Ethiopia Touts Good Conditions in Factories for Brands Like H&M and Calvin Klein, but Workers Scrape By on $1 a Day

HAWASSA, Ethiopia — Five years ago this spring, Rana Plaza, an eight-story building in Bangladesh that housed several factories making clothing for Western brands, collapsed on top of its workers. Deep cracks had been found in the structure the day before. Recognizing the danger, the bank and shops on the lower floors closed for the day. The factory workers begged to do the same, but the managers refused, forcing them to head into the factories as usual. One thousand one hundred thirty-four people were suffocated or crushed to death. In the face of harsh criticism from consumers and advocacy groups worldwide, the garment industry realized that in order to keep its customers, it needed to improve working conditions.

The Hawassa Industrial Park in Ethiopia is the new face of the garment industry’s makeover. It has attracted PVH, one of the largest apparel companies in the world, whose brands include Calvin Klein and Tommy Hilfiger, along with JC Penney, the Children’s Place, and H&M, among others. The labor conditions are far better than those in Bangladesh — the well-ventilated sheds are structurally sound, the park contains 17 miles of unblemished paved roads, and all of its wastewater is pumped into a “zero liquid discharge” treatment plant that recycles and reuses 90 percent of the water. Bill McRaith, chief supply chain officer for the American PVH, said the new park “will show the world there is no conflict between companies doing well and companies doing right by the people, the community, and the environment they operate within.”

But the notion that the Hawassa Industrial Park is the future of the garment industry is less rosy than it might first appear — in a notoriously exploitative industry, the factories in Ethiopia pay some of the lowest wages of any garment factories in the world. The base salary for workers inside the park is less than $1 a day.

The man widely hailed as the architect of Ethiopia’s new industrialization agenda, senior adviser to the prime minister, Arkebe Oqubay, has urged workers not to dwell on their low wages, but to see the bigger picture. “We shouldn’t focus on present things, we should think about the future,” he said in a speech on a factory floor when the park opened, according to a worker who attended.

The opening of the Hawassa Industrial Park is a small but significant step toward that future and toward Ethiopia’s ultimate goal of becoming a lower-middle-income country by 2025. To that end, amid strikes in clothing factories in Bangladesh and rising manufacturing wages in China and Vietnam, Ethiopia hopes to swoop in as the world’s new hub for “fast-fashion” production.

On the private-sector side, PVH has led the drive to bring the garment sector to Ethiopia. In 2014, the company conducted a study of several African nations to determine which would be most suited to the ready-made garment industry. Ethiopia beat out Kenya, Tanzania, Ghana, Zambia, and Uganda, largely because of the responsiveness of certain individuals in the government, as well as Ethiopia’s access to cheap renewable energy and, perhaps most importantly, its cheap labor. While their study showed that productivity was higher in Kenya, as the workforce was more industrialized, PVH chose Ethiopia, where labor costs were lower and government commitment more evident. (PVH did not respond to requests for comment.) The government plans to build 17 industrial parks across the country, some of which are even set to employ 30,000 refugees of the population of nearly 1 million to which Ethiopia is host.

Employees make shirts on the assembly line at TAL Apparel, a Hong Kong-based company.

Not a Living Wage

The clean and safe working environment and the focus on the sustainability of the park — for which Ethiopia has been rightly praised — can obscure the fact that workers are still paid poverty wages, just as they have been in every other country where the garment industry has set up shop.

“There is a slipperiness in terms of how the industry talks about social and environmental sustainability, and those are different issues,” says Jennifer Bair, professor of sociology at the University of Virginia whose research focuses on the garment sector. “We tend to think companies that are better citizens in one area are also good citizens in another,” despite the fact, she points out, that this is often not the case. Sustainable facilities can in some cases save companies money in the long run; if, for example, investments in energy efficiency result in lower production costs. Wages, on the other hand, are simply seen as a zero-sum relationship between company and worker.

In the Hawassa Industrial Park, factory operators make 750 Ethiopian birr, or about $27 a month. Out of this sum, workers must pay for rent and food.

In the Hawassa Industrial Park, factory operators make 750 Ethiopian birr, or about $27 a month. Out of this sum, workers must pay for rent and food. They say it is a struggle to afford soap and coffee on weekends. Many are forced to ask family members in the countryside to send them money to supplement their income because they can’t survive on their factory wages. All across Hawassa, young women — most of them around 18 — sleep in bare, concrete rooms, sharing two thin mattresses on the floor between four people. They split the cost of the $36 rent between them. “My father told me, think of the factory as a way to get a bit of experience, then come home,” says Genet, a 20-year-old garment worker with the Sri Lanka-based apparel company Hirdaramani (the names of all workers and former workers have been changed because they fear retaliation from their employers). Her family doesn’t see the factory as a long-term career opportunity because she can’t support herself on the wages she earns.

To put this in a more global perspective, the average monthly salary of a garment worker making minimum wage in Vietnam is $136 to $175; in Sri Lanka, it’s $66; in India, it’s $78 to $136; and in Cambodia, it’s $170. In Bangladesh, where garment workers have historically been paid the lowest wages, the minimum wage for garment workers is $65, and the government is thinking of raising it again. Of course, cost of living varies in each country, but all of them have a minimum wage. Ethiopia, in contrast, does not. The international poverty line is $1.90 a day, about $57 a month.

When garment workers complain about the low pay, as they frequently do, factory managers have two responses. The first is to say that workers are actually making more than 750 birr a month. They argue that if you factor in certain “extras,” including a monthly food allowance — meaning an in-kind lunch at work, or enough money to buy a cheap lunch at the canteen — and a bonus for attendance, the salary is more like 1,100 or 1,200 birr, or $1.33 a day ($40 a month). They say that such “extras” are not offered to workers in other sectors. However, in Ethiopia, other low-wage jobs do sometimes include such informal benefits. Domestic workers, for example, receive on average 1,200 birr per month, but food and housing are generally included. Furthermore, when The Intercept examined the bank accounts of some of the workers, the amount deposited monthly varied from 577 birr ($19) to 828 birr ($30). The workers, most of whom have never had a bank account before and whose levels of financial literacy are low, could not account for these discrepancies.

Factory managers also say wages are low in Ethiopia because productivity is low, and that this will change as productivity increases. But David Muller, director of human capital management with TAL Apparel, a company in the park which is headquartered in Hong Kong, explained that the base workers’ salary of 750 birr is pegged to a “60 percent efficiency rate,” which he says the factory managers thought would be reached in six months. However, he says they now expect workers to reach 60 percent in two to three years, meaning that their wages are unlikely to increase significantly until then. In the meantime, when workers ask for salary increases as their productivity goes up, Muller says he has the following response: “I am paying you for 60 percent [efficiency], so am I to reduce [your salary] then to 30 percent because you’re only giving me 30 percent [efficiency]? Am I going to take it back from you?”

Doug Miller, a professor of workers’ rights in fashion at the Northumbria School of Design, who has studied the industry for 30 years, says, “That’s an outrageous way of calculating wages.” He added, “If you look at the [International Labor Organization] convention on minimum-wage fixing, their whole approach is based on what do workers need to live, not how efficient they are.”

The efficiency numbers are calculated using an internationally recognized metric known as the Standard Allowed Minutes. But Miller says he has never seen it used to calculate wages in this way, since most countries, unlike Ethiopia, have a minimum wage that is taken into account when fixing workers’ salaries.

In the garment sector worldwide, it is far from a given that increased productivity actually leads to wage increases. Miller noted that if workers receive more money because of improved efficiency, it might be reflected in some sort of productivity bonus, but more often, companies simply pocket the extra earnings.

H&M embarked on a campaign to pay workers in the garment industry “a living wage by 2018”…but would not provide a specific dollar amount for Ethiopia.

“Theoretically, you should see wages go up when productivity increases, but it’s not clear that that holds very strongly in the industry globally,” says Bair, the sociologist. “In China, you have seen wage rates rise in part because of the competition for labor” from other industries. By contrast, in Bangladesh, which has had a garment industry for decades, garment workers still earn roughly minimum wage. One reason why wages might be unlikely to increase, Bair explains, is if a country is heavily dependent on this industry as the main source of export revenue. In the Hawassa Industrial Park, the companies determine workers’ wages collectively, so for the moment, competition for labor, at least within the park, is not possible.

Sometimes wages do not increase even when there is explicit commitment from a brand. In 2013, H&M, one of the companies that sources from the park, embarked on a campaign to pay workers in the garment industry “a living wage by 2018.” H&M defines a living wage as one that “satisfies the basic needs of employees and their families, and provides some discretionary income such as savings,” but would not provide a specific dollar amount for Ethiopia. Iñigo Sáenz Maestre, press officer for H&M, told The Intercept in an email, “Our goal for 2018 is to set up democratically elected worker representatives committees and improved wage management systems at suppliers representing 50 percent of our product volume,” a step he called “the first milestone in our strategy forward to address fair living wages.”

A park employee rides her bike through the Hawassa Industrial Park. There are 17 miles of paved road inside the park grounds.

Growing Pains

The early days of the Hawassa park have not been easy. At first, workers said that their managers were often aggressive with them. “If someone made a mistake, they would shout or hit them. The workers were afraid and kept quiet,” says Aynalem, a former supervisor at Indochine, a China-based apparel company, who quit because of what she describes as a hostile working environment. “They expected me to be aggressive like that.” She says that all of the workers who started at the same time as she did have quit. Adanech, a factory operator with Indochine, says that things have changed over time: “Previously, they used to shout but recently, as of a month or two ago, they are calmer because employees started leaving their jobs and going back to their families.” (Indochine did not respond to a request for comment.) Turnover at the park in the last year is about 10 to 12 percent a month and more than 100 percent in the course of a year.

Belay Tessema, the Ethiopian Investment Commission manager at the park, says that the difficult working environment has led to strikes. “Once a month, there are strikes and there are three to four companies with regular strikes,” he says. “Strikes happen because of mismanagement and mistreatment.” Tessema attributes many of the challenges to cultural misunderstandings. “There is a communication gap between the expat leadership and the operators. The leadership style of Asian companies is autocratic. As Ethiopians, we need to be heard, counseled, and involved.” One senior human resources manager said the brands have recently started working with a behavioral psychologist from the University of Hawassa to try to determine the profile of person more likely to stay in the industry.

Most of these young women come from rural areas miles from Hawassa, and this is their first time away from their families. Many had never seen a city or indoor plumbing before they came to Hawassa, let alone the complicated machines they are being hired to operate. Some did not grow up in houses with electricity.

“Once a month, there are strikes and there are three to four companies with regular strikes. Strikes happen because of mismanagement and mistreatment.”

Workers often live far from the park because they are unable to afford closer housing. Initially, the young women would walk to and from work, sometimes in the dark if they were working a night shift. Early on, however, the management realized that they needed to provide transportation. “A woman was raped eight or nine months ago,” says Genet, who works for Hirdaramani. “After that, they provided transportation.”

Almaz, another Indochine sewing operator, says the factory bus used to drop her at the end of the closest paved road to her house. As soon as her feet hit the dirt road, she would run. The area — a bustling market during the day — was pitch dark, and sometimes drunk young men from the neighborhood would chase her and another young worker she was with, jeering and calling them “children of China.” (As factory workers, they were associated with the Chinese-funded development boom that is reshaping Ethiopia by the day.) Recently though, according to workers who spoke to The Intercept, Indochine changed its hours to a single shift that runs only during the daytime, and no one walks home in the dark. Almaz believes that the factory made the change after a woman she knew was sexually assaulted as she walked the last few minutes on unlit paths from the bus to her home. Almaz and some other workers went to their bosses to report the incident and ask that something be done. “We gathered together because, we said, tomorrow this will happen to us, so we had to do something,” she said. Workers for some of the other factories in the park still walk five to 30 minutes in the dark because the buses don’t go down unpaved roads.

Investors and the government hope that the park will eventually employ 60,000 workers. Yet, at present, they have only managed to house about a quarter of that number, and already housing prices have skyrocketed. The government’s initial hope was to have workers integrated into the life of the city by housing them among the population — in part to avoid critiques faced by other countries where garment workers are housed in overcrowded unsanitary conditions. To that end, they introduced a microcredit scheme whereby local families were given a loan that covered 85 percent of the cost of building a small room in their family compound to rent to workers. But the scheme presented some unforeseen challenges. In some instances when young women quit and returned to their families, one of the roommates would be left behind, liable for the whole rent. In at least one case, the family locked the young woman in the house until the company came and intervened. What will happen next is unclear. While there is much talk of building dormitories for workers, neither the government nor the companies seem to want to take responsibility for them: “Now it’s fine because they don’t know where workers live. The minute the housing has a tag of PVH, it’s a problem,” says Girum Abebe, a researcher at the government-affiliated Ethiopian Development Research Institute. If something were to go awry, neither the government nor the companies want to be blamed.

Residents of the city say they that so far, they are disappointed with the returns on the Industrial Park. Many who had expected to see an economic boost when the workers moved in say that the young women are paid so little that they can hardly afford to contribute to the local economy. In fact, they say, all that has happened is that the cost of living has gone up for local residents. “It’s a burden on the city,” says Tedi, who drives a tuk-tuk in Hawassa. “Rent used to be about 500 birr a month; now because of the Industrial Park, it’s gone up to 1,000 birr.”

Those living in and around the city sense that it is about to change. Mohammed Dewiso, 75, is a farmer just outside Hawassa and as the city expands, he says he will probably lose his land, like the farmers whose land was expropriated by the government to build the industrial park. “This farm will disappear,” he says, “it is inevitable. When you are going to vomit, your teeth are not going to stop it.” He says the compensation that the government might offer is unlikely to be useful to someone like him. “If money comes today, it will be finished tomorrow, but this land will sustain us.”

Hawassa’s roads are under construction, and new buildings are going up; there is talk of building a bridge across the lake. At present, it takes almost an hour by bus to go from Hawassa’s new airport — built to accommodate the nascent industry — to the city down a bumpy dirt track that follows dry riverbeds along the lakeshore. Along the way, the contrast between the new Hawassa and the old is stark: Donkeys and cows graze among tukel huts, and children run along the sandy shore to the water. By the end of the year, a paved highway will be built to bring people from the airport to the city in 15 minutes.

Workers arriving at and leaving Hawassa Industrial Park at the moment of an evening shift changeover.

Asking for More

The government has made enormous efforts to attract foreign investors, but now the companies are pushing for more.

For companies operating inside the industrial parks, there will be no taxes for their first 10 years in Ethiopia. For expatriate employees, no income taxes for five years. There is no tax for materials imported for manufacturing, and Ethiopia has virtually no export tax. In addition, everything from water pipes and electrical wiring to the factory sheds themselves was provided by the government. “All they had to do was bring their machines and plug them in,” said Fitsum Keltema, the manager of the Industrial Parks Development Corporation in Hawassa. And while in the past, foreign companies in Ethiopia complained of a quagmire of bureaucratic procedures, this time the government has brought the bureaucracy to them — financial services, telecommunications, customs, and other logistics are all located in one office inside the park.

Additionally, manufacturing goods in Ethiopia allows companies privileged access to the North American market under the African Growth and Opportunity Act, which the U.S. Congress renewed for another 10 years in 2015. They also benefit from duty-free and quota-free access to the European single market through the Everything but Arms agreement.

Yet despite these inducements, the companies say they should be getting more. Muller, with TAL Apparel, says the costs of working in Hawassa are very high and that the government should intervene. “They charge us 1,200 birr ($43) [per day] for renting the average vehicle. Now if you consider, that is two girls working for one entire month to pay for that vehicle.”

Managers also complain about the high cost of living in Hawassa. “Hawassa has become the most costly city in Ethiopia for basic food varieties, for basic rent,” says Muller, adding that the houses they rent cost as much “as us staying in the Hilton hotel in any other country.” That may be, but expatriate employees like Muller, unlike the factory operators, get a housing allowance as part of their $4,000 to $5,000 monthly salaries. Some live in hotel apartments in Hawassa’s most luxurious resorts, with access to a swimming pool and spa. Food items aren’t tax-exempt, but the companies are currently lobbying the Ethiopian government to import spices and other ingredients tax-free for use by company chefs.

The state’s role in all this is an ambivalent one. At times, the government, which is operating under a state-led development model akin to China’s, plays a kind of mediating role between the companies and the workers, seeking to ease tensions around housing and cultural differences in the workplace. At other moments, they accommodate and defer to the companies, as the latter leverage their power to make demands, implicitly threatening to go elsewhere if the government does not acquiesce to them.

The government is now pressing for changes to the country’s labor code that would make it easier to penalize workers for tardiness or absenteeism, and would significantly curtail benefits such as annual leave and severance pay.

Some other countries have decided to designate certain areas such as industrial parks as zones where the local labor law doesn’t apply for periods of time, or have declared certain areas as strike-free zones. Though the Ethiopian government has not gone that far, the lobbying of companies inside the park may end up affecting labor law for the entire country. For example, at the behest of the companies, the government is now pressing for changes to the country’s labor code that would make it easier to penalize workers for tardiness or absenteeism, and would significantly curtail benefits such as annual leave and severance pay.

Meanwhile, unions are not welcome in the industrial park. This is another instance in which factory owners have learned from their experiences in other countries. “Public unions … can close industries,” says Muller, “It happened in Sri Lanka. Unilever ice cream closed. … So many beautiful organizations and factories had to close because the demands were high.” The government agrees: “Trade unions have a tendency to be politicized,” says Belachew Fikre, deputy commissioner of the Ethiopian Investment Commission. The Ethiopian government has a history of repression of trade union leaders who disagree with it. Members of independent unions have faced dismissal, harassment, and torture for their activities over the years.

Fikre and the companies point to in-house workers’ councils, which they say can do the job of a union. “When you have a workers’ council, you have the most important element of a union, which is to have a platform for workers to come together and voice common issues,” Fikre said.

But workers say that so far, efforts to lobby management for higher wages have failed. “We tried informal collective bargaining, but it didn’t work. They usually respond to us: If you don’t like it, you can leave; there are so many like you who need a job,” says Genet. “They don’t know what they are doing,” says Chanyalew Akebe, head of the Confederation of Ethiopian Trade Unions branch in Hawassa, citing the workers’ lack of experience in industrial jobs and organizing. The workers’ councils, he says, are “not legally registered according to the labor law,” and therefore, they cannot represent workers in court. The councils are also completely voluntary and not all factories have them.

Outside the unions, there are virtually no civil society organizations that can lobby for better pay for the workers: In 2009, the Ethiopian government passed a law that drastically weakened civil society. This does not bode well for workers hoping to see wage increases because in the absence of competition for labor to drive up wages, the only other force to do so tends to be civil society pressure.

As everyone who works at the industrial park points out, it is early days yet. But if McRaith’s pledge is to come true, if the Hawassa Industrial Park is going to show that there is “no conflict between companies doing well and companies doing right by the people,” there will need to be an awareness that shiny new facilities are not enough — that, fundamentally, workers also need fair compensation for their labor.

Laura Dean reported from Ethiopia on a fellowship from the International Reporting Project.