VZCZCXRO4646
RR RUEHMA RUEHPA
DE RUEHAR #2091/01 2751704
ZNR UUUUU ZZH
R 021704Z OCT 07
FM AMEMBASSY ACCRA
TO RUEHC/SECSTATE WASHDC 5415
RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 04 ACCRA 002091 
 
SIPDIS 
 
SENSITIVE, SIPDIS 
 
STATE FOR AF/EPS: JPOTASH; EEB/TPP/ABT: GARY A. CLEMENTS 
STATE PASS TO USTR CAROYL MILLER, COMMERCE FOR MARIA D'ANDREA 
 
E.O. 12958:N/A 
TAGS: ECON ETRD KTEX GH
SUBJECT: Ghana: Information on Textiles and Apparel Production 
 
REF: A) STATE 114799; B) 2006 Accra 2321 
 
1.(U) Summary.  Ghana's apparel and textile exports to the United 
States grew strongly in 2006 and continue to do well in 2007.  The 
extension of the third country fabric provision provided an 
important lifeline for Ghanaian firms.  In spite of the growth of 
apparel exports to the United States, Ghana's textile and clothing 
sector in general remains limited and prospects for significant 
growth are uncertain.  End summary. 
 
Statistics 
---------- 
 
¶2. (U) Reliable, up-to-date statistics in all requested categories 
are not available. 
 
Total industrial production in USD:  USD 3.1 billion.  Note: this is 
derived from data in the 2007 budget in which industry was estimated 
to contribute 25% of GDP in 2006.  The figure is not comparable to 
that provided in ref B for 2003. 
 
Total textiles and apparel production in USD: 2004-2007 data are not 
available: USD 202 million (2003) 
 
Textile and apparel import share of Ghana's imports: 3.4 percent 
(2005); 3.8 percent (2006). 
(Source: Ghana Statistical Service) 
 
Textile and apparel export share of Ghana's exports: 0.1 percent 
(2005); 6.4 percent (2006). 
(Source: Ghana Statistical Service) 
 
Exports in textiles and apparel to the US in USD value: 
USD 9,564,000 (2006); YTD Jan-June 2007 USD 5,393,000. 
(Source: ITC from Dept. of Commerce Statistics) 
 
AGOA including GSP Exports in textiles and apparel: 
USD 8,834,000 (2006); YTD 2007 Jan-June USD 5,231,000 
(Source: ITC from Dept. of Commerce Statistics) 
 
Total manufacturing employment: 869,083 (2005/2006). 
(Source: World Bank draft Country Economic Memorandum, derived from 
data from Ghana Living Standard Survey.  Note: this figure is not 
comparable to that provided in ref B.) 
 
Total textile and apparel employment: 2004-2007 data are not 
available. 
 
Textiles 
-------- 
 
3.(SBU) Ghana's textile production remains very small.   Ghana's 
textile sector more or less collapsed in the eighties when import 
controls were loosened and access to foreign exchange needed for 
imports to modernize plants was scarce.  One industrial spinning 
facility (Akosombo Textile Limited -ATL) has survived, producing 
about 1.4 million linear meters of unbleached cotton (gray baft) per 
month.  As part of the GoG efforts under the President's Special 
Initiative, Juapong Textiles Limited, which had closed due to lack 
of competitiveness in June 2005, was re-opened as Volta Star 
Textiles Limited.  Volta Star is being managed by a Chinese firm 
that has also made commitments to refurbish and purchase new 
equipment.  They are not, however, shareholders in the firm. 
Production as of July was very limited (only a portion of the looms 
and spinning frames had been refurbished) and the firm had not yet 
found a buyer.  However, the fabric was of high quality, per a 
consultant who works for the West Africa Trade Hub.  There are press 
reports, possibly politically motivated, that the government is not 
paying the workers in a timely manner and the enterprise is 
teetering. 
 
There are four textile printing manufacturers, including ATL, with 
an estimated total production of around 40 million yards, over half 
of which uses imported fabric.  The bulk of production is used 
locally.  A small amount of fabric is exported to Nigeria, which 
should be a large natural market for Ghana but Nigeria continues to 
place high barriers to textile imports. 
 
¶4. (U) Employment in the textile manufacturing and printing sector 
has declined steadily: 25,000 in 1977; 7,000 in 1995; 5,000 in 2000; 
and fewer than 3,000 in early 2005.  The current figures are 
probably even lower.  Akosombo Textiles employs about 1400 people. 
The other three firms, not counting Volta Star, employ less than 
1000 combined.  Volta Star may have about 200-300 workers.   These 
figures are for industrial production and do not capture small-scale 
or artisanal production such as Kente cloth, which from unscientific 
observation appears to be showing some growth associated with 
tourism development. 
 
5.(U) As reported in ref B, local textile spinning and printing 
 
ACCRA 00002091  002 OF 004 
 
 
industries face stiff competition primarily from Nigeria, Cote 
d'Ivoire, China, India and Pakistan.  There is little sign of a 
turnaround although it is too early to declare the Volta Star effort 
a failure.  Smuggling also remains a significant problem, as is 
pirating of designs, especially by the Chinese.  In an attempt to 
control smuggling and copying, the government mandated that all 
textile imports were to be received only through the Port of 
Takoradi and that prior to import, a sample must be submitted to the 
Standards Board to ensure it was not a stolen design.  These 
measures, in place for more than a year, have not been effective 
and, in informal conversation, a Ghanaian Customs official, 
suggested it has probably made matters worse.  Small traders who 
might otherwise be law abiding cannot afford to comply with the 
requirements and simply take their chances by smuggling the goods in 
"through the bush."  The current import regime has been under review 
for more than a year. 
 
Apparel 
--------- 
 
¶6. (U) There is little or no industrial-scale apparel production 
geared to selling on the local market.  With the exception of about 
a dozen export oriented firms, apparel production in Ghana is 
dominated by small-scale tailoring and dressmakers, and most output 
is traditional garb.  As with the textile industry, apparel 
manufacturing went into significant decline in the eighties, in 
large measure due to the introduction of imports of secondhand 
clothing.  In an effort to promote Ghanaian-made apparel, the GoG 
has promoted wearing of clothing of traditional fabric and styles 
each Friday.  The idea has found some traction and there is a 
noticeable increase in traditional wear on Fridays. 
 
AGOA Exports 
------------ 
 
¶7. (U) Contrary to the situation in the textile sector where AGOA 
has had virtually no impact on textile investment, AGOA has made a 
critical difference in Ghana's competitiveness in the apparel 
sector.  The benefits conferred by AGOA help compensate for the 
price and productivity advantage of competitors such as China, 
particularly for apparel made from synthetics or blended fabrics. 
In addition, access to factory space and equipment, along with 
generous financing available from government funds has spurred 
investment, often by those well-connected politically. 
 
8.(SBU) In spite of the fact that Ghana's apparel exports are 
increasing, there is considerable lack of stability in the sector 
and expected investment has not materialized as quickly as hoped. 
Two large AGOA exporters, Belin and California Link, have closed 
this year.  A third, Top Circle, is suspended from taking advantage 
of AGOA benefits pending conclusion of an investigation into 
allegations that a significant percentage of the socks it exported 
were socks made in China rather than socks made in Ghana from 
Chinese yarn. 
 
9.(SBU) As with most business matters in Ghana, the reasons for the 
closures cannot be explained by simple competitive pressures.  Both 
of the firms that closed had pending orders.  California Link has 
been kept open by the President's Special Initiative (PSI, i.e., the 
GoG) and the politically well-connected owner of Belin is opening a 
new, larger factory under a new name next door.  With a few notable 
exceptions (e.g., Sleek Garments), ownership of apparel factories in 
Ghana is dominated by Ghanaians who have little or no experience in 
the sector.  With GoG support, ex-pat management has been brought in 
to provide technical expertise.  Joint ventures are a rarity.  Thus, 
when problems arise with management, the factory is in serious 
trouble and the owners are ill-equipped to take corrective action 
quickly.  In the case of Belin, the manager from Mauritius had 
family problems and returned to Mauritius.  An Indian was brought 
in, initially as a manager but ostensibly with plans to buy an 
equity stake.  Financial irregularities emerged associated with the 
new manager and the plant was closed.  Belin had benefited from a 
large GoG-backed loan and it is not clear if it will be recovered. 
 
¶10. (SBU) California Link, the second largest AGOA beneficiary, had 
orders as part of a sub-contract for drugstore uniforms.  For 
unknown reasons, the owner closed the plant on very short notice and 
walked away from a large loan through Ecobank (one of the leading 
regional banks) that was guaranteed by the USG's Development Credit 
Authority.  A Sri Lankan investor with long experience in Kenya is 
now managing the plant.  He is also planning to invest in an apparel 
and denim washing plant here in Ghana. 
 
¶11. (U) In general, the export orders are not adequate to keep the 
firms running consistently at full capacity so most take advantage 
of the Free Zone provision allowing them to sell up to 30% of output 
locally.  School uniforms and commemorative-event wear often help 
fill the gap and keep machines and workers working.  In the 
exporting factories, there are probably at least about 1600-2000 
sewing machines. 
 
ACCRA 00002091  003 OF 004 
 
 
 
 
China 
----- 
 
12.(U)  ATL is a subsidiary of CHA Textiles Group of Hong Kong and 
Volta Star is, as noted managed by a Chinese firm. However, there is 
little or no Chinese management or equity investment in the apparel 
sector in Ghana but Chinese inputs are omnipresent.  China is the 
dominant supplier of sewing machines, fabric, and notions such as 
zippers and buttons.  China is also a major competitor for business. 
 However, in at least one case, Ghana garnered a major order for 
drugstore uniforms because the buyer (Superior Uniform Group) was 
looking to diversify suppliers away from dependence on China. 
Shipping times from Ghana to the East Coast are also shorter and 
costs of labor are lower, although that does not compensate for the 
higher costs of electricity and trade financing interest rates in 
Ghana. 
 
 
¶13. (SBU) China is likely to remain the supplier of choice for 
inputs for some time to come, although some managers are looking at 
other sources.  For example, the new managers of California Link 
(the name will change soon to U&U Fashions) are planning to source 
at least a few imports such as thread and poly bags (for packaging) 
from established contacts in Kenya.  The owner of Sleek Garments has 
done some test production with denim from Cote d'Ivoire but until 
Ghana has a denim washing facility, that line will not take off. 
There is some limited South African supply but managers Post spoke 
with said they generally just return to suppliers with whom they 
already have a relationship in China. 
 
Efforts to Increase Competitiveness 
----------------------------------- 
 
14.(SBU) The President's Special Initiative (PSI) is a 
capacity-building and incentive program designed to increase Ghana's 
competitiveness across a number of sectors.  Launched in 2001, the 
PSI includes an ambitious Textile and Apparel element that focuses 
in particular on garment manufacturers.  As set out in ref B, it 
remains a mixed success.  The provision of good factory space and 
equipment at attractive prices and access to finance, along with 
expedited customs clearance by virtue of location in a free zone, 
have been effective in bringing new investment into the sector. 
However, the importance of personal connections in accessing PSI 
benefits and reliance on ex-pat management raise questions about 
sustainability. 
 
¶15. (SBU) PSI plays a very hands-on role in the apparel sector as 
evidenced by its takeover of the California Link facility when 
California Link defaulted on its loan.  It also played a major role 
in garnering the Superior Uniform Group order by stepping in as the 
recipient of the purchase order when individual firms could not get 
commitments for letters of credit from banks to purchase fabrics. 
It also used to run a training center with a view to providing 
well-trained workers to the apparel factories.  However, based on 
conversations with several managers, those trained at the center 
represent a very small portion of their workforce and attracting 
labor for the basic sewing tasks was not a major issue with which 
they needed government assistance.  The managers said they could 
train a worker in about two weeks. 
 
¶16. (U) Other efforts to improve Ghana's competitiveness that could 
benefit the textile and apparel sectors include development of an 
industrial policy that should be ready for review by Cabinet in 
early 2008.  In addition, for the first time, Ghana will place a 
trade attach in Nigeria, the first for Ghana in the region. 
Reduction of Nigeria's barriers to textile and apparel imports would 
provide a major boost to Ghana's prospect to become more globally 
competitive. 
 
¶17. SBU) The managers Post spoke with generally argued for more, or 
different, government support, not a hands-off approach.  Access to 
finance, equipment and infrastructure were areas where they believed 
government should do more to support the sector. 
 
Overall Assessment of Future Competitiveness 
-------------------------------------------- 
 
¶18. (SBU) Ghana's relative success in the apparel sector depends on 
the use of imported fabric and other inputs and access to financing 
through dedicated funds.  The extension of the third country fabric 
provision will keep Ghana's apparel firms in business for a few more 
years but the jury is still out as to whether Ghana is making and 
attracting the kinds of investments needed to build the foundation 
for a globally competitive Ghanaian textile or apparel capacity. 
There are a number of investors looking into vertically integrated 
textile and apparel mills and the GoG is offering the same kind of 
assistance they have offered for several years, including 
construction of factory facilities, and advantageous loan terms 
 
ACCRA 00002091  004 OF 004 
 
 
through the Export Development Investment Fund (EDIF). 
 
 
¶19. (SBU) More generally, Ghana's total reliance on imported inputs 
makes its supply chain prone to disruption.  This compounds other 
key challenges to meeting large orders in a timely manner such as 
access to finance and low labor productivity.  Pay at the apparel 
factories for sewers on the production lines is right at minimum 
wage, just under the equivalent of $50/month, lower than some 
comparable countries.  However, when working hours and output are 
factored in, Ghana's wage advantage disappears.  For example, the 
manager with experience in Kenya said that the factory he oversaw in 
Kenya produced 3.5 garments per machine per day while the figure at 
California Link is 2.5. 
 
 BRIDGEWATER