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Cablegate: Agoa: Tanzania's Textile Sector and Support For

VZCZCXRO5073
PP RUEHBZ
DE RUEHDR #1409/01 2300851
ZNR UUUUU ZZH
P 180851Z AUG 06
FM AMEMBASSY DAR ES SALAAM
TO RUEHC/SECSTATE WASHDC PRIORITY 4611
INFO RUEHUJA/AMEMBASSY ABUJA PRIORITY 0103
RUEHDS/AMEMBASSY ADDIS ABABA PRIORITY 3038
RUEHAN/AMEMBASSY ANTANANARIVO PRIORITY 0073
RUEHBP/AMEMBASSY BAMAKO PRIORITY 0038
RUEHJL/AMEMBASSY BANJUL PRIORITY 0202
RUEHBZ/AMEMBASSY BRAZZAVILLE PRIORITY 0008
RUEHRY/AMEMBASSY CONAKRY PRIORITY 0023
RUEHCO/AMEMBASSY COTONOU PRIORITY 0100
RUEHDK/AMEMBASSY DAKAR PRIORITY 0251
RUEHDJ/AMEMBASSY DJIBOUTI PRIORITY 0130
RUEHKM/AMEMBASSY KAMPALA PRIORITY 2812
RUEHLG/AMEMBASSY LILONGWE PRIORITY 5389
RUEHLS/AMEMBASSY LUSAKA PRIORITY 1723
RUEHTO/AMEMBASSY MAPUTO PRIORITY 7440
RUEHNR/AMEMBASSY NAIROBI PRIORITY 0215
RUEHOU/AMEMBASSY OUAGADOUGOU PRIORITY 0289
RUEHSA/AMEMBASSY PRETORIA PRIORITY 3201
RUEHWD/AMEMBASSY WINDHOEK PRIORITY 0292
RUEHYD/AMEMBASSY YAOUNDE PRIORITY 0023
RUEHC/SECSTATE WASHDC PRIORITY 4612

UNCLAS SECTION 01 OF 03 DAR ES SALAAM 001409

SIPDIS

SIPDIS

DEPT FOR AF/EPS T HASTINGS AND AF/E B YODER

E.O. 12958: N/A
TAGS: EINV ETRD KTEX TZ
SUBJECT: AGOA: TANZANIA'S TEXTILE SECTOR AND SUPPORT FOR
THIRD-COUNTRY FABRIC PROVISIONS

REF: STATE 131825

1. (U) SUMMARY. With twelve active manufacturers employing
over 12,000 people, Tanzania's textile and apparel sector is
slowly on the rise after near collapse in the mid-1990s.
Except for two vertically integrated firms, Tanzania's
textile companies source most of their fabric from China,
India and Pakistan to produce African printed cloth or
"khangas" for the local market. There are currently three
major textile firms exporting to Europe and the U.S. There is
also a major new investment on the horizon for an
export-ready apparel factory established by a Cyprus-based
company known as Cami Textiles Group. Regarding extension of
the African Growth and Opportunity (AGOA) third-country
fabric provision, the industry view is divided: those firms
which source fabric from abroad strongly favor the extension
while Tanzania's largest vertically integrated textile firm,
Sunflag, strongly opposes any extension. The Government of
Tanzania (GOT) has come forth publicly in favor of extending
the provision until 2015, issuing a request along with other
AGOA eligible countries during the fifth AGOA Ministerial
meeting in Washington D.C. in June 2006. END SUMMARY.

Tanzania's Textile and Apparel Production Facilities
--------------------------------------------- --------
2. (U) Tanzania's textile industry appears to be moving
forward in terms of productive capacity and export potential.
There are currently 12 active textile/apparel manufacturers
which have a total production capacity of more than 224
million meters of dyed or printed fabric. Tanzania's Ministry
of Industry, Trade and Marketing estimates that the textile
industry employs approximately 12,700 people, more than half
of whom are women. Approximately half of all textile/apparel
firms are producing garments for the local market, ("khanga"
and "kitenge") as well as bed sheets and blankets. The
following list highlights Tanzania's key textile factories,
the main products, estimates of capacity (million meters per
year) and employment figures:

Factory Product Capacity Employment
--------------------------------------------- ---------------
A to Z Textiles Garments 1,500
Cami Apparel Garments 1,600
Cami Suma Garments 320
EverFit Uniforms 115
Karibu Textiles Khanga 40 600
Kilimanjaro Khanga 8 600
Mbeya Textile Gray Cotton 6 500

Musoma Textiles Khanga/bed sheets 12 500
Mwanza Textiles Khanga/bed sheets 15 1,300
NIDA Textiles Khanga/bed sheets 9 800
Namera Group Gray cloth 18 600
Sunflag Garments 25 3,000
Urafiki Textiles 1,284
Yarn
Gray woven fabric 23
Printed fabric 24
--------------------------------------------- --------------
TOTAL EMPLOYEES: 12,719
--------------------------------------------- --------------


Fabric Imported From China, India, Pakistan
-------------------------------------------
3. (U) Of the 12 main manufacturers, Sunflag and A-to-Z
Textiles, are the only two vertically integrated firms,
spinning cotton, knitting, weaving, dyeing, and finishing
garments. Sunflag's fabric, for example, is 100 percent

DAR ES SAL 00001409 002 OF 003


cotton ring spun and finished into knitted tops for men,
women and children. Otherwise, Tanzania's textile
manufacturers primarily source their fabric from Asia: Karibu
Textiles and NIDA Textiles buy their fabric from India and
Pakistan, while New Mwanza Textile Mill, Urafiki Textiles,
and Cami Textiles Group buy fabric from China. According to
the Managing Director of Cami Textiles Group, Maurice Lezmi,
fabric sourced from China is the only way to remain cost
competitive in the low margin textile market that his company
targets.

New Textile Investment from Cyprus
-----------------------------------
4. (U) Cyprus' Cami Textiles Group, a holding company with
six factories in Bulgaria, is the newest, significant
investor in Tanzania's apparel sector. Cami Textiles Group
has invested approximately USD 5 million in three factories
in the Dar es Salaam area. In early 2006, Cami Apparel
opened a small and medium sized factory, Everfit Apparel and
Cami Suma respectively. In September 2006, Cami Textiles
Group will open Cami Apparel, its third and largest apparel
factory in Tanzania's new Export Processing Zone (EPZ). Cami
Textiles Group uses Mitsubishi sewing machines from Japan and
sources the vast majority of its fabric from China. The
following are the estimated number of machines and employees
per Cami Group factory:

Factory Machines (Mitsubishi) Employees
--------------------------------------------- ---------------
Everfit 135 115
Cami Suma 350 320
Cami Apparel 900 1600

Tanzania's Textiles Target Bargain Market
------------------------------------------
5. (U) Currently, Sunflag is the only textile company
exporting significant quantities under AGOA, with
approximately USD 3.8 million worth of exports in 2005. The
company targets a low-end market with customers in the United
States such as WalMart. Both NIDA and Urafiki Textiles
export apparel to Europe, also targeting the lower-end
market. With its new factory in the EPZ, Cami Textiles Group
intends to begin exporting to the United States under AGOA.
According to Lezmi, Cami will sell its products through
already well-established relationships between Cami (in
Bulgaria) and buyers such as WalMart and Champion. The
remaining textile companies in Tanzania are primarily
producing African printed fabrics ("khanga") as well as bed
sheets and blankets for the local market.

Comment: Industry Divided on Extension
--------------------------------------
6. (U) While the Government of Tanzania (GOT) supports an
extension of the AGOA third-country fabric provision, the
industry view on the extension of third-country fabric
provision is divided between those firms which are vertically
integrated and those which are not. Sekela Mwaisela, AGOA
Desk Officer at the Ministry of Industry, Trade and
Marketing, recently informed post in writing of its joint
request to U.S. Congress, in collaboration with other AGOA
eligible countries, for the extension of the third country
fabric provision from 2007 until 2015.

7. (U) Because Sunflag is vertically integrated, making its
own yarns and fabrics, the company does not stand to benefit
from an extension of the AGOA third-country fabric provision.
Rajeev Shah, Managing Director of Sunflag noted, "We do not
support an extension as it will defeat the purpose of
building regional capacity. We have invested in modernizing

DAR ES SAL 00001409 003 OF 003


our plant and machinery with the 2007 deadline in mind. If
the provision is extended our investment will have no meaning
and we will be another tailoring shop exporting cheap labor
from Africa instead of exporting value added garments made
from African raw materials." Equally emphatic from the other
side, Lezmi of Cami Textiles Group stressed, "If the
third-country fabric provision is not extended, that will
kill our chances to export under AGOA, that will kill our
investment here in Tanzania as well as the new jobs our
largest factory is ready to create."
RETZER

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