A new fund set up by the United Kingdom and Germany in collaboration with Ethiopia could save thousands of jobs in the east African country’s textile and garment industry, while helping support its economic recovery from COVID-19. With $6.5 million invested at its recent launch, the partnership aims at helping safeguard an important industry.
Textile factories in the country’s industrial parks can apply for wage subsidies and incentives to reward businesses that are able to adapt in response to the pandemic.
The partnership may further expand its reach through additional support in the coming months, according to a UK media report.
Ethiopia’s textile and garment industry is a leading provider of jobs in the country’s manufacturing sector. However, the collapse of demand both in the country and globally is expected to hit the sector hard. Ethiopia’s Jobs Creation Commission estimates that between 1.4 and 2.5 million jobs could vanish over the next three months.
At the start of the pandemic, textile and garment factories in Ethiopia’s industrial parks employed 95,000 people, with women accounting for 70 per cent of these jobs.
The wage subsidy will cover a portion of total employment costs for textile factory workers in Ethiopia’s industrial parks. The fund will protect jobs, enable textile factories to keep running and support factories to build back better.
The innovation incentive will reward factories that have been able to demonstrate their ability to make their businesses more resilient in the face of COVID-19, including through the development of new production lines and partnerships.
To be eligible for the support, businesses will need to show they have experienced an economic shock and that they have a business recovery plan. Businesses will also need to commit to certain principles like adhering to International Labour Organization core labour standards.
The Commercial Bank of Ethiopia will be responsible for assessing applications and disbursing the funding to factories. Continuing the international collaboration at the heart of the fund, UK Aid-funded FSD Africa will implement the project in partnership with First Consult, a leading Ethiopian consulting firm.
Already, 13 textile firms have stopped operating due to low demand and with many firms under financial stress, the landmark fund will provide them with liquidity to maintain operations while protecting jobs.
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