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The fund is an international collaboration between the UK, Germany and Ethiopia that will protect some of Ethiopia’s most vulnerable workers.
Addis Ababa, October 29, 2020: A landmark fund established between the UK and Germany in partnership with the Ethiopian Government could save thousands of jobs in Ethiopia’s textile and clothing industry, while helping to support the country’s economic recovery from COVID-19. With $ 6.5 million invested in the launch, the association aims to help safeguard a critical industry and protect the livelihoods of those who work in it.
Through the fund, textile factories in Ethiopia’s industrial parks can apply for wage subsidies, similar to licensing schemes operating in many countries, including the UK and Germany, and incentives to reward companies that can adapt in response. to COVID-19. The funding announced today will get the facility up and running and the association may further expand its reach through additional support in the coming months.
Ethiopia’s textile and clothing 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 Ethiopian Job Creation Commission estimates that between 1.4 and 2.5 million jobs could disappear in the next three months. At the beginning of the pandemic, textile and garment factories in Ethiopia’s industrial parks employed 95,000 people, and women accounted for 70% of these jobs. The loss of jobs would have a significant impact on vulnerable households.
The wage subsidy will cover a portion of the total labor costs for workers in textile factories in Ethiopia’s industrial parks. The fund will protect jobs, allow textile factories to continue operating and support factories to rebuild better. Meanwhile, the incentive for innovation will reward factories that have been able to demonstrate their ability to make their businesses more resilient to COVID-19, including through the development of new production lines and partnerships.
To be eligible for support, companies must demonstrate that they have experienced an economic impact and that they have a business recovery plan. Companies will also need to commit to certain principles, such as adhering to the ILO core labor standards. The Commercial Bank of Ethiopia will be responsible for evaluating applications and disbursing the funds to factories. Continuing the international collaboration at the heart of the fund, FSD Africa, funded by UK Aid, will implement the project in partnership with First Consult, a leading consulting firm in Ethiopia.
The Ethiopian government has put employment protection at the center of the country’s economic response to the COVID-19 crisis and has been working with businesses to address the impact of the pandemic. Already, 13 textile firms have ceased operations due to low demand and with many firms under financial stress, the historical fund will provide them with liquidity to maintain their operations while protecting jobs.
Today’s announcement recognizes the important contribution that Ethiopia’s textile and clothing industry has made to the country’s industrialization strategy over the past decade. With this fund, the Government of Ethiopia and sponsors from the UK and Germany are working together to ensure the survival of a vital industry that will be instrumental in Ethiopia’s economic recovery from COVID-19.
HE Nigussu Tilahun Gebreamanuel, Commissioner of the Job Creation Commission of the Federal Republic of Ethiopia, commented:
“The FDRE Job Creation Commission estimates that about 1.4 million wage employment opportunities are threatened and approximately 1.9 million people in vulnerable jobs will lose their income due to the economic impact of COVID-19. This facility and other similar programs are crucial, as they will support factories affected by the pandemic and help protect jobs in industrial parks, while slowing the harsh economic impact. “
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HE Lelise Neme, Commissioner of the Ethiopian Investment Commission, commented:
“The COVID-19 pandemic has caused an unprecedented disruption to global business and will undoubtedly have a significant impact on the global economy on many fronts. The Ethiopian government has coordinated efforts with donors to help businesses cope with the impact of COVID-19. This emergency labor protection facility will help manufacturing companies sustain their businesses and reduce the impact on their financial performance. ”
Mark Napier, Executive Director of FSD Africa, commented:
“Our support is part of the work that FSD Africa is doing in African financial markets to build resilience and help drive the economic recovery from COVID-19. This fund brings together funding and technical expertise from the UK and Germany to deliver real benefits to vulnerable households and ensure Ethiopia’s patient efforts to build manufacturing capacity are preserved for many years to come.
