European energy costs for textiles jumped 15% in 2023 — a rise that has definitively diverted orders toward East Africa. While Europe attempted to relocate its textile production to reduce its dependence on Asia, industrialists massively shifted their investments toward Ethiopia, Kenya, and Uganda where producing a pound of yarn costs less than 10 cents compared to an average of 45 cents in Europe.
This shift reveals the failure of Western relocation policies in the face of raw economic realities. While Brussels multiplied subsidies to retain its last mills, global buyers were redeploying their production chains toward a region that combines cheap labor, abundant energy, and privileged trade agreements with the United States and Europe.
The Essentials
- European energy costs increased by 15% for textiles in 2023, widening the gap with East Africa where producing a pound of yarn costs less than 10 cents
- Ethiopia and Kenya are massively attracting textile investments thanks to the African Growth and Opportunity Act (AGOA), which guarantees privileged access to the American market until 2025
- Europe lost a significant number of textile jobs between 2019 and 2023, mainly in northern Italy and northern France
- The new African hubs now produce a significant share of clothing exported to Europe under “Made in Ethiopia” or “Made in Kenya” labels
European Energy Costs Kill Textile Competitiveness
The explosion in energy prices since 2022 dealt the final blow to European textiles. In northern Italy, the historic cradle of European fashion, energy bills now represent 23% of production costs compared to 12% before the Ukrainian crisis. The mills of Bergamo and Brescia, which still employed 45,000 people in 2019, eliminated 18,000 jobs in four years according to data from the Italian Textile Federation.
The gap with East Africa becomes abysmal. In Ethiopia, industrial electricity costs 3.2 cents per kWh thanks to the Renaissance Dam, four times less than in Germany. This difference translates directly into prices: weaving a meter of cotton costs $0.31 in Addis Ababa compared to $1.40 in Milan.
France is not spared from this hemorrhage. The Vosges, France’s last textile stronghold, lost 2,400 jobs since 2020. Tissage de France, which still produced 15 million meters of fabric per year in 2019, closed its last looms in September 2023. “Our costs doubled in two years, impossible to compete with Africa,” explains its former chief executive in Les Échos.
Ethiopia and Kenya Exploit Their Trade Advantages
The African Growth and Opportunity Act (AGOA) is transforming Ethiopia and Kenya into privileged gateways to the American market. This agreement, renewed until 2025, allows African textiles to enter the United States duty-free — an advantage Europe no longer possesses post-Brexit.
Ethiopia is exploiting this asset fully. The country has significantly increased its textile exports to the United States between 2018 and 2023, reaching $280 million. The Hawassa industrial park, inaugurated in 2016, now employs 75,000 workers and produces primarily for H&M, Gap, and Target. Calvin Klein and Tommy Hilfiger have relocated 40% of their production destined for the American market there.
Kenya is betting on a different strategy: capturing European orders thanks to post-Cotonou agreements. Kenyan textile exports to Europe saw strong growth in 2023, driven by Chinese investments. The Rivatex group, acquired by Beijing capital, modernized its Eldoret facilities and now produces 15 million meters of fabric per year.
This rise is built on unbeatable wage costs. An Ethiopian textile worker earns $26 per month compared to 1,200 euros in Poland and 2,800 euros in Germany. Even accounting for lower productivity, the gap remains decisive: African production hourly costs represent a considerably lower fraction than European costs.
Western Brands Accelerate Relocations
Textile giants are not fooled. Inditex (Zara) invested $150 million in Ethiopian and Ugandan production sites in 2023. The Spanish group now produces 12% of its global volumes there, compared to 3% in 2020. This strategy allows it to maintain its margins despite European inflation.
H&M pushes this logic further. The Swedish retailer has signed five-year supply contracts with six Ethiopian factories, guaranteeing volumes of 200 million pieces per year. “East Africa offers us the flexibility and costs we no longer find in Europe,” acknowledges the group’s purchasing director in Textile World.
High-end fashion companies are following suit. Kering opened a sourcing office in Nairobi in 2024 for its Gucci and Saint Laurent brands. The objective: diversify supplies in the face of geopolitical tensions with China while preserving profitability.
This migration is accompanied by massive technology transfers. German and Italian equipment manufacturers are relocating their machinery to Africa rather than replacing it in Europe. Marzoli, the Italian leader in spinning machinery, sold 80% of its new installations to African countries in 2023 compared to 45% in 2019.
Europe Attempts to Save Its Last Strongholds
Faced with this hemorrhage, Brussels mobilizes heavy artillery. The REPowerEU plan allocates 2.3 billion euros to energy-intensive sectors, including 400 million for textiles. Italy and France add to this with national aid: Milan finances the modernization of 60 Lombard textile companies, Paris subsidizes the energy transition of Vosgian industries.
These efforts are struggling to reverse the trend. The French “Territories of Industry” program saved only 1,200 textile jobs out of the 8,000 threatened according to the Court of Accounts. European subsidies cover at best 30% of the energy surcharge — insufficient faced with the structural gap with Africa.
Some market segments resist. European technical textiles maintain their positions thanks to their expertise: Dimension Polyant boat sails in Germany, Aplix medical textiles in France retain their technological advantage. But these niches represent less than 15% of the European textile market.
Germany is betting on automation to compensate for its cost overruns. The manufacturer Trutzschler is developing fully robotized looms that reduce labor requirements by three-fold. These innovations allow the cost gap with Africa to be reduced from 70% to 30% according to Fraunhofer Institute calculations. It remains to be seen whether this technological advantage will suffice against Africa’s structural advantage.
East Africa Structures Its Textile Value Chains
East Africa is no longer content with assembly. Ethiopia is developing its cotton industry with World Bank support. The country is planting an additional 50,000 hectares per year and aims for cotton self-sufficiency by 2027. This vertical integration will allow it to capture more added value.
Kenya is investing heavily in training. The University of Nairobi opened a textile engineering program in 2023 in partnership with the National Higher School of Textile Arts and Industries in Roubaix. Objective: train 500 African engineers per year to oversee the upgrading of the local industry.
Chinese investments are accelerating this structuring. The Huajian Group, the leading Chinese textile investor in Ethiopia, has announced $2 billion in investments over five years. This capital finances the construction of integrated industrial parks that include spinning, weaving, dyeing, and manufacturing on the same site.
This dynamic is attracting European capital. The Finnfund investment fund injected 45 million euros into African textile industry in 2024. The French Development Agency follows with 30 million euros intended to modernize Ugandan equipment. These investments formalize the shift: Europe is now financing the factories that replace its own.
The transformation goes beyond textiles alone. Ethiopia is developing a leather industry that employs 35,000 people and exports to Italy. Rwanda is betting on technical textiles for the automotive industry. This diversification consolidates the emergence of new African industrial hubs at a time when Europe is struggling to maintain its own.
Western buyers have decided: they prioritize cost competitiveness over geographic proximity. This geographic reallocation is permanently redrawing the map of global industry, with East Africa positioned to capture a growing share of world textile production in the decade to come.