus spread across the globe, disrupting supply chains and triggering economic downturns, Ethiopia’s manufacturing sector felt the squeeze. Production delays, a plunge in exports, and the shuttering of factories ensued. Women, youth, and low-skilled workers- groups already on the fringe- were pushed further to the edge.

Many migrant workers, faced with wage cuts and substantial food insecurity, were forced to return to their rural families until their factories could reopen. During the pandemic, workers also experienced other problems such as stigma and discrimination. Many people had the misconception that coronavirus was a “Chinese” disease and that anyone who worked in a park would frequently come into contact with Chinese people. This bogus information led to repeated exclusions from neighborhoods and harsh threats against workers.

Another jolt came from the geopolitical arena. The war in the north and subsequent human rights concerns led the US to suspend Ethiopia’s AGOA privileges. The US abruptly ended Ethiopia’s participation in AGOA on January 1, 2022 owing to “gross violations of human rights”. The abrupt termination of AGOA privileges created significant disruption for international companies that had made strategic investments in Ethiopia based on this preferential trade access.

There has been an exodus of foreign firms from Ethiopia’s industrial parks, including PVH, the biggest clothing and textile company operating in the country. Since then, more than 11,000 employees have been laid off. Job losses disproportionately hit poor women, who were mostly employed in the garment industry. The combination of job insecurity and social instability has fostered a sense of alienation among many migrant women.

Additionally, prices for key commodities and energy are on the rise due to the Russia – Ukraine war. The price of everyday goods has more than doubled in Hawassa. However, the only thing that remains the same is the workers’ pay. As a result, women’s survival becomes more difficult and begins to have pessimistic hopes for the future. Access to basic human needs remains the most important challenge for migrant workers. The devaluation of the Ethiopian Birr was mentioned as an additional burden that is exacerbating food insecurity among the urban poor in this round.