Ghana's garment segment supported by state incentives and increased specialisation

Long famed for its vibrant traditional prints, the Ghanaian apparel industry has experienced volatility in recent years, with exports falling to a historic low in 2016. Nevertheless, as a result of government efforts to support the revitalisation of the segment and the take-off of a number of key firms, the segment appears to be on the road to recovery. Moreover, the authorities are now seeking to further expand the industry, unveiling a series of tax exemptions and undertaking efforts to attract international investors to the country.

Overcoming Hurdles

Buoyed by increased trade liberalisation, the Ghanaian textile and garment industry grew steadily during the first decade of the 20th century – albeit with a fall during the global financial crisis – with exports reaching a record value of $285m in 2011, according to the World Bank. However, exports fell precipitously after this, with the total export value reaching a low of $24m in 2016. Meanwhile, sectoral employment fell from around 25,000 in 2005 to under 2000 in 2016. Intense competition from lower-cost East Asian markets played an important role in this diminution of the segment, contributing to the closure of companies such as Lucky 1888 in 2014, which had previously exported $2m in goods annually to the US. In addition, the high cost of overheads, changing consumer preferences and a lack of technical expertise also played a decisive role.

At the same time, the increased competition has provided an opportunity for consolidation. As a result, number of new and established firms have been able to successfully leverage niche markets and production is once again on the rise, with $98m worth of garment exports leaving the country in 2017, according to the World Bank.

Notable among these is the Dignity DTRT factory located in the Adjabeng Free Zone in Accra. Launched in mid-2017, the US-Ghanaian joint venture employs 1500 workers and has the capacity to produce 80,000 t-shirts and 50,000 polo shirts per week. In addition, the UK company Sixteen47 established its primary factory in Accra in 2005 and the facility has since expanded to become a leading exporter of ethically sourced plus size garments. Furthermore, domestic firms such as House of Damaris, Nalem and Yvonne Exclusive have all expanded production to cater to a growing market for Ghanaian fashions in West and Southern Africa.

State Support

The government has been proactive in facilitating the revitalisation and expansion of the industry, introducing a range of initiatives to support the segment, while also working to attract foreign investment. In 2017 the Ministry of Trade and Industry helped establish the Association of Ghana Apparel Manufacturers, a business network for garment segment professionals. Furthermore, in 2018 the government announced plans to attract Chinese garment manufacturers to move production to the country. If successful, these efforts would both help to develop local manufacturing and support the domestic market.

Building on these initiatives, the 2019 budget provided a raft of measures intended to support the industry through lowering costs, improving the investment environment and tightening regulation of unfair trade practices. The government has introduced zero-rated value-added tax on locally manufactured textiles for three years from 2019. The move is expected to ease cost pressures on the industry, allowing it to lower prices and increase competitiveness. In addition, the budget pledges to provide financial support and incentives to local manufacturers in upgrading facilities, as well as attract foreign textile companies to set up factories in Ghana. To tackle counterfeiting, the budget proposes establishing a textile import management system to help improve the regulation of imports.