Indian exporters are increasingly shifting focus to Africa to mitigate the impact of new US tariffs, some as high as 50%, imposed on Indian goods. The duties, introduced as a penalty for India’s purchases of Russian oil, threaten to slash exports of textiles, jewellery, and diamonds, worth over $20 billion in 2023, by more than half, according to Bloomberg Economics.
Apparel makers are among the first to adapt. GAP Inc. supplier Gokaldas Exports Ltd. is banking on its existing footprint in Africa, where tariffs remain significantly lower. “We will continue to expand in Africa in case of 50% tariffs,” said Managing Director Sivaramakrishnan Ganapathi in an interview with The Economic Times, highlighting the company’s four factories in Kenya and one in Ethiopia, both facing only 10% levies. Raymond Lifestyle Ltd. is following a similar path, with Chief Financial Officer Amit Agarwal telling Bloomberg that the company is negotiating with US buyers to divert more shipments from its Ethiopian unit.
The jewellery sector is also eyeing Africa. Surat-based Dharmanandan Diamonds may boost output in Botswana if the tariff pressure continues, Reuters reported, citing Managing Director Hitesh Patel. Industry insiders say such moves are essential, as labour-intensive sectors like garments and gems face the sharpest declines, with some exports projected to fall by as much as 90%.
African nations are actively positioning themselves as alternative manufacturing bases by offering attractive incentives such as tax breaks, duty exemptions, and special economic zones. “African governments are offering compelling incentives such as tax breaks, land concessions, and regulatory facilitation to attract investment in manufacturing and technology transfer,” observed Soumya Bhowmick, Fellow at the Observer Research Foundation. Countries like Ethiopia, Nigeria, Morocco, and Botswana are being considered prime destinations.
However, shifting supply chains is not without hurdles. Some US buyers remain cautious about sourcing from Ethiopia due to political uncertainties, even though labour costs there are about a third of India’s. Renegotiating contracts and building stable operations in new markets will take time. Still, as India’s competitive advantage erodes under the tariff regime, Africa is emerging as a critical hedge for exporters determined to sustain their share in the US market.
Sources: Bloomberg, Economic Times, Reuters
