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Illegal clothing imports threaten SA retail

Jul 24 2011 11:05 Letitia Watson

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Last traded 0
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Market cap 67.91bn

Last Updated: 29-01-2015 at 03:55. Prices are delayed by 15 minutes. Source: McGregor BFA

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Cape Town - The South African clothing industry is seriously concerned about the growth in illegal Chinese imports.

Research by the Apparel Manufacturers of South Africa (Amsa) indicates that there are an estimated 6 000 informal Chinese shops in the country.

Amsa executive director Johann Baard said that  South African clothing retailers have between 200 and 1 000 shops around the country selling around 50% local and 50% imported products.

But this compares with 6 000 Chinese shops which are selling 99% Chinese products, he said.

According to Pep group commercial director Louis Brand, Pep, with more than 1 300 shops in South Africa, is well represented in rural areas.

Over the past seven years the group has however seen an increasing number of little Chinese shops mushrooming around its branches.

The group reckons that for every Pep store in a town there are at least six Chinese shops. Pep is in favour of commerce and competition, which is good for the economy, but then the playing field needs to be even, Brand said.

What is worrying clothing retailers is that they are competing with merchants who are possibly not paying import levies, tax, rental or the necessary duties.

It is also alleged that many of the Chinese working in the shops do not have the required immigration or work permits.

According to Amsa’s information, most such shops do not comply with legal requirements like registration with the South African Revenue Service (Sars).

Baard said Amsa is continuously in discussion with SARS’s customs division and working steadily to combat the problem.

He maintains that the problem involves not only the small shops in the rural areas.

Massive retail centres like China City and Dragon City in Johannesburg, Durban and elsewhere are shooting up. These centres accommodate clothing - and other - retailers on a huge scale.

At an industrial policy meeting of trade union federation Cosatu, Trade & Industry Minister Rob Davies said the country was struggling with illegal clothing imports as well as under-declaration of the value of goods so as to avoid paying duty.

The Department of Trade & Industry found a 60% price difference in clothing which, according to China, is being sold to South Africa, and that which enters the country according to the local authorities.

This means that 60% of the relevant duties are not being paid because values are being understated.

Amsa’s costing of a whole range of clothing items shows that the retail price of clothing in Chinese shops is sometimes lower than what the material alone would cost in China.

Baard said these cheap product are a major concern for local retailers who compete at the bottom end of the price chain.

Amsa has no doubt that under-declaration is taking place on a large scale.

This is not only in regard to the clothing retail trade focusing on the lower LSM groups.

Mr Price Group [JSE:MPC] executive chairperson Alistair McArthur  reckons most of the illegal imported goods are sold in informal markets right across the price spectrum.

If one takes into account the size of the informal market, he said, this will have a negative impact on all large clothing retailers.

- Sake24

For business news in Afrikaans, go to Sake24.com.
mr price group  |  china  |  clothing industry



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