Illegal clothing imports threaten SA retail
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.
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The retailers have destroyed local textile and clothing industries together with the unions and government departments with conflicting policies on trade. The 150 000 former employees of these industries supported approx 1 million people. When retailers abandoned local suppliers they put this one million people in a position where they have to buy clothing from the cheapest possible source. This means cheap Chinese informal stores. This coupled with poor government control of visas/permits and unions insisting on minimum wages that are not viable for this type of industry have systematically destroyed textiles in SA. Other manufacturers are experiencing the same problem. If low wages are morally unacceptable to unions/government/man-in-the-street in SA then surely it is morally unacceptable to buy clothing from countries whose wages are lower, conditions of employment are poor and environmental consideration is non-existent. The SA public is big on striking for a few % more but to succeed in creating employment they have to become more patriotic when buying products and SARS must be more vigilant of illegal imports
Illegal clothing imports are not threaten SA retail, it is minimum wages, crazy labour laws and trade unions that threaten all industries in South Africa. Chinese imports are only the punch bag, we need to blame somebody or something to get the attention away from the real problem.
Manufacturing costs are way toooo high in South Africa. If the cost came down it would be better to buy local than to import but because of the high manufacturing cost it does not make business sense to buy local.
The trade unions encourage people to strike for bigger wages so that the trade unions can get more money (they get paid percentage of the peoples' salaries). But in the end because of the high salaries the factory have to close and the people looses their jobs. In my opinion it is far better to pay many people small salaries than fighting for very high salaries and have half the works force being without jobs.
It's ironical that the large retailers should complain about a situation they helped create. They are the ones who imported Chinese manufactured cloting at low cost and sold at retail level at huge profits.The local clothing industry suffered as a result. This scenario has created a huge opportunity for the Chinese as they can import and sell at a lower cost. The discrepancy in prices is that there is no cost of credit, advertizing and management benefits in the price of Chinese sold goods.Instead of complaining we should re-examine our national pririties and start re-industrializing South Africa to the benefit of our Country and the workers.Workers are in the end Consumers that the retail industry needs to sustain themselves.
Chinese imports = cheap. Local unionised labour = expensive. Rent = expensive. Trasport = expensive. Tax = expensive. BEE = very epensive. AA = very expensive. Calculate the maths. Local retail is not responsible. Government and the unions are.