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Cape Town - The elephant in the room of SA's declining clothing industry is no longer Mainland China, Vietnam and Bangladesh, but the rest of Africa and neighbouring states in the sub-continent in particular, according to Johann Baard, executive director of the Cape Clothing Association (CCA).
"Both the lurking and ever growing competition at our doorstep and beyond on the African continent must bring us to the realisation that it can no longer be business as usual," said Baard at the CCA's annual general meeting held in Cape Town on Wednesday.
"The disruptive impact on our domestic manufacturing base may very well prove to be far more devastating than the fall-out witnessed as a consequence of cheap imports from South East Asia over the past ten to fifteen years. We have reached the proverbial cross-roads."
South Africa and the clothing manufacturing sector in particular need to take serious stock of its competitiveness (or lack thereof) within the global market place, he said.
Baard spoke about the support expressed for Trade and Industry Minister Rob Davies to continue his commitment and support for the development of manufacturing and industrialisation domestically.
"This despite growing criticism from, amongst others, the Free Market Foundation for industrial policy to be scrapped completely in favour of supply and demand in a global free trade environment," he said.
"Broad consensus amongst global institutions who are traditionally on the same policy page when it comes to trade and industrial policy, appears to be shifting in the wake of the world economic and financial crisis."
Employment
Baard said there is a continued decline in employment levels in the clothing industry and the large footprint of non-compliant factories competing with compliant membership is still a problem.
The CCA is also continuing its efforts to persuade government to support the call for an expanded list of fabrics, not locally available, to be added to the current limited duty rebate schedule.
"It is suicidal for domestic manufacturers to suffer the ongoing prejudice of having to pay on average 22% duty on imported fabric - which is our single biggest input cost - whilst these fabrics are not domestically available," said Baard.
"This feature of our industrial policy environment must now be remedied without any further delay."
The potential to make SA's overall value proposition more attractive to local retail customers and grow the domestic clothing manufacturing sector footprint is compelling, according to Baard.
"The growing trend for retailers to embrace ‘fast fashion and high stock turn’ business models adds further momentum to the case that fabric input cost relief for our sector is now non-negotiable and in the national interest," he said.
"Just recently Mauritius overtook South Africa as the most competitive country in sub-Saharan Africa (SSA), whilst a WEF report ranked South Africa bottom of the list on labour market efficiency as well as in labour-employer relations, 144th in flexibility of wage determination and 147th in hiring and firing practices."
Action needed
Baard said decisive action is now required by government, labour, retailers and manufacturers and consumers.
"The clothing manufacturing sector, with its favourable ratio of jobs per rand invested, must now accept the imperative need to realise its job creation potential to the full," he said.
"If fast fashion/quick response purchases represented 40% of total apparel stock sourced and around 20% of ‘normal’ lead time buy was also sourced locally, this would amount to a total of R55bn in value of locally sourced clothing sales."
Converting this into employment growth, it represents the potential of creating 150 000 new local clothing and textile manufacturing jobs.
Shorter lead times needed
The South African clothing industry will have to drastically shorten manufacturing lead times and learn to respond quickly to demand in the retail stores if it is to become more competitive, according to Professor Justin Barnes, an international expert on industrial policy.
At present lead times were about 160 days and the challenge was to reduce lead times to about eight weeks or 56 days.
He said Quick Response retailing was based on flexibility and quick response to emerging trends and “the ability to adjust production on a continuous basis to ensure a constant flow of on-demand designs to an unpredictable fashion market".
In its annual report the CCA said exports had grown by 25.5% in the first half of 2013, with most of the exports going to neighbouring African countries.
Baard said the bulk of these exports could be accounted for by SA retailers’ expansion into Africa.
The majority of clothing goods were, however, most likely not locally manufactured, but re-exported.
Clothing imports continued to increase with China being the main source, providing 81% by volume and 67% by value.
Mauritius came next, providing 4% by volume and 9% by value. The report noted that imports from Madagascar had almost doubled and now accounted for 3% by volume and 5% by value.
Facing the future
The future of the South African clothing industry could effectively be decided at a ministerial sector summit meeting in the first quarter of 2014 where all stakeholders would come together to map out a sustainable growth path, said Baard.
The summit was agreed on as part of this year’s wage agreement with the SA Clothing and Textile Workers’ Union (Sactwu).
- Fin24
"Both the lurking and ever growing competition at our doorstep and beyond on the African continent must bring us to the realisation that it can no longer be business as usual," said Baard at the CCA's annual general meeting held in Cape Town on Wednesday.
"The disruptive impact on our domestic manufacturing base may very well prove to be far more devastating than the fall-out witnessed as a consequence of cheap imports from South East Asia over the past ten to fifteen years. We have reached the proverbial cross-roads."
South Africa and the clothing manufacturing sector in particular need to take serious stock of its competitiveness (or lack thereof) within the global market place, he said.
Baard spoke about the support expressed for Trade and Industry Minister Rob Davies to continue his commitment and support for the development of manufacturing and industrialisation domestically.
"This despite growing criticism from, amongst others, the Free Market Foundation for industrial policy to be scrapped completely in favour of supply and demand in a global free trade environment," he said.
"Broad consensus amongst global institutions who are traditionally on the same policy page when it comes to trade and industrial policy, appears to be shifting in the wake of the world economic and financial crisis."
Employment
Baard said there is a continued decline in employment levels in the clothing industry and the large footprint of non-compliant factories competing with compliant membership is still a problem.
The CCA is also continuing its efforts to persuade government to support the call for an expanded list of fabrics, not locally available, to be added to the current limited duty rebate schedule.
"It is suicidal for domestic manufacturers to suffer the ongoing prejudice of having to pay on average 22% duty on imported fabric - which is our single biggest input cost - whilst these fabrics are not domestically available," said Baard.
"This feature of our industrial policy environment must now be remedied without any further delay."
The potential to make SA's overall value proposition more attractive to local retail customers and grow the domestic clothing manufacturing sector footprint is compelling, according to Baard.
"The growing trend for retailers to embrace ‘fast fashion and high stock turn’ business models adds further momentum to the case that fabric input cost relief for our sector is now non-negotiable and in the national interest," he said.
"Just recently Mauritius overtook South Africa as the most competitive country in sub-Saharan Africa (SSA), whilst a WEF report ranked South Africa bottom of the list on labour market efficiency as well as in labour-employer relations, 144th in flexibility of wage determination and 147th in hiring and firing practices."
Action needed
Baard said decisive action is now required by government, labour, retailers and manufacturers and consumers.
"The clothing manufacturing sector, with its favourable ratio of jobs per rand invested, must now accept the imperative need to realise its job creation potential to the full," he said.
"If fast fashion/quick response purchases represented 40% of total apparel stock sourced and around 20% of ‘normal’ lead time buy was also sourced locally, this would amount to a total of R55bn in value of locally sourced clothing sales."
Converting this into employment growth, it represents the potential of creating 150 000 new local clothing and textile manufacturing jobs.
Shorter lead times needed
The South African clothing industry will have to drastically shorten manufacturing lead times and learn to respond quickly to demand in the retail stores if it is to become more competitive, according to Professor Justin Barnes, an international expert on industrial policy.
At present lead times were about 160 days and the challenge was to reduce lead times to about eight weeks or 56 days.
He said Quick Response retailing was based on flexibility and quick response to emerging trends and “the ability to adjust production on a continuous basis to ensure a constant flow of on-demand designs to an unpredictable fashion market".
In its annual report the CCA said exports had grown by 25.5% in the first half of 2013, with most of the exports going to neighbouring African countries.
Baard said the bulk of these exports could be accounted for by SA retailers’ expansion into Africa.
The majority of clothing goods were, however, most likely not locally manufactured, but re-exported.
Clothing imports continued to increase with China being the main source, providing 81% by volume and 67% by value.
Mauritius came next, providing 4% by volume and 9% by value. The report noted that imports from Madagascar had almost doubled and now accounted for 3% by volume and 5% by value.
Facing the future
The future of the South African clothing industry could effectively be decided at a ministerial sector summit meeting in the first quarter of 2014 where all stakeholders would come together to map out a sustainable growth path, said Baard.
The summit was agreed on as part of this year’s wage agreement with the SA Clothing and Textile Workers’ Union (Sactwu).
- Fin24
