The South African Clothing, Footwear and Textiles Industry

The South African Clothing, Footwear and Textiles Industry

Where to from here?

EXECUTIVE SUMMARY

"Welcome to Ghost Town."

The title of an article published in the Clothing industry Pursuit magazine. Dimbaza once a thriving hub of clothing and garment factories now lies deserted with 110 of the once 120 active factories mothballed, 5000 job losses in 18 months.

Unfortunately this is not an uncommon story but rather one which is becoming all the more frequent as the local Clothing, Footwear and Textiles industries are ravaged by the competitive global juggernaut, China!

But surely this could have been avoided the lament rises.

The truth is that global move to free trade and the effects of a rampant Rand in recent years have all but blindsided an industry which for years existed in a artificial vacuum, blissfully ignorant to the slumbering global forces that would change the market for ever.

And laments there have been! COSATU have held national strikes, Retailers have diplomatically fended off local procurement commitments and the government has steadfastly remained stoic - help yourself and we will assist the continued view. A divided sector in a time when division is not only ill-advised but tantamount to suicide!

Where to for here?

This discussion analyses the contributing factors and outlines policy recommendations, vital to the survival of the sector in ANY form.

CONTENTS

EXECUTIVE SUMMARY 2

1. INTRODUCTION 4

2. CONTEXT 4

2.1 Formation of the South African Clothing, Footwear and Textiles Industry 4

2.2. The current reality is bleak! 4

3. CONTRIBUTING FACTORS 6

3.1. Overview 6

3.2. Trade liberalisation 6

3.3. Local Competitiveness 8

3.4. Less protectionism and compromised competitiveness = more imports 9

3.5. Reasons for Chinese dominance of world markets 9

4. REACTION FROM STAKEHOLDERS 10

4.1. SACTWU and COSATU 10

4.2. National Retailers Response 11

4.3. Governments response 12

4.4. China's response 13

5. POLICY SUGGESTIONS 14

5.1. Short Term Measures 14

5.1.1. Consensus must be achieved! 14

5.1.2. Short-Term Protectionism is key 14

5.1.3. Stem illegal and under-invoiced imports 15

5.1.4 Outcome of Short Term Measures 15

5.2. Longer Term Interventions 15

5.2.1. Industry assistance 15

5.2.2. Reduce raw material prices 16

5.2.3. Relaxation of current labour legislation 16

5.2.4. Increase trade opportunities 16

5.2.5. Repositioning of the industry model 17

5.2.6. Skills, technology and process improvements 17

5.2.7. Outcome of longer-term initiatives 17

6. CONCLUSION 18

REFERENCES 19

1. INTRODUCTION

The South African Clothing, Footwear and Textiles Industries are in crisis!

Once cosseted by the protection offered by high levels of trade restrictions and international isolation, and a blissful period of Rand weakness the past three years have seen it being harshly exposed to international competition especially from the dominant Asian giant, China.

The industry context, major contributing factors and stakeholder reaction is examined with policy recommendations being presented in defining an effective strategy going forward.

One thing is clear. Business as usual is no longer an option, only radical and focused

effort will meet with any measure of success!

2. CONTEXT

2.1 Formation of the South African Clothing, Footwear and Textiles Industry

The South African Clothing, Footwear and Textiles industry developed in an environment of heavy protectionism with restrictive import tariffs and quantitative quota's shielding the local industry from international competition. In addition to the market interventions the apartheid regime provided direct support to the industry formation through investment support from by the state-owned Industrial Development Corporation (IDC).

The focus of the industry was largely internal with exports only forming 6% of production in the 1970's growing sedately to 15% in 1989 (Democratic Alliance, Hanging by a Thread) prior to the imposition of international sanctions in the late 80's and early 90's.

2.2. The current reality is bleak!

After years of protectionism firstly through the intervention of the state and thereafter isolation from competitive world markets through the imposition of international trade sanctions, the inward focused

Clothing, Footwear and Textiles industry was harshly exposed to international competition post the implementation of extensive trade liberalisation policies after South African acceptance of the General Agreement on Tariffs and Trade (GATT) in 1994.

As trade regulations have been aggressively relaxed over the past few years the impact on the local industry has been severe. More than 43500 jobs have been lost since 2003 with a net reduction in employment estimated at 75000 since 1996 by Statistics SA. (The Shopsteward" Special Edition, 2005) This is clearly demonstrated by the data in Table and Figure 1 below.