Awassa Textile S.C. plans to undertake a 168 million Birr expansion project at its plant through a loan agreement with the Development Bank of Ethiopia (DBE) that concluded on April 17, 2015. Out of the 168m Birr loan, 134 million Birr will be used on capital expenditure, while the remaining sum is for working capital, said Eyasu Atnafu, general manager of Awassa Textile S.C.

Awassa Textile, located in the city of Hawassa, 273Km south of Addis Abeba, was founded in 1989 under state ownership. However as of 2011, the ownership was transferred to Dukem Textile Plc. at a cost of 37 million Birr. The company produces bed sheets and foam mattress covers, school uniforms, workers' uniforms and threads.

Of all its poducts, only semi-finished thread is exported primarily to the international market, Kenya being their major export destination, said Eyasu Atnafu, general manager of Awassa Textile. The expansion project will help the company to increase its export items.

Currently, the company produces four tons of textiles per day and secures 15 million Birr monthly.

But after five or six months, when the expansion project is finalised with the procurement and installation of new textile machinery its production capacity of the company is expected to double and reach eight tons a day upon the completion of the expansion project, said Eyasu. Hence, the factory’s revenue is also expected to increase to 45 million Birr per month via the expansion of its export destination to Europe and the United States markets.

Moreover, for the realisation of its goal, the company will hire seven foreign textile experts to train and enhance the production and efficiency of its 980 employees.

Awassa Textile has earned a meager USD 26,000 from exports in the third quarter of this budget year. The company plans to boost its export capacity by availing 20 - 30 percent of its total production to the international market, added Eyasu.

There are 130 medium and large-scale textile factories in Ethiopia, of which 37 are owned by foreign investors. Challenges such as lack of managerial skills, commitment from the textile industries, high cost of cotton and low productivity are issues that are raised in relation to the low export performance of the factories according to government, experts in the field and people from the textile factories.

In order to encourage and attract investors to the sector, the government provides various incentives such as duty-free privileges, financial loans and lands. Furthermore, in order to enhance the level of productivity, the government is developing a benchmark that defines the production capacity of an employee on a daily basis and which will also be a standard for calculating the wages earned, said Bentihun Gessesse, corporate communications director of the Ethiopian Textile Industry Development Institute.

In third quarter of the current fiscal year, Awassa Textile generated 26,000 dollars from exports, according to the Ethiopian Textile Industry Development Institute data.