Tuesday, October 27, 2015

Kanoria Chemicals announces completion of Ethiopian denim unit

Kanoria Africa Textiles, a wholly-owned subsidiary of Delhi-based Kanoria Chemicals and Industries Ltd., announced the completion of its ‘integrated denim project’ in Ethiopia here on Tuesday.

The unit, located about 50 km from the capital Addis Ababa, has an annual capacity of 12 million metres and has been set up with a total investment of $50 million (around Rs 325 crore).

Of the total amount, $35 million (Rs 227.5 crore) is a foreign exchange component brought into the east African nation.

“As far as Africa is concerned, the textiles industry has huge potential for manufacturing and exports. Ethiopia is a $51 billion economy but currently imports almost all of its textiles,” said RV Kanoria, the company’s Chairman and Managing Director.

The project — in which Kanoria Chemicals holds an 80 per cent stake with the rest being held by Hong Kong-based Fung Capital — is expected to provide direct employment to 500 people and indirect employment to 20,000 in the garments sector.

The company expects to generate about $25 million (about Rs 162.5 crore) annually through the project.

Kanoria said that with Ethiopia project’s being given an extension for 10 years in the African Growth and Opportunity Act (AGOA) and the Ethiopian Government providing a host of incentives, the chance to export to foreign markets was an attractive proposition.

“Through the AGOA, the US and EU markets can be accessed duty and quota free. This provides an opportunity for us to export significantly but also further the ‘Made In Africa’ brand which has taken off well in recent years,” said Kanoria.

Overseas sales are likely to take off within the next four months and the unit will seek to cater to demand in neighboring markets like Uganda, Kenya and Tanzania.

The unit will use about 5,000 tonnes of cotton each year which will go up to 7,500 tonnes at full capacity. Cotton is being sourced from Pakistan and African countries like Sudan at present with production likely to be hit in Ethiopia due to a drought.

Kanoria said that was falling domestic output was a concern, along with infrastructural shortcomings like road connectivity and undeveloped ginning processes but expected improvements in the short-term.

“The work on the Lamu port corridor is under way and will help improve road networks up to Ethiopia. A number of free trade agreements have also been signed with neighboring countries which will improve access. That is why this project is a long term bet,” he explained.

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